Jargon buster: A-Z of blockchain and cryptocurrency

June 05, 2018
Chris Wheal

Don’t be bamboozled by blockchain or confused by cryptocurrencies. Here’s glossary of terms you might hear or read about, each simply explained.

51% attack

When one person or group controls more than half of the computing power of a blockchain/cryptocurrency network, enabling them to fraudulently manipulate transactions.

Address

A string of alphanumeric characters used to send or receive transactions on a blockchain. Unlike email addresses, these are often disposable and a user will often use many separate addresses in some blockchains.

Algorithm

A set of rules or process to be followed in strict order. Used as the basis for software programs.

Altcoin

An alternative cryptocurrency to Bitcoin but with similar characteristics.

ASIC

Application Specific Integrated Circuit. Often compared to Graphical Processing Units (GPUs) that are used to speed up computer gaming. Companies tailor-make ASICs for computing tasks including cryptocurrency mining.

Bitcoin

Bitcoin was the first decentralised, open source cryptocurrency.

Bitcoin ATM

A cash point where people can trade fiat currency and bitcoins

BitShares

An open-source, public financial platform developed by software engineer Dan Larimer, which uses Distributed Proof of Stake (DPoS) as the basis for a decentralised cryptocurrency-based financial derivatives market.

Block

A package of transactions on a blockchain.

Blockchain

A blockchain is a shared ledger in which transactions are permanently recorded by adding new blocks. The blockchain is a historical record of all transactions, from the genesis block to the latest block in a continuous chain.

Block ciphers

A method of encrypting an entire block of data at once using a cryptographic key and an algorithm. The most commonly-used encryption method, popular in cryptographic technologies like AES.

Block explorer

An online tool to view all transactions on the blockchain.

Block height

The number of blocks connected on the blockchain.

Block reward

An amount of cryptocurrency given to a miner who successfully verifies a block of transactions by calculating its hash.

Delegated Byzantine Fault Tolerance (dBFT)

NEO Consensus system, achieved if two-thirds of the nodes on the network can agree with a bookkeeper’s version of the blockchain and this is then validated.

C#

A programming language developed by Microsoft.

C++

A common programming language supported by many hardware vendors

Central ledger

A single ledger maintained by an organisation such as a bank.

Chain linking

The process of connecting two blockchains to allow transactions between them.

Cloud mining

Mining using machines hosted in a company’s data centres. Various forms of cloud mining exist, including buying the equipment yourself and having the company operate it for you, and buying a contract to use the company’s computing power.

Confirmation

Successfully hashing a transaction and adding it to the blockchain.

Consortium blockchains

Sometimes called Federated Blockchains, these operate under the leadership of a group and do not allow unauthorized participants to verify transactions. Early use cases concentrated on the banking sector.

Cold storage

A secure way of storing cryptocurrencies offline, typically using secure hardware or a paper wallet.

Coloured coins

An early proposal to represent real-world assets on the Bitcoin network by adding extra information to transactions.

Consensus

A method of agreeing on the validity of blockchain transactions.

Cryptocurrency

Also known as tokens or coins, cryptocurrencies are representations of digital assets. Some blockchains have the same name for their tokens (Bitcoin), others have a different name (Stellar/Lumen).

Cryptography

The process of encrypting and decrypting information. Used extensively in verifying and protecting blockchain transactions.

Cryptojacking

The hijacking of computers to mine cryptocurrency without the owner knowing or benefiting from it. Cryptojackers can inject malicious JavaScript into client-side web browsers, or they can infect endpoints or back-end servers with mining malware.

Cryptographic hash function

Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input (see hash)

dApp

A decentralised application (dApp) is an application that runs and stores its data on a blockchain.

DAO

Decentralised Autonomous Organizations are organizations that write governance structures and business rules into smart contracts and execute them automatically on the blockchain.

Denial of service attacks (DoS) and Distributed DoS (DDoS)

A denial of service (DoS) attack is a cyber-attack in which the perpetrator seeks to make a service unavailable by disrupting a host connected to the internet. Attackers typically bombard the target with superfluous requests to overload the host and stop it from fulfilling legitimate requests. When launched from a distributed network of machines, it is called a distributed denial of service (DDoS) attack.

Distributed ledger

A ledger that stores data across a network of decentralised nodes. A distributed ledger need not have its own token, and is typically private.

Distributed network

A type of network where processing power and data are spread across a network of computers rather than having a centralised data centre.

Difficulty

Common in Proof of Work blockchains, this is the level of computing effort needed to solve the cryptographic problem that successfully hashes a block. The blockchain maintains a standard time between the mining of each block by altering the difficulty according to the amount of computing power available.

Digital signature

An encrypted digital code generated by combining a private and a public key. The signature is attached to an electronically transmitted document to verify the sender’s identity and the content.

Double spending

When a sum of money is spent more than once. The consensus mechanism on the blockchain is intended to avoid double spending by ensuring that all participants agree on what assets have been spent.

ECDSA

The Elliptic Curve Digital Signature Algorithm. This is the cryptographic algorithm used to sign transactions in the Bitcoin protocol. Its advantage is that it is a lightweight protocol.

Escrow

A financial arrangement in which a trusted third party temporarily holds a payment made between two parties. The third party releases the funds after confirming that all the terms of the agreement have been met.

Encryption

The encoding of data using a cipher so that it cannot be read by an unauthorised party.

Ethereum

Ethereum is a blockchain-based decentralised platform that can run smart contracts.

Ethereum Virtual Machine (EVM)

The Ethereum Virtual Machine is the runtime environment for smart contracts based on Ethereum. EVM can be used to automatically conduct transactions or perform specific actions on the Ethereum blockchain. It also provides security, such as preventing denial-of-service attacks.

ERC20

Ethereum Request for Comment 20. This the standard for producing tokens on the Ethereum network.

ETH

The symbol for Ether, which is the primary token of the Ethereum blockchain.

Faucet

A marketing technique used to promote the uptake of a young altcoin. The developers pre-mine coins and then give them away to the public in an attempt to generate interest and encourage them to mine more coins.

F#

An open source, cross-platform programming language.

Federated Blockchains

See Consortium Blockchains.

Fiat

Currencies backed by central banks and adopted by countries. Examples include the dollar ($), euro (€) and pound (£).

Fork

Forks create an alternate version of the original blockchain. The original and the new blockchain fork run simultaneously.

Forging

Verifying transactions without a block reward, instead relying on transaction fees as the sole incentive. Common in proof of stake blockchains.

FPGA

A Field Programmable Gate Array. This is a silicon chip that can be repeatedly reprogrammed at the hardware level after fabrication, equipping it to carry out specific tasks. They can be produced at volume, making them cheaper than ASICs, but there is a performance trade-off.

Gas

Smart contracts on the Ethereum network take computing power to run, and someone must pay for it. Gas is the unit that they pay in. Transactions must specify an upper limit that the operator is prepared to pay in gas, and miners then choose whether to accept that payment for processing the transaction. Transaction operators pay for gas using ETH.

Genesis block

The first or first few blocks of a blockchain.

Gigahashes/sec

The number of hashing attempts possible in a given second, measured in billions of hashes (thousands of Megahashes).

GPU

Graphical Processing Unit. This is a silicon chip designed for complex floating point calculations. Originally focused on gaming and high-end graphics, these chips have become useful for other tasks that are suitable for parallel processing. These include the cryptographic calculations used in some proof of work-based cryptocurrency mining algorithms. Some algorithms, such as Bitcoin’s allowed miners to use higher-performance ASICs, which made GPUs obsolete. Other blockchain consensus systems are more ‘GPU-friendly’, using algorithms that are unfavourable for ASIC mining.

Halving

When the number of coins produced in each cryptocurrency block divides by two. This is a feature of some cryptocurrencies that only allow a finite number of coins to be mined. Bitcoin is a good example. Every few years, the bitcoin reward halves.

Hard fork

A type of fork that renders previously valid transactions invalid, and vice versa. It requires all nodes and users to upgrade to the latest version of the protocol software.

Hash

A computational process that takes input data of any length (called a string), performs an operation on it and returns output data of a fixed length (called the digest). The output data is also known as the digital fingerprint, because each digest could only ever represent its specific original string.

Hashcash

A proof-of-work system used to limit email spam and denial-of-service attacks by calculating a hash. It was also the inspiration for the proof of work mechanism used in Bitcoin.

Hash rate

A measurement of computational performance in proof of work-based mining rigs. Expressed in hashes per second.

HODL

A slang term for holding onto cryptocurrency and not trading emotionally. Based on a Reddit forum post by an intoxicated user.

Hybrid PoS/PoW

A hybrid PoS/PoW allows for both Proof of Stake and Proof of Work as consensus methods on the network.

Hyperledger

An umbrella collaborative project of open source blockchains and tools, started in December 2015 by the Linux Foundation.

Initial Coin Offering (ICO)

A blockchain-based fundraising mechanism, typically used to sell tokens for new decentralized applications to investors.

InterPlanetary File System (IPFS)

An open source project seeking to connect all computing devices with the same peer-to-peer distributed file system, enabling the creation of distributed applications.

Java

An Oracle (formerly Sun Microsystems) general purpose programming language.

Kotlin

A programming language that runs on the Java virtual machine.

Light node

A computer on a blockchain network that only verifies a small number of transactions relevant to it, making use of the simplified payment verification (SPV) mode

Lightning Network

A decentralised network that attempts to solve the bitcoin scalability problem using smart contracts to enable instant payments.

mBTC

1 thousandth of a bitcoin (0.001 BTC).

Microtransaction

A very small payment for a product or service online that is difficult using conventional payment systems because of their large commissions. Microtransactions are a commonly-cited use case for public, permissionless blockchains like Bitcoin which are more efficient at processing online transactions between untrusted parties for low fees.

Mining

The act of validating a block of transactions in a proof of work blockchain using computing power. Usually rewarded with the blockchain’s tokens or coins.

Mixing service

Also known as a tumbler, this kind of service is common on the Bitcoin blockchain. It mixes different customer’s cryptocurrency together, sending back bitcoins with different inputs and outputs from the ones that the customer sent. Used to obfuscate a particular coin’s origin and prevent forensic analysis of the Bitcoin’s provenance using a blockchain explorer.

Multi-signature

Multi-signature addresses provide an added layer of security by requiring more than one electronic signature to authorise a transaction.

Node

A copy of the distributed ledger operated by a participant of the blockchain network.

Nonce

When trying to mine a transaction block, miners repeatedly use random strings of data called nonces to find the right answer to a mathematical problem.

Oracles

Oracles source data needed by smart contracts from sources external to their blockchain. An oracle might read the price of wheat from an agricultural exchange and communicate it to a smart contract that would use the data to calculate a payout, for example.

Orphan block

Not all forks are intentional. In unintended forks, the fork with fewer blocks is eventually discarded. In this situation, an orphan block is the block on the discarded fork.

Paper wallet

A paper record of blockchain addresses and their private keys, often used by Bitcoin holders as a form of cold storage.

Peer to peer (P2P)

Direct interactions between parties in a network without a central intermediary. Popularized by Internet file sharing and by services like Skype.

Permissioned blockchain

A blockchain in which participants must be authorized to verify transactions.

Permissionless blockchain

A blockchain in which any participant may verify a transaction.

Pool

A group of miners that collaborate to mine blocks and share the reward between them.

Public address

On public, permissionless blockchains, A public address is the cryptographic hash of a public key. They are published as a destination for transactions, but their contents can only be accessed when combined with a private key.

Public blockchain/public Ledger

A blockchain with no access restrictions. Anybody on the internet can access it.

Private blockchain/private Ledger

Only those invited by the network administrators can participate and see the data.

Private key

A secret alphanumeric string used to access a secret. In cryptocurrency, private keys grant access to the contents of a public address. In public key infrastructure (PKI), private keys are combined with public keys to create a digital signature.

Proof of Authority (PoA)

A consensus mechanism in a private blockchain giving one client/group of clients with a private key the right to verify all blocks.

Proof of Importance (PoI)

Proof-of-Importance is a blockchain consensus mechanism introduced by NEM. It functions similarly to proof-of-stake but means that hoarding coins (XEM) will result in a lower score. Being a merchant pays better than hoarding.

Proof of Stake (PoS)

A consensus validation method based on the number of tokens held.

Proof of Work (PoW)

A consensus validation method based on using computing power to mine transaction blocks.

Public key

An alphanumeric string used to encrypt messages for a recipient or to decrypt messages from that recipient. It must be used with a corresponding private key.

Ring signature

An attempt to make individual transactions on the blockchain untraceable. A message signed with a ring signature is endorsed by one of a ring (group) of people and it should be impossible to determine which of the group members’ keys was used.

Ripple

A currency transfer network that uses payment nodes and gateways to process payments.

Satoshi

A hundred millionth of a bitcoin. The smallest unit of Bitcoin, equal to 0.00000001 BTC

Satoshi Nakamoto

The name used by the original inventor of the Bitcoin protocol. Nakamoto ended their association with Bitcoin in 2010 and has never been definitively identified.

Scrypt

A cryptographic algorithm used by Litecoin for its proof of work. It favours CPU mining using a ‘memory-hard’ computing model, precluding ASIC miners from participating.

Segwit

Segregated Witness. This is a process created by bitcoin developer Pieter Wuille that removes signature data from bitcoin transactions to free up space in the block, increasing transaction capacity.

SHA-256

The Secure Hash Algorithm used by cryptocurrencies such as Bitcoin to calculate cryptographic hashes. It uses a lot of computing power, processing time and electricity.

Sidechains

Blockchains that are interoperable with each other and Bitcoin, pegged to Bitcoin.

Smart contracts

Smart contracts are blockchain-based programs. They encode business rules in a programmable language onto blockchains like Ethereum.

Soft fork

A fork that modifies a blockchain’s rules while still working with older blockchain mining clients. Old mining clients will accept blocks mined by upgraded ones, but the upgraded clients will reject blocks mined by the older clients. This causes temporary forks in the blockchain that eventually resolve, and the fork mined by new clients wins, becoming the accepted blockchain. Eventually, all clients running the old software will upgrade.

Solidity

The programming language used to create smart contracts on Ethereum.

SPV

Simplified Payment Verification. On the Bitcoin blockchain, these are lightweight clients that only download the block headers and do not store the whole blockchain locally.

Stream ciphers

This is a method of encrypting data one bit at a time rather than in a block.

Stale block

A blockchain block that has already been successfully hashed.

Taint

A form of forensic analysis that correlates two addresses that have held the same bitcoin.

Testnet

A test blockchain used by developers so they don’t use assets on the main chain.

Token

A unit of cryptocurrency distributed on a blockchain. When called a token, it is typically used as a way to pay for services in a decentralized application.

Transaction block

A group of transactions that is confirmed as a single block in a blockchain.

Transaction fee

In proof of work-based systems, cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block.

Transactions per second (TPS)

A measure of how many transactions a single node is capable of participating in.

Turing complete

Turing complete refers to the ability of a machine, given enough time and memory, to solve any computational problem. An example of this is the Ethereum Virtual Machine (EVM), which would be Turing complete given an infinite amount of Ethereum gas.

Vanity address

A Bitcoin address with a desirable pattern, such as a name. Akin to vanity licence plates.

Visual Basic .NET (VB.NET)

A Microsoft programming language launched in 2002 as the successor to its original Visual Basic language.

Wallet

A store of public cryptocurrency addresses and private keys. Software versions can view and create transactions on a specific blockchain for which the wallet was designed.

Zero-confirmation transaction

A transaction on the Bitcoin network that has not yet been confirmed on the blockchain. It can carry a risk of double spending. In practice, many merchants and exchanges will require confirmation in multiple blocks before considering a transaction complete.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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