Explaining blockchain jargon
The world of cryptocurrency and blockchain has an extended jargon which might be inconvenient if you are just starting and want to explore all the coins. Here is a list of frequently used words to guide you. Please contact us if you come across a word that isn’t on this list: firstname.lastname@example.org.
Cryptocurrencies are the money valued communication method of a blockchain. It is used to grant access to a blockchain and to reward validators. The first generation of cryptocurrency is bitcoin. The second generation are the alternative coins that have a different type of blockchain technology. The third generations are tokens build on an existing blockchain.
A blockchain is a chain of blocks in which information and transactions are stored which makes it transparent. Blocks are made by validators and are hashed so they are irreversible. Blockchain is a blockchain based on a reward system of fees.
A blockchain protocol is the list of rules a computer has to follow to be part of a blockchain ecosystem.
Open source means that the source codes of software can be available to anyone with any purpose. Open Source software stimulates open collaboration.
Peer-to-peer network is a decentralized network of direct contact. Transactions are made without a third party.
Smart contracts are pieces of code that run without the reliance on a single entity, but on a network of entities. This code ensures censorship resistance, up-time and transparency.
Proof of work
Proof of work is a consensus mechanism that determines the miner of a next block in the form of mathematical puzzles. The cracking of the puzzle ensures security by proving that work had been done.
Proof of stake
Proof of stake is a consensus mechanism that determines the validator of a next block in the form of various stakes. This could be age, weight in tokens or randomness.This consensus mechanism costs less energy.
Public key is the official name of an address. It is a hash that codes the information. It is public so it can be used to receive transactions without giving anyone access.
A private key is a code that works together with the public key. This code is private because it gives full access to the stored value on the public key.
Transaction ID is the hashcode of a cryptocurrency transaction. It ensures that transactions are traceable and secure.
A hashcode is a code that comes out of an algorithm and works as a digital fingerprint. This code can be used to code information, without the possibility of decoding, so uniqueness and security can be ensured.
Exchanges are the online markets where cryptocurrencies can be bought and sold.
HODL is a typo-turned-term for holder of cryptocurrency and is used for someone who keeps a certain cryptocurrency out of the believe that the coin or token will grow in value (again). It became later an abbreviation of “Hold On for Dear Life”.
Mining is the creation of new blocks of transactions by proof of work or stake. The contenders are called miners and the person chosen to lead the next block gets a reward.
A scalable system is a system that keeps the same quality performance with increasing usage. Work and performance are kept in balance.
Tangle is an alternative for blockchain that is organised as a web of transactions that refer to each other, instead of being organized in a chronically ordered chain of blocks.
Gas only exist inside a virtual machine and is the measurement of the amount of work a validator has to process a transaction.Gas can be bought and that is the incentive reward for miners and validators. Gas ensures that validators are rewarded for their work, even when a transaction fails.
Fee is the incentive reward for miners or validators to process transactions this ensures that a network keeps running.
Out of gas
Out of gas means that the gas limit has been reached. This means that there was more gas needed to process the transaction, but not enough gas had been bought.
A wallet is a program that lets you interact with your public and your private key. (e.g. You can make transactions with a wallet)
Delayed proof of work
This is a proof of work mechanism that works on the energy of a normal proof of work mechanism. It is slower but eco-friendly and therefor ideal for smaller blockchains.
A slow start means that in the beginning of the blockchain the size of reward increases exponential with the number of blocks. Incentive is lower in the beginning, but the effect of security vulnerability is less.
A consensus mechanism is a way to come to an agreement on which transaction will be added into the next block. This concerns the agreement of value, identity of the leader, etc. A consensus mechanism must provide trust and security.
Crypto economics is a hybrid of different expertises and concerns everything that has been developed and innovated in the world of cryptocurrencies. These are the systems and applications that exist and are invented to improve the cryptocurrencies.
A full node is the backbone of a blockchain. A full node validates all transactions in a network and contains the complete transaction history.
A lite client only synchronizes necessary parts of the blockchain, so it doesn’t have to use as much storage and bandwidth and performs better on mobile devices for example
Virtual machine is a program that emulates a computer. Virtual machines are needed to execute smart contracts.
Ethereum Virtual Machine
Ethereum has its own Turing-complete virtual machine, called Ethereum Virtual Machine or the EVM. The EVM smart contracts are written in the programming language solidity.
Initial Coin Offerings (ICO)
ICO is the method for fundraising and distributing tokens.Participants of an ICO buy tokens generated by a start-up or a foundation.
A fork is a chain that separated from an older blockchain. It has the same origin and data of the older blockchain, but went a different way from that moment on.
A child chain is a type of blockchain that uses the security of the blockchain it’s linked to (the parent chain). All the transactions in a child chain are using the structure of the parent chain.
A side chain is an independent blockchain and provides its own security, but its technology is connected to the main blockchain.
ERC20 Token standard
ERC20 Token standard is a list of rules in a piece of code that ensures that tokens are created in the same way. This ensures compatibility with dApps and infrastructure.
A quick transaction is the usual way of exchange transactions.Quick transactions uses the current exchange rate. The outcome of a quick transaction is not fixed but variable.
A precise transaction is the opposite of a quick transaction.The amount of cryptocurrencies in the exchange transaction are determined in advance, so.the exchange rate is fixed for limited time, often a couple of minutes.
Solidity is a programming language developed for writing smart contracts. It is one of the four programming languages of Ethereum.
ERC721 Token standard
The ERC721 token standard allows non fungible assets to be created, which means that each asset has different properties,so every asset is unique. These assets are collector’s items.
Proof of Stake Velocity
Proof of Stake Velocity is a form of a proof of stake consensus mechanism, that combines a proof of stake with a proof of activity, so the validator with the most transactions is more likely to get chosen by the proof of stake.