Blockchain begins by building a better understanding of the accompanying terminology. Explore all the important terms pertaining to blockchain and cryptocurrency to form a greater appreciation of the ecosystem and its features.
A long string of letters and numbers that are used to send or receive payments on a cryptocurrency network. Bitcoin addresses start with a 1 or 3; while Ethereum addresses start with “0x.”
An altcoin is a common name for any digital currency that was launched after the success of bitcoin. The success of Bitcoin as the first peer-to-peer cryptocurrency paved the way for many others to follow such as Litecoin, Ethereum, and Ripple. As the term “altcoins” collectively refers to all digital currencies which are not Bitcoin there are more than 1000 altcoins currently in existence. Although early examples included Ethereum, Litecoin, and Ripple, these coins are now more widely considered leading cryptocurrencies and not commonly referred to as altcoins.
Artificial Intelligence is a technical concept that seeks to integrate human knowledge into computer-controlled machines.
The first decentralized cryptocurrency (BTC) created by Satoshi Nakamoto in 2008. Allows you to send and receive money without having to pass through a middleman like a bank. Bitcoins are created through a process known as “mining” that requires large amounts of computer processing power.
A decentralised, digital, and shared ledger where transactions in value or information are permanently recorded in chronological order by appending blocks.
Refers to a collection of data related to transactions that have happened during a specified period of time (10 minutes for bitcoin), which are then bundled together and appended (added) to the blockchain.
A confirmation signifies that a bitcoin transaction has been successfully been verified by the network through the process of mining. Once a transaction has been confirmed, it can neither be reversed nor double spent.
An automated process by which blockchain participants agree on which transactions happened and in what order, ensuring that the ledgers remain exactly alike.
A type of digital currency that is typically decentralized and uses cryptographic encryption to ensure security.
A branch of mathematics and computer science. Refers to the process of encryption, by which ordinary information (called plaintext) is converted in to unintelligible text (called ciphertext).
Fundraising method that attempts to incorporate the best features of a Decentralised Autonomous Organization (DAO) with those of an Initial Coin Offering (ICO) in order to create a structure that results in more effective token sale.
The Decentralised Autonomous Organization (DAO) can be thought of as an organisation that runs without any human intervention, surrendering all levels of control to an incorruptible set of business rules.
Acronym for decentralised application. It is an open source application that operates autonomously and has its data stored on a Blockchain. Ethereum is the largest decentralized application platform.
A state where there is no central power, control or function.
Refers to how easily a data block of transaction information can be successfully mined.
Process of removing the intermediary or middleman from financial transactions. Cryptocurrency is a “disintermediating technology.”
An open-source, decentralized blockchain network that helps developers build and publish distributed applications. The Ethereum token is termed as “Ether,” representing a tradable asset that rewards contributors to the network.
Denotes a temporary or permanent situation whereby a blockchain splits in to two branches, either due to a change in consensus algorithm or some other software changes. Transactions can be lost during the process.
Essential process of blockchain management by which an input of letters and numbers are converted into an encrypted output of fixed length.
ICO is the abbreviation of Initial Coin Offering, and refers to the creation and sale of digital tokens. In an ICO, a cryptocurrency venture creates a digital coin or a token, which is thereafter offered for sale to the public, generally in exchange for other cryptocurrencies such as bitcoin or Ethereum.
Internet of Things (IoT) is an ecosystem of billions of connected physical devices from around the globe that are connected to the internet, collecting and sharing data. For example, a television that can be switched on and off using a smartphone app is an IoT device.
Signifies a state in which once data has been written to a blockchain, it can’t be changed. Useful for audit of databases of financial transactions.
In simple terms, a ledger is a large database that is spread across numerous sites and locations that is used to store transactional information.
An application of artificial intelligence that allows systems to automatically learn and improve from past experience, without being explicitly programmed.
Act of verifying and adding transactions to a Blockchain. In turn for their validation services, miners are rewarded, usually in the form of coins.
A participant in a blockchain network that hosts a copy of the entire blockchain and all related transactions.
Offline storage medium for cryptocurrency. A bitcoin paper wallet is a public and private key printed together on a physical document.
Proof of Work
An algorithm that rewards the first person (miner) who solves a computational problem to achieve distributed consensus.
Proof of Stake
Since Proof of Work requires substantial computer resources, an alternative called Proof of Stake has emerged, which is based on ownership of coins. The more one invests in a coin, the more he or she gains by mining with this protocol.
A string of numbers and letters that are used to receive cryptocurrency. It can be shared publicly, and works similar to a traditional bank account number.
Ripple is a technology that acts both as a cryptocurrency (XRP) and a digital payment network. Ripple proposes the use of XRP as a common currency underlying all money transfers between the various currencies. Not only are the transaction charges lower, the transfer time is also significantly lesser than conventional money transfer.
A very strong cryptographic standard that is used by Bitcoin, as well as other proof of work systems. SHA 256 is also the technology that protects digital wallets.
If a cryptocurrency token derives its value from an external, tradable asset, it is deemed to be a security token. Security tokens fall under the purview of regulations and security laws.
An automated mechanism by which decisions are made based on pre-set rules that later can’t be changed. The most well-known Smart Contract implementation is the Ethereum Virtual Machine (EVM) where these contracts are executed.
In the world of cryptocurrency, the term “Token” is broadly used to describe a unit of value for a particular blockchain-based product or service. Besides payment, tokens can be used for accessing and facilitating the overall infrastructure, purchasing utility, or investing in assets both digital and physical.
Full disclosure of all events or actions that take place in a system, to all participants of that system. The shared blockchain ledger ensures transparency for users who transact in cryptocurrency, by providing a system whereby each transaction is inscribed permanently onto the ledger for all to see. Ledgers typically update for each participant in real-time with each new transaction and cannot be altered. This is the backbone of a decentralized model in which users employ their own collective consensus, rather than the arbitration of a single authority, to transact safely, quickly, and accountably.
Tokens that are used for particular functions in specific systems. Best compared to a software license or a gift card, a token that allows you access a certain amount of cloud storage is an example of a utility token.
Refers to an individual who owns a very large amount of a cryptocurrency. If a “whale” sells a lot of his or her stake, it can significantly increase the supply in a market, causing the price of the cryptocurrency to dip.