Glossary

1. Blockchain

A decentralized and distributed ledger that records transactions across multiple computers in a way that ensures security, transparency, and immutability.

2. Node

A device or computer that participates in a blockchain network by storing and validating copies of the blockchain. There are different types of nodes (e.g., full nodes, light nodes).

3. Smart Contract

A self-executing contract with the terms directly written into code. These contracts automatically execute and enforce agreements without intermediaries when the specified conditions are met.

4. Consensus Mechanism

A protocol used by blockchain networks to achieve agreement on a single data value or transaction record among distributed processes. Common types include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).

5. Proof of Authority (PoA) is a consensus mechanism used in blockchain networks where a small number of trusted nodes are given the authority to validate transactions and create new blocks. In contrast to Proof of Work (PoW) or Proof of Stake (PoS), which rely on computational power or stake to validate transactions, PoA relies on the reputation and identity of validators.

6. Proof of Stake (PoS)

A consensus algorithm where validators are chosen to create new blocks based on the amount of cryptocurrency they hold and are willing to "stake" or lock up as collateral.

7. Gas

A fee required to execute a transaction or smart contract on the Ethereum network. It compensates the network participants for the computational resources they provide.

8. dApp (Decentralized Application)

An application that runs on a decentralized network like Ethereum. Unlike traditional applications, dApps are not hosted on centralized servers but rather on blockchain networks.

9. Private Key

A secret number that allows users to sign transactions and prove ownership of a blockchain address. It is critical for security, and if compromised, control of assets is lost.

10. Public Key

The cryptographic key that is shared publicly and is used to receive transactions. It is mathematically linked to the private key.

11. Address

A unique string of characters that represents a blockchain wallet, similar to a bank account number, where you can send or receive cryptocurrency.

12. Wallet

A software or hardware tool that stores public and private keys, allowing users to interact with various blockchain networks, such as sending or receiving cryptocurrencies.

13. Mining

The process of validating blockchain transactions and adding new blocks to the blockchain in a PoW system. Miners use computational power to solve complex problems in exchange for cryptocurrency rewards.

14. Fork

A change or divergence in the blockchain protocol, which results in two different chains. Forks can be "hard" (a permanent split, often creating a new cryptocurrency) or "soft" (a backward-compatible update).

15. Bridge

A mechanism that connects two separate blockchain networks, allowing assets or data to be transferred between them. This is crucial for interoperability between different blockchains like Ethereum and Solana.

16. Layer 1

The base layer or main blockchain protocol (e.g., Bitcoin, Ethereum) on which transactions are processed and smart contracts are executed.

17. Layer 2

A secondary protocol built on top of a Layer 1 blockchain to improve scalability and transaction throughput. Examples include Lightning Network (for Bitcoin) and Optimism (for Ethereum).

18. Validator

A participant in a Proof of Stake system responsible for validating transactions and adding new blocks to the blockchain. Validators are selected based on the amount of stake they hold.

19. Oracle

A service that provides off-chain data to smart contracts, enabling them to interact with the external world. For example, an oracle could provide the current price of an asset to a DeFi application.

20. Token

A digital asset that exists on a blockchain and can represent anything from cryptocurrencies (like Ethereum's ERC-20 tokens) to assets, services, or utilities.

21. DeFi (Decentralized Finance)

A movement that leverages decentralized networks and dApps to recreate traditional financial services such as lending, borrowing, and trading without intermediaries.

22. NFT (Non-Fungible Token)

A type of cryptographic token that represents a unique digital asset. NFTs are commonly used to represent ownership of digital art, collectibles, or virtual real estate.

23. Merkle Tree

A structure used in blockchain to efficiently and securely verify data. It allows for the quick verification of large data sets, ensuring that the data has not been tampered with.

24. Hash

A cryptographic function that takes an input and produces a fixed-length string, which appears random. Hashes are used to secure data, such as in the process of generating addresses and verifying transactions.

25. Immutable

A property of blockchain that means once a transaction is added to the ledger, it cannot be altered or deleted. This ensures the trustworthiness of the data.

26. Interoperability

The ability of different blockchain networks to communicate and work together. This often involves using cross-chain technology or bridges to transfer assets between blockchains.

27. Liquidity Pool

A pool of tokens locked in a smart contract that allows for trading between tokens on a decentralized exchange (DEX). Users can contribute to liquidity pools and earn a share of the trading fees.

28. Sharding

A scaling solution that involves splitting a blockchain network into smaller partitions, or "shards." Each shard processes its own transactions and smart contracts, which increases network throughput.

29. Decentralized Exchange (DEX)

An exchange that operates without a central authority, allowing peer-to-peer trading of cryptocurrencies directly between users via smart contracts.

30. Block

A group of transactions that are bundled together and added to the blockchain. Each block contains a reference to the previous block, forming a chain of blocks (hence the name "blockchain").

31. Genesis Block

The very first block of a blockchain. It serves as the foundation for all subsequent blocks in the chain.

32. Mainnet

The main network of a blockchain where actual transactions take place and have real-world value, as opposed to a testnet, which is used for testing and development.

33. Testnet

A blockchain network used by developers for testing and experimentation. Transactions on testnets do not involve real assets and have no value.

34. Gas Limit

The maximum amount of gas a user is willing to spend on a transaction. It is used to prevent users from overspending on transaction fees.

35. Staking

The process of locking up cryptocurrency in a Proof of Stake network to participate in block validation and earn rewards.

36. Whitepaper

A document that explains the technical and business details of a blockchain project or cryptocurrency. Bitcoin’s whitepaper, written by Satoshi Nakamoto, is one of the most famous examples.