Blockchain Glossary For Beginners - Blockchain Basics - BlockchainHub

2/6/2018 Blockchain Glossary for Beginners - Blockchain Basics - BlockchainHub
Glossary
A – B – C – D – E – F – G – H – I – J – K – L – M – N – O – P – Q – R – S – T – U – V – W –
X–Y–Z
A

Altcoins
Altcoin is an abbreviation of “Bitcoin alternative”. Currently, the majority of altcoins are forks of
Bitcoin with usually minor changes to the proof of work (POW) algorithm of the Bitcoin
blockchain. The most prominent altcoin is Litecoin. Litecoin introduces changes to the original
Bitcoin protocol such as decreased block generation time, increased maximum number of coins and
di erent hashing algorithm
ASIC
An “Application Speci c Integrated Circuit” is a silicon chip speci cally designed to do a single task.
In the case of Bitcoin, they are designed to process SHA-256 hashing problems to mine new
bitcoins. ASICs are considered to be much more e cient than conventional hardware(CPUs, GPUs).
Using a regular computer for Bitcoin mining is seen as unpro table and only results in higher
electricity bill
B

Bitcoin
is a cryptocurrency that runs on a (1) global peer to peer network, is (2) decentralised (no single
entity can control it), it’s (3) open source (wallet & transaction veri cation), (4) bypassing
middlemen or central authority, with (5) no issuer or acquirer, (6) anyone with a computer or
smartphone can use it
Bitcoin ATM
A cash point where people can trade at currency and bitcoins
Blockchain
Shared, trusted, public ledger of transactions, that everyone can inspect but which no single user
controls. It is a cryptographed, secure, tamper-resistant distributed database. It solves a complex
mathematical problem to exist. A blockchain is a perfect place to store value, identities, agreements,
https://blockchainhub.net/blockchain-glossary/ 1/14
property rights, credentials, etc. Once you put something like a Bitcoin into it, it will stay there
forever. It is decentralized, disintermediated, cheap and censorship-resistant. Applications of
Blockchain: Bitcoin (cryptocurrency), Namecoin (wants to replace the entire DNS system of the
Internet), or Sia (a decentralized cloud storage), Ethereum (Turing complete Virtual Machine where
you can run any smart contract); Any centralized service like eBay, Dropbox can potentially be built
in a decentralized way using blockchain technology, considerably lowering transaction costs
Block (on the Bitcoin Blockchain)

Data is permanently recorded on the Bitcoin network through les called blocks. A block is a record
of some or all of the most recent Bitcoin transactions that have not yet been recorded in any prior
blocks. New blocks are added to the end of the record (known as the blockchain), and can never be
changed or removed once written (although some software will remove them if they are orphaned).
Each block memorializes what took place in the minutes before it was created. Each block contains a
record of some or all recent transactions and a reference to the block that came immediately before
it. It also contains an answer to a di cult-to-solve mathematical puzzle – the answer to which is
unique to each block. New blocks cannot be submitted to the network without the correct answer –
the process of “mining” is essentially the process of competing to be the next to nd the answer
that “solves” the current block. The mathematical problem in each block is extremely di cult to
solve, but once a valid solution is found, it is very easy for the rest of the network to con rm that
the solution is correct. There are multiple valid solutions for any given block – only one of the
solutions needs to be found for the block to be solved. Because there is a reward of brand new
bitcoins for solving each block, every block also contains a record of which Bitcoin
addresses or scripts are entitled to receive the reward. This record is known as a generation
transaction, or a coinbase transaction, and is always the rst transaction appearing in every block.
The number of Bitcoins generated per block starts at 50 and is halved every 210,000 blocks (about
four years). Bitcoin transactions are broadcast to the network by the sender, and all peers trying to
solve blocks collect the transaction records and add them to the block they are working to solve.
Miners get an incentive to include transactions in their blocks because of attached transaction fees.
The di culty of the mathematical problem is automatically adjusted by the network, such that it
targets a goal of solving an average of 6 blocks per hour. Every 2016 blocks (solved in about two
weeks), all Bitcoin clients compare the actual number created with this goal and modify the target
by the percentage that it varied. The network comes to a consensus and automatically increases (or
decreases) the di culty of generating blocks. Because each block contains a reference to the prior
block, the collection of all blocks in existence can be said to form a chain. However, it’s possible for
the chain to have temporary splits – for example, if two miners arrive at two di erent valid solutions
for the same block at the same time, unbeknownst to one another. The peer-to-peer network is
designed to resolve these splits within a short period of time so that only one branch of the chain
survives. The client accepts the ‘longest’ chain of blocks as valid. The ‘length’ of the entire
blockchain refers to the chain with the most combined di culty, not the one with the most blocks.
This prevents someone from forking the chain and creating a large number of low-di culty blocks
and having it accepted by the network as ‘longest’
Block explorer
An online tool for exploring the blockchain of a particular cryptocurrency, where you can watch and
follow live all the transactions happening on the blockchain. Block explorers can serve as blockchain
analysis and provide information such as total network hash rate, coin supply, transaction growth,
etc.
Block reward
An amount of crypto-currency a miner receives for processing transactions in a given block. Because
creating (or “mining”) blocks is so crucial to the security of the Bitcoin network and yet so hard, the
Bitcoin protocol includes a mechanism to encourage people to mine: every time a block is added, the
miner who found the block is given 12,5 BTC(this number will change at the next halving in 2020) as a
block reward
C

Chain linking
Chain linking is the process of connecting two blockchains with each other, thus allowing
transactions between the chains to take place. This will allow blockchains like Bitcoin to
communicate with other sidechains, allowing the exchange of assets between them
Client
A software program a user executes on a desktop, laptop or a mobile device to launch an application
Cloud Mining
Classical cryptocurrency mining requires huge investments in hardware and electricity. Cloud mining
companies aim to make mining accessible to everybody. People just can log in to a website and
invest money in the company which already has mining datacenters. The money is managed by the
company and it is invested in mining equipment. Investors get a share of the revenue. The
disadvantage for the user is that cloud mining has low returns compared to traditional mining.
Consensus (general)
A fundamental problem in distributed computing is to achieve overall system reliability in the
presence of a number of faulty processes. This often requires processes to agree on some data value
that is needed during computation. The consensus problem requires agreement among a number of
processes for a single data value. Some of the processes may fail or be unreliable in other ways, so
consensus protocols must be fault tolerant. The processes must somehow put forth their candidate
values, communicate with one another, and agree on a single consensus value. The bitcoin
blockchain uses electricity to ensure the security of the system. It creates an economic system where
you can only participate by incurring costs, Proof of work (POW). You do that for the possibility of
reward/bitcoin. If you spend money, and you play fair by the rules, you get money back. If you cheat,
you lose money. It doesn’t pay to cheat. This simple game theoretical equilibrium is the core of the
bitcoin consensus algorithm
Consensus (Bitcoin’s Process Consensus)

Developers suggest bitcoin improvements/modi cations, small or big, proposals on Github,
Bitcointalk, Reddit, mailing lists, etc. Discussion on this level is critical to enable smooth runtime
consensus transitions.Modi cations with reference implementations get tested on the testnet.
After successful testing developers implement the changes into the Bitcoin software. Who has a say
in the consensus process?: (1) Software Developers (do the reference implementations), (2) Miners
(Runtime consensus for mining blocks), (3) Exchanges (They run nodes that validate transactions),
(4) Wallet companies (create transactions run on nodes), (5) Merchants (Merchant processing also
through nodes)
Consortium blockchains
A consortium blockchain is a blockchain where the consensus process is controlled by a pre-selected
set of nodes; for example, one might imagine a consortium of 15 nancial institutions, each of which

operates a node and of which ten must sign every block for the block to be valid. The right to read
the blockchain may be public or restricted to the participants. There are also hybrid routes such as
the root hashes of the blocks being public together with an API that allows members of the public to
make a limited number of queries and get back cryptographic proofs of some parts of the blockchain
state. These blockchains may be considered “partially decentralized”
Cryptographic Hash Function

iThe cryptographic hash function is a mathematical algorithm that takes a particular input which can
be any kind of digital data be it a password or jpeg le and produces a single xed length output.
Some examples of di erent hash function algorithms are MD5, MD4 or SHA256. The last one is used
in the Bitcoin protocol. Main properties: (1) easy to compute hash value for any given message (2)
infeasible to generate a message from its hash except by trying all possible input
combinations(brute force attack) (3) infeasible to modify a message without changing the hash (4)
infeasible to nd two di erent messages with the same hash (5) deterministic so the same message
always results in the same hash. Cryptographic hash functions have many information security
applications, notably in digital signatures, message authentication codes (MACs), and other forms of
authentication. They can also be used as ordinary hash functions, to index data in hash tables, for
ngerprinting, to detect duplicate data or uniquely identify les, and as checksums to detect
accidental data corruption
Cryptojacking
Cryptojacking is referred as a secret use of a device to mine cryptocurrency. The rst widely known
attempt for cryptojacking was the torrent tracker Piratebay. They enabled an in-browser mining software
so when somebody visits the website his/her computer will start mining cryptocurrency via the browser.
Users started noticing the unusual behavior in their browsers and Piratebay took down the software.
There have been many attempts for cryptojacking since then. The easiest way to nd out if a computer is
mining cryptocurrency is to check the resources monitor for unusual CPU behavior or using the debug
console of your browser an look for mining scripts. Developers also released Chrome browser extensions
to protect users from mining occurring on their devices.
D

dApp (decentralized application)

For an application to be considered a Dapp or decentralized application it must meet the following
criteria (1) Application must be completely open-source, it must operate autonomously, and with no
entity controlling the majority of its tokens. The application may adapt its protocol in response to
proposed improvements and market feedback, but all changes must be decided by consensus of its
users. (2) Application data and records of operation must be cryptographically stored in a public,
decentralized blockchain in order to avoid any central points of failure. (3) The application must use
a cryptographic token (bitcoin or a token native to its system) which is necessary for access to the
application, and any contribution of value from miners/farmers should be rewarded with the
application’s tokens. (4) The application must generate tokens according to a standard cryptographic
algorithm acting as a proof of the value nodes are contributing to the application (Bitcoin uses the
Proof of Work Algorithm)
DAOs (Decentralized Autonomous Organization)

fully automated business entity (FAB), or distributed autonomous corporation/company (DAC) is a
decentralized network of narrow-AI autonomous agents which perform an output-maximizing
production function and which divides its labor into computationally intractable tasks (which it
incentivizes humans to do) and tasks which it performs itself. It can be thought of as a corporation
run without any human involvement under the control of an incorruptible set of business rules.
These rules are typically implemented as publicly auditable open-source software distributed across
the computers of their stakeholders. A human becomes a stakeholder by buying stock in the
company or being paid in that stock to provide services for the company. This stock may entitle its
owner to a share of the pro ts of the DAO, participation in its growth, and/or a say in how it is run…
Digital Signature
Private keys are used for signing transactions. Each time a transaction is sent over the blockchain it
gets signed by the user’s private key. The signed transaction is broadcasted over the network
together with the corresponding public key. Each miner is able to verify the signature by verifying
the signature with the public key.
Double Spending
Double-spending is the result of successfully spending some money more than once. Bitcoin is the
rst to implemented a solution in early 2009 which protects against double spending by verifying
each transaction added to the blockchain to ensure that the inputs for the transaction had not
previously already been spent
E

Ethereum
Ethereum is an open software platform based on blockchain technology that enables developers to
write smart contracts and build and deploy decentralized applications(Dapps). The native token of
the blockchain is called Ether which is used to pay for transaction fees, miner rewards and other
services on the network. The main innovation of Ethereum is the Ethereum Virtual Machine (EVM)
which runs on the Ethereum network and enables anyone to run any application. The EVM makes the
process of developing blockchain applications much easier. Before the emergence of Ethereum
developers had to develop a dedicated blockchain for each application they wanted to create. This
process is time-consuming and resource-intensive. Ethereum will enable the development of many
applications on the same platform, making the process much easier and accessible for developers.
The Ethereum Project, based in Switzerland, raised millions in seed money by pre-mining and selling
ethers to supporters & investors. As opposed to Bitcoin, its scripting language is Turing-
complete and full-featured, expanding the kinds of smart contracts that it can support. The
Ethereum project wants to “decentralize the web” by introducing four components as part of its
roadmap: static content publication, dynamic messages, trustless transactions and an integrated
user-interface
F

Fiat currency
Any money declared by a government to be to be valid for meeting a nancial obligation, like USD or
EUR
Fork
The creation of an ongoing alternative version of the blockchain, by creating two blocks
simultaneously on di erent parts of the network. This creates two parallel blockchains, where one
of the two is the winning blockchain. The winning blockchain gets determined by its users, by the
majority choosing on which blockchain their clients should be listening
G
Genesis block
The very rst block in the blockchain
H

Hardfork
A hardfork is a change to the blockchain protocol that makes previously invalid blocks/transactions
valid, and therefore requires all users to upgrade their clients. The most recent example of a
hardfork in public blockchains is the Ethereum hardfork which happened on July 21st, 2016. The
hardfork changed the Ethereum protocol, therefore a second blockchain emerged (Ethereum Classic,
ETC) which supports the old Ethereum protocol. In order to continue existing ETC needs miners,
which would validate the transactions on the blockchain
Hashcash
is a proof-of-work system used to limit email spam and denial-of-service attacks, and more recently
has become known for its use in bitcoin (and other cryptocurrencies) as part of the mining algorithm.
Hashcash was proposed in May 1997 by Adam Back
Halving
A reduction in the block reward given to crypto-currency miners once a certain number of blocks
have been mined. The Bitcoin block mining reward halves every 210,000 blocks
I
Initial Coin O ering (ICO)
ICOs are types of crowdfunding mechanisms conducted on the blockchain. Originally, the main idea
of an ICO was to fund new projects by pre-selling coins/tokens to investors interested in the project.
Entrepreneurs present a whitepaper describing the business model and the technical speci cations
of a project before the ICO. They lay out a timeline for the project and set a target budget where
they describe the future funds spending (marketing, R&D, etc.) as well as coin distribution (how
many coins are they going to keep for themselves, token supply, etc.). During the crowdfunding
campaign, investors purchase tokens with already established cryptocurrencies like Bitcoin and
Ethereum.
IPFS
The InterPlanetary File System (IPFS) is a hypermedia distribution protocol, addressed by content
and identities. IPFS enables the creation of completely distributed applications. It aims to make the
web faster, safer, and more open. IPFS is an open source project developed by the team at
Interplanetary Networks and many contributors from the open source community. It is a peer-to-
peer distributed le system that seeks to connect all computing devices with the same system of
les. In some ways, IPFS is similar to the Web, but IPFS could be seen as a single BitTorrent swarm,
exchanging objects within one Git repository. In other words, IPFS provides a high throughput
content-addressed block storage model, with content-addressed hyperlinks. This forms a
generalized Merkle DAG, a data structure upon which one can build versioned le systems,
blockchains, and even a Permanent Web. IPFS combines a distributed hash table, an incentivized
block exchange, and a self-certifying namespace. IPFS has no single point of failure, and nodes do
not need to trust each other
J

K

L

Light Node
A computer on a blockchain network that only veri es a limited number of transactions relevant to
its dealings, making use of the simpli ed payment veri cation (SPV) mode
Lightning Network
The Lightning network is a decentralized network using smart contract functionality on the
blockchain to enable instant payments across a network of participants. The Lightning Network will
allow bitcoin transactions to happen instantly, without worrying about block con rmation times. It
will allow millions of transactions in a few seconds, at low costs, even between di erent blockchains,
as long as both chains use the same cryptographic hash function. The Lightning network will allow
two participants on the network to create a ledger entry, conduct a number of transactions between
themselves and after the process has nished, record the state of the transactions on the
blockchain. As for now, the bitcoin network is capable of processing up to 7 transactions per second.
The Visa payment network, for instance, is believed to complete 45,000 transactions per second
during a regular holiday period. This protocol tries to solve the bitcoin scalability problem
M

Merkle tree
The basic idea behind Merkle tree is to have some piece of data that is linking to another. You can do
this by linking things together with a cryptographic hash. The content itself can be used to
determine the hash. By using the cryptographic hashing we can address the content, and content
gets immutable because if you change anything in the data, the cryptographic hash changes and the
link will be di erent. Bitcoin uses cryptographic hashing, where every block points to the previous
one if you modify the block, the hash will change and will make the block invalid
Mining (Bitcoin)
Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions or
blockchain. This ledger of past transactions is called the blockchain as it is a chain of blocks. The
blockchain serves to con rm transactions to the rest of the network as having taken place. Bitcoin
nodes use the blockchain to distinguish legitimate Bitcoin transactions from attempts to re-spend
coins that have already been spent elsewhere. Mining is intentionally designed to be resource-
intensive and challenging so that the number of blocks found each day by miners remains steady.
Individual blocks must contain a proof of work to be considered valid. This proof of work is veri ed
by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work
function. The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant
consensus. Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid
any transaction fees as well as a “subsidy” of newly created coins. This both serves the purpose of
disseminating new coins in a decentralized manner as well as motivating people to provide security
for the system
Mining Di culty
Mining di culty measures how hard it would be to nd the next Bitcoin block. Every proof of work
consensus algorithm has a mining di culty which is also adjustable. Depending on how many miners
join the network the di culty might rise or fall. The aim of the di culty is to keep the block times
even and make the network secure. The average time for nding a Bitcoin block is set for 10
minutes. Litecoin is set for 2.5 minutes.
Mining Pool
In a mining pool, di erent users organize together in order to provide computing power for the
bitcoin network. If a Bitcoin block is newly created, each of the users in the mining pool receives its
fair share proportionately to his mining power. To become a member of a mining pool, the user
needs to run software provided by the mining pool. The advantage of the mining pools is that block
rewards get distributed across the pool providing more stable income.
N

Node (Full Node)

Any computer that connects to the blockchain network is called a node. Nodes that fully enforce all
of the rules of the blockchain (i.e., Bitcoin) are called full nodes. Most nodes on the network are
lightweight nodes instead of full nodes, but full nodes form the backbone of the network
O

Oracles
Smart contracts on the blockchain cannot access the outside network on their own. Therefore
oracles sit between a smart contract and the external world, providing the data needed by the smart
contract to prove performance while sending its commands to external systems
P

Private Blockchains
a fully private blockchain is a blockchain where write permissions are kept centralized to one
organization. Read permissions may be public or restricted to an arbitrary extent. Likely applications
include database management, auditing, etc. internal to a single company, and so public readability
may not be necessary in many cases at all, though in other cases public auditability is desired
Private key
Each time a user runs a cryptocurrency wallet for the rst time a public-private key pair gets
generated. The private key is a randomly generated number which allows users to transact over the
blockchain. It is locally stored and kept secret. Each time a Bitcoin gets sent a private key has to sign
the transaction. This action is automatically executed by the wallet software. When a wallet asks
users to do a backup what this means is that the users must secure their private key. There are
di erent types of wallets such as online wallets, mobile wallets, desktop wallet, hardware wallets or
paper wallets. The category of each wallet is determined by where private keys are stored. Online
wallets are mostly provided by exchanges and keep user’s private keys on their servers. If the service
provider goes o ine users would lose access to their funds. Hardware wallets for example store
user’s private keys in a secure device which looks like a USB ash drive.
Proof of Authority(PoA)
A Proof of authority is a consensus mechanism in a private blockchain which essentially gives one
client(or a speci c number of clients) with one particular private key the right to make all of the
blocks in the blockchain
Proof of Stake
Proof-of-stake (PoS) is a method by which a cryptocurrency blockchain network aims to achieve
distributed consensus. While the proof-of-work (PoW) method asks users to repeatedly run hashing
algorithms or other client puzzles, to validate electronic transactions, proof-of-stake asks users to
prove ownership of a certain amount of currency (their “stake” in the currency). Peercoin was the
rst cryptocurrency to launch using proof-of-Stake. Other prominent implementations are found in
BitShares, Nxt, BlackCoin, NuShares/NuBits and Qora. Ethereum has planned a hard fork transition
from PoW to PoS consensus. Decred hybridizes PoW with PoS and combines elements of both in an
attempt to garner the bene ts of the two systems and create a more robust notion of consensus.
With Proof of Work, the probability of mining a block depends on the work done by the miner (e.g.
CPU/GPU cycles spent checking hashes). In the case of Bitcoin, with Proof of Stake, the resource
that’s compared is the amount of Bitcoin a miner holds – someone holding 1% of the Bitcoin can
mine 1% of the “Proof of Stake blocks”. Instead of sacri cing energy to mine a block, a user must
prove they own a certain amount of the cryptocurrency to generate a block. The more stake you
own, the more likely you are to generate a block. In theory, this should prevent users from creating
forks because it will devalue their stake and it should save a lot of energy. Proof of Stake sounds like
a good idea, but ironically, there is the “Nothing at Stake” problem. Since mining Bitcoins is costly, it
is not smart to waste your energy on a fork that won’t earn you any money, however with Proof of
Stake, it is free to mine a fork
Proof of Work
POW system/protocol/function is an economic measure to deter denial of service attacks and other
service abuses such as spam on a network by requiring some work from the service requester,
usually meaning processing time by a computer. The concept may have been rst presented by
Cynthia Dwork and Moni Naor in a 1993 journal. The term “Proof of Work” was rst coined and
formalized in a 1999 paper by Markus Jakobsson and Ari Juels. A key feature of these schemes is
their asymmetry: the work must be moderately hard (but feasible) on the requester side but easy to
check for the service provider. This idea is also known as a CPU cost function, client puzzle,
computational puzzle or CPU pricing function
Public Blockchains
a public blockchain is a blockchain that anyone in the world can read, anyone in the world can send
transactions to and expect to see them included if they are valid, and anyone in the world can
participate in the consensus process – the process for determining what blocks get added to the
chain and what the current state is. As a substitute for centralized or quasi-centralized trust, public
blockchains are secured by crypto economics – the combination of economic incentives and
cryptographic veri cation using mechanisms such as proof of work or proof of stake, following a
general principle that the degree to which someone can have an in uence in the consensus process
is proportional to the quantity of economic resources that they can bring to bear. These blockchains
are generally considered to be “fully decentralized”
Q

R

Ring Signature
Ring signature is a cryptographic technology that could provide a decent level of anonymisation on a
blockchain. Ring signatures make sure individual transaction outputs on the blockchain can’t be
traced. A message signed with a ring signature is endorsed by someone in a particular group of
people. One of the security properties of a ring signature is that it should be computationally
infeasible to determine which of the group members’ keys was used to produce the signature
S

Satoshi
The smallest unit of Bitcoin, equal to 0.00000001 BTC
Satoshi Nakamoto
is a person or group of people who created the bitcoin protocol and reference software, Bitcoin Core
(formerly known as Bitcoin-Qt). In 2008, Nakamoto published a paper on The Cryptography Mailing
list at metzdowd.com describing the bitcoin digital currency. In 2009, they released the rst bitcoin
software that launched the network and the rst units of the bitcoin cryptocurrency, called bitcoins
SHA (Secure Hash Algorithm)

is a family of cryptographic hash functions published by the National Institute of Standards and
Technology (NIST) as a U.S. Federal Information Processing Standard (FIPS). SHA256 is an algorithm
used in Bitcoin that takes an input of any size which can be any form of data(text, jpeg, pdf, etc.),
mixes it up and creates a xed size output(a hash) which is 256-bit (32-byte) long . You can think of
the hash as the ngerprint of the data. Hashes are one-way functions – they cannot be decrypted
back. The only way to decrypt a hash is by brute forcing it. Brute force means to systematically try all
the combinations for an input. Brute force attack will always nd the input, no matter its complexity.
The downside is whether or not you will still be alive when it nally guesses it
Smart contracts
are computer protocols that facilitate, verify, or enforce the negotiation or performance of
a contract, or that obviate the need for a contractual clause. Smart contracts usually also have a user
interface and often emulate the logic of contractual clauses. Proponents of smart contracts claim
that many kinds of contractual clauses may thus be made partially or fully self-executing, self-
enforcing, or both. Smart contracts aim to provide security superior to traditional contract law and
to reduce other transaction costs associated with contracting
Sidechains
are blockchains that are interoperable with each other and with Bitcoin, avoiding liquidity shortages,
market uctuations, fragmentation, security breaches and outright fraud associated with alternative
crypto-currencies. “Sidechains are new blockchains which are backed by Bitcoins, via Bitcoin
contracts, just as dollars and pounds used to be backed by cold hard gold. You could in principle have
thousands of sidechains “pegged” to Bitcoin, all with di erent characteristics and purposes … and
all of them taking advantage of the scarcity and resilience guaranteed by the main Bitcoin
blockchain, which in turn could iterate to implement experimental sidechain features once they have
been tried and tested…” more
Softfork
A softfork is a change to the bitcoin protocol wherein only previously valid blocks/transactions are
made invalid. Since old nodes will recognize the new blocks as valid, a softfork is backward-
compatible. This kind of fork requires only a majority of the miners upgrading to enforce the new
rules
Solidity
Solidity is a programming language designed for developing smart contracts. Its syntax is similar to
that of JavaScript, and it is intended to compile into bytecode for the Ethereum Virtual
Machine(EVM)
SPV(Simpli ed Payment Veri cation) client

SPV clients are Bitcoin lightweight clients which do not download and store the whole blockchain
locally. These wallets provide a way to verify payments without having to download the complete
blockchain. An SPV client only downloads the block headers by connecting to a full node
State Channel
State channels are interactions which get conducted o the blockchain without signi cantly
increasing the risk of any participant. Moving these interactions o of the chain without requiring
any additional trust can lead to signi cant improvements in cost and speed. State channels work by
locking part of the blockchain state so that a speci c set of participants must completely agree with
each other to update it
Swarm
Swarm is a distributed storage platform and content distribution service, a native base layer service
of the Ethereum web three stack. The primary objective of Swarm is to provide a decentralized and
redundant store of Ethereum’s public record, in particular, to store and distribute dApp code and
data as well as blockchain data
T

Token
In the context of Blockchains, a token is a digital identity for something that can be owned.
Historically, tokens started as meta information encoded in simple Bitcoin transactions, thereby
taking advantage of the Bitcoin blockchain’s strong immutability. At a protocol layer, tokens were
outsourced extensions to Bitcoin’s core protocol. Instead of being integrated as a feature on a
software level, those tokens were created by misappropriating data elds in Bitcoin transactions
(such as encoding data in the amount or op_return eld). Today, modern tokens are created as
sophisticated smart contract systems with complex permission systems and interaction paths
attached. Smart contracts can be understood as software agents, which act deterministically and
autonomously, within the scope of a given network, according to a prede ned rule set. If the
governance rules around issuance and management of a token are su ciently complex regarding
how they coordinate a group of stakeholders, token smart contracts may be understood as
organizations sui generis. The management rules may re ect those of known legal, organizational
entities such as stock corporations, but they do not have to
Testnet
a second blockchain used by developers for testing new versions of client software without putting a
real value at risk
Transaction Fees (Bitcoin)

may be included with any transfer of bitcoins from one address to another. At the moment, many
transactions are typically processed in a way where no fee is expected at all, but for transactions
which draw coins from many bitcoin addresses and therefore have a large data size, a small
transaction fee is usually expected. The transaction fee is processed by and received by the bitcoin
miner. When a new bitcoin block is generated with a successful hash, the information for all of the
transactions is included with the block, and all transaction fees are collected by that user creating
the block, who is free to assign those fees to himself. Transaction fees are voluntary on the part of
the person making the bitcoin transaction, as the person attempting to make a transaction can
include any fee or none at all in the transaction. On the other hand, nobody mining new bitcoins
necessarily needs to accept the transactions and include them in the new block being created. The
transaction fee is, therefore, an incentive on the part of the bitcoin user to make sure that a
particular transaction will get included in the next block which is generated. It is envisioned that
over time the cumulative e ect of collecting transaction fees will allow somebody creating new
blocks to “earn” more bitcoins that will be mined from new bitcoins created by the new block itself.
This is also an incentive to keep trying to create new blocks even if the value of the newly created
block from the mining activity is zero in the far future
Turing completeness
A machine is Turing complete if it can perform any calculation that any other programmable
computer is capable of. All modern computers are Turing-complete in this sense. The Ethereum
Virtual Machine (EVM) which runs on the Ethereum blockchain is Turing complete. Thus it can
process any “computable function”. It is, in short, able to do what you could do with any conventional
computer and programming language
U

V

W

Wallet
is a le that contains a collection of private keys and communicates with the corresponding
blockchain. Wallets contain keys, not coins. Wallets require backups for security reasons.
Whisper
Whisper is a part of the Ethereum p2p protocol suite that allows for messaging between users via
the same network that the blockchain runs on. The main task of whisper will be the provision of a
communication protocol between dapps
X

Y

Z

51% attack
A condition in which more than half the computing power of a cryptocurrency network is controlled
by a single malicious miner or group of miners. If he controls 51% of the network that makes him the
authority on the network, giving him the power to spend the same coins multiple times, issue
transactions that con ict with someone else’s or stop someone else’s transaction from being
con rmed
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Block (on the Bitcoin Blockchain)

Consensus (Bitcoin’s Process Consensus)

Cryptographic Hash Function

dApp (decentralized application)

DAOs (Decentralized Autonomous Organization)

Node (Full Node)

SHA (Secure Hash Algorithm)

SPV(Simpli ed Payment Veri cation) client

Transaction Fees (Bitcoin)

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