Annotated Blockchain Terminology

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ALTCOIN – Short for “Bitcoin alternative,” this is a quick way to describe the various cryptocurrencies not named Bitcoin.

BITCOIN – Created in 2009, Bitcoin is a cryptocurrency that is peer-to-peer and thus requires no middleman or third party.

BLOCK – A record of permanent transactions that cannot be edited or altered; this record will end up being added to the ledger and is considered an integral component of the blockchain.

BLOCKCHAIN – A distributed and decentralized ledger of transactions that everyone can view but that no single entity controls – one simple example is that of a shared spreadsheet where multiple persons can add data to subsequent cells but cannot edit what has already been added; the most common blockchain that people refer to is the Bitcoin blockchain.

CONSENSUS – The situation that occurs when several nodes all have the same blocks within their locally-validated blockchain.

CRYPTOCURRENCY – A medium of exchange that relies of encryption to verify the transfer of value, the evidence of which is added to the blockchain.

CRYPTOGRAPHIC HASH – A “digital fingerprint,” created by a complex mathematical algorithm, which makes input data virtually impossible to reverse engineer in a nefarious manner.

CRYPTOGRAPHIC HASH – A “digital fingerprint,” created by a complex mathematical algorithm, which makes input data virtually impossible to reverse engineer in a nefarious manner.

CRYPTOGRAPHY – The study of secure communication techniques that prevent the interception of data being communicated by unintended recipients.

CRYPTONYM – A primary public identifier; the keyed hash of a minimum attribute set for an identity.

DECENTRALIZED AUTONOMOUS ORGANIZATION (DAO) – An organization that is run based upon the rules which are set within specific “smart contracts”.

DISTRIBUTED LEDGER – A shared database that has multiple witnesses, virtually eliminating both fraud and double spending; a blockchain is a type of distributed ledger.

ETHER – The token of the Ethereum blockchain, Ether is mined in a manner similar to that of Bitcoin.

ETHEREUM – A decentralized blockchain network that runs “smart contracts:” applications that run exactly as programmed and which are based on a triggering event.

FIAT CURRENCY – Money which is deemed legal tender by a government and which can be used to settle a transaction (ex. USD, EUR, JPY).

GENESIS BLOCK – The first block in a blockchain.

HASH RATE – The measuring unit of the processing power of the Bitcoin network.

HIERARCHICAL DETERMINISTIC WALLET – A system of deriving keys from a single starting point (also referred to as a seed); this system allows a user to perform a wallet backup or restore a wallet without needing additional information.

INITIAL COIN OFFERING (ICO) – A popular (albeit unregulated) method of fundraising within the cryptocurrency world that avoids the need for a company to raise traditional venture capital.

MERKLE TREE – A binary tree of cryptographic hashes.

MINING – The method by which transactions are ultimately added to the blockchain; this process involves adding transactions together in one “block” and then solving a complex mathematical puzzle.

MULTI-SIG – A situation where more than one key is required in order to authorize a given transaction.

NODE – Typically a reference to a computer, this is what a member of the blockchain computer network is called.

ORACLE – A data feed that can be leveraged to import external data onto the blockchain.

PRACTICAL BYZANTINE FAULT TOLERANCE (PBFT) – An algorithm that is relied upon in order to establish consensus within a blockchain system.

PRIVATE KEY – A string of letters and numbers that allow you to send cryptocurrency to others.

PROOF OF STAKE (POS) – An alternate system to Proof of Work; the PoS system states that the more cryptocurrency possessed by a given miner, the more mining power he has.

PROOF OF WORK (POW) – A system that requires miners prove that they have utilized significant computing power to perform the validation of a given block; PoW makes it extremely difficult to alter any aspect of the blockchain, as doing so would require the re-mining of all subsequent blocks.

PUBLIC KEY – This is also a string of letters and numbers, but it is derived from your unique Private Key.

SATOSHI (UNIT) – Contrary to popular belief, Bitcoins can be broken up into smaller units; Satoshis are a one hundred millionth of a Bitcoin (.00000001 BTC).

SATOSHI NAKAMOTO – The official “creator of Bitcoin;” to date, nobody knows exactly who this person (or group of people) actually is.

SECURE ENCLAVE – A cryptographic co-processor, commonly seen within Apple devices, that enhances the security of a device even if the other processor is compromised in any way.

SECURE HASH ALGORITHIM-256 (SHA256) – A type of cryptographic hash function commonly used within blockchains.

SMART CONTRACTS – Digitally self-executing contracts that run on the Ethereum blockchain; a simple example is an “if this, then that (IFTTT)” contract.

VALIDATING NODE – A node which verifies a given transaction and then adds the transaction to the blockchain.

WALLET – Software which is used to store the private keys that you need in order to access & spend cryptocurrencies.

ZERO-KNOWLEDGE SUCCINCT NON-INTERACTIVE ARGUMENTS OF KNOWLEDGE (ZK SNARKS) – A form of cryptography that is used to verify the correctness of a computation without needing to execute the computation.

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