| Term | Description |
|---|---|
| Encryption | Encryption is the process used by a blockchain network to encode its data in a way that makes that data unreadable to anyone or anything else. The data being encrypted is made useless without the appropriate key or formula to decrypt it back to the base data. |
| Decryption | Decryption is the opposite process to encryption, used by a blockchain network to translate the meaningless string back into its original form so that the receiving entity can see and use the data being sent. In a blockchain context, the decryption algorithm first has to validate that the receiving entity is the correct and rightful receiver, and will then decrypt the data for use. |
| Cryptocurrency / Crytpocoin |
Cryptocurrency and Cryptocoins are tradable digital assets that run on blockchain technology. Cryptocurrency is different to Fiat currency (normal money) in a few key ways, below:
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| Digital Currency | Digital currency (such as cryptocurrency or cryptocoins) are digital currencies where no actual physical currency is exchanged. Instead, data and balances relating to the sender and recipient is exchanged and verified using blocks on the blockchain. |
| Bitcoin | Bitcoin is a decentralised blockchain that transacts tokens between accounts and is the original blockchain-based cryptocurrency. Bitcoin uses Unspent Transaction Outputs (UTXOs) to store data and a Proof-of-Work (PoW) consensus algorithm. |
| Ethereum | Ethereum is a decentralized Blockchain 2.0 chain. It was the first major smart contract platform and has widespread support from Fortune 500 companies through the Ethereum Enterprise Alliance (EEA). Ethereum uses a Proof-of-Stake (PoS) consensus algorithm, and is the primary chain through which NFTs are bought and sold on marketplaces. |
| Proof of Work | Proof of Work (PoW) is one of the most widely known consensus algorithms, which acts as a verification of all transactions completed within that block. Whenever the blockchain network has a new block to verify and publish it will engage the PoW algorithm and 'miners' will begin the process of 'solving' the block. In order to do that, a significant amount of computational power is required to solve a mathematical sum and since a substantial amount of resources are spent in the form of energy (i.e. work done), the network rewards the miner who does this exhausting job with a payment. |
| Proof of Stake | Proof of Stake (PoS) is another consensus algorith, one which the Ethereum network has recently moved to. Proof of Stake consumes less energy than Proof of Work and is actually more decentralized. Under this algorithm, the age and stake value of the node are determined randomly before selecting it to verify and publish a block on the chain. |
| Blocks | Blockchains are made up entirely around the concept of blocks! Every record of every transaction, transfer, balance, wallet user, or other piece of data that occurs within the blockchain network, is stored inside a single block. Every new bit of information generated on the blockchain gets stored inside the latest new block, and is then verified using a consensus algorithm and recorded forever on the blockchain. |
| Blockchain | To continue on from 'blocks', above - once a block has been filled with data and verified by an algorithm (ie. mining), it is added to the blockchain and linked to its predecessor. This creates a chain of blocks that are all sequentially linked together and are immutable and unchanging. Hence, the blockchain! |
| Mining | Mining is used primarily in Proof of Work consensus algorithms, and is the process through which a new block is 'solved'. Whenever the blockchain network has a new block to verify and publish it will engage the PoW algorithm and 'miners' will begin the process of 'solving' the block. Once solved, that block is fully verified and added to the blockchain - there is no reversal for that operation, it is final and recorded on the blockchain. |
| Tokens / Coins | Tokens and Coins are both types of currencies that can be bought and traded on various blockchains. For the most part, coins and tokens are very similar, with the main exception being that a coin is the native asset of a blockchain, where a token is not. For example, ETH is coin native to the Ethereum blockchain, but the Ethereum protocol allows other platforms to build and trade their own tokens on Ethereum as well. Whilst coins are the backbone of their relevent blockchain, the tokens built on that blockchain can represent a number of different uses and values. |
| Wallet | A wallet is a theoretical 'vault' where the data of your digital assets is stored. Wallets can be cloud-based, stored on your personal harddrives, or stored on a specific external storage device. Different types of wallets have different risks in regards to safeguarding your digital assets, and wallet access is the most likely way to fall subject to scams or confidence tricks by other users. Read our Common Crypto Scams and How to Avoid Them article for more information on how to safeguard your assets. |
| Address | An address is the public identity of your wallet or wallet key. This address allows for the sending and receiving of assets (on both Layer 1 and Layer 2 protocols), and is what you can safely provide to other users in order to enable transactions. |
| Transaction | A transaction on the blockchain is essentially an event that has caused the generation of data. That data will be recorded to block, and once verified, that block becomes part of the chain and is visible to the public, including the relevant information. One of the most common forms of transactions is the sending of cryptocurrencies from one wallet to another - a transaction of this kind generates data regarding who intitiated the transfer, the value of the transfer, and the wallet address of the recipient. As the data/block is verified and added to the blockchain, so too does the recipient receive their currency, and the transaction is recorded forever on the blockchain. |
| Immutability | Immutability is a term we hear a lot in blockchain and cryptocurrency circles. It's also the basis for our company name, Immutable! Immutability refers to the unchanging nature of the blockchain and the data contained there in those blocks. Once data is verified and committed to the blockchain, it is there forever. No one person, developer, or system owner, is capable of removing or changing that record in any way - it is unchangeable, and this is what we refer to as immutability. |
| Decentralised | The concept of a decentralised market means that no one person or entity has absolute control over the entire network. Within blockchain terms, all actions occur after most of the network has consented, which thus removes the need for a single entity to control or administrate over the network. Every member of the blockchain has the same level of authority as the next. |
| Non-Fungible Token / NFT | An NFT, or Non-Fungible Token, is a unique digital identifier that cannot be copied, substituted, or subdivided. It is recorded in a blockchain, and used to certify ownership of a particular digital asset and the rights to it. An NFT can come in many forms, and can be minted from items such as art, music, in-game items, videos, and even tweets! They can be bought and sold on Layer 2 marketplaces usually using the Ethereum network. |
| Smart Contracts | A smart contract is a program that runs on the Ethereum blockchain, and is essentially a functioning contract that has it's own specific address on the Ethereum blockchain. In it's most basic form, it is a contract that is predetermined and can be triggered automatically by end users. Smart contracts are not controlled by a particular person, but instead by a series of predetermined functions set when they are deployed - user accounts can then interact with the smart contract by submitting transactions, and the smart contract will execute it's predetermined function, ie. dispensing NFTs. |
| Exchange | A cryptocurrency exchange is a platform where the public are able to exchange and trade their digital assets without involving an intermediary (ie. a broker). Some popular exchanges may include Binance, CoinBase, Bitmex, etc. |
| Gas Price | A transaction fee is similar to what you may pay a bank for services or transfers, and is a form of payment to the other blockchain users participating in the validation of blocks to add to the chain. On Proof of Work blockchains, the gas price is a transaction fee used to compensate miners for the work done on maintaining and solving blocks on the blockchain. The more mining needed to validate the block, the larger the fee. In blockchains using Proof of Stake algorithms (such as Ethereum, who switched to PoS in September 2022), gas fees have become the reward for staking ETH and participating in the validation process. The more a user stakes in the process, the more they can earn in fees. |
| Testnet | Testnet is a blockchain protocol that is not available to the general public and is primarily for developers’ testing. This is utilised during development in order to properly develop any blockchain aspects of the product, as well as give the developers the ability to prioritise the product over addressing mainnet blockchain use and tradability in real-time as well. |
| Mainnet | When a blockchain or product is fully developed and ready for use on a decentralised market such as the Ethereum blockchain, it will be deployed on the mainnet. It's entire functionality will be fully available for mainstream users and the public. |
Blockchain Dictionary
