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Typical examples of 2FA (Two-factor authentication) are: Money withdrawal from an ATM or secure log in to a webservice.
Money withdrawal requires combining "Something you have" (card) with "Something you know" (pin). Secure log in to a webservice requires "Something you know" (Username/Password) with "Something you have" (e.g. cell phone to receive a pushed code). 2FA is a subset of multi-factor authentication. Typical factors are: "Something you have", "Something you know", "Something you are" and "Somewhere you are".Synonyms
Two-factor authentication, two step verification, dual-factor authenticationRelated terms
An attack on a blockchain by a group of miners who control more than 50% of the network's mining hash rate. Due to this majority they can prevent new transactions from confirming and revise transaction history, meaning they can double spend coins. They cannot create new coins or steal funds from a certain address. Nor can they create false transactions that never occured or reverse confirmed transactions.Synonyms
Double spend attack, majority attack, consensus hacking
An address allows us to send and receive digital assets on a blockchain. The address is derived from the public key and is represented as long string of alphanumerical characters (or a QR code). The method to generate these addresses and the length of a string may be different per blockchain. An address can be shared publicly and is the only thing you need to share to enable someone to send you cryptocurrency funds. This is similar to sharing your mail address to receive e-mail, sharing your home address to receive a parcel, or sharing your bank account to receive a payment.Synonyms
Altcoins are all cryptocurrencies other than Bitcoin. Ethereum (ETH), Ripple (XRP), Tether (USDT) and Bitcoin Cash (BCH) complete the top 5 (30 May 2020) in terms of market capitalization. The majority of altcoins are forks of Bitcoin with minor changes.
On the Ethereum blockchain an Application Binary Interfaces enables interaction with a smart contract running on an EVM (Ethereum Virtual Machine). Smart contracts are stored as bytecode in a binary format into the blockchain under a specific address and may contain several functions. An ABI is required to specify which function in the contract you want to invoke, and ensure you get meaningful data in return.Synonyms
An ASIC is an Application Specific Integrated Circuit. It's a microchip designed to execute a particular hashing algorithm as quickly as possible. Because different coins use different hashing algorithms this means that you need an ASIC mining rig per coin you want to mine. For example, bitcoin uses the SHA-256 hash algorithm and Litecoin uses Scrypt.Related terms
Bit is another name for a micro Bitcoin (0.000001 BTC). Other typical names for denominations expressed in decimal exponents are 1 Bitcoin = 1 BTC, 1 milli-Bitcoin = 0.001 BTC and 1 Satoshi (the smallest unit of Bitcoin) = 0.00000001 BTC
Bitcoin (BTC) is the first and most valuable cryptocurrency, that can be sent from user to user via a peer-to-peer network. User transactions do not require an intermediary such as a bank. They are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin is open source; the design is public, no one owns or manages Bitcoin, and anyone can participate. Bitcoin was developed by a person or an anonymous group of people called Satoshi Nakamoto. Bitcoin is the first and most prominent blockchain application. Since then a broad range applications have followed. Amongst these are cryptocurrencies, smart contracts, proof of provenance and electronic voting.
A bitcoin ATM is a machine from which you can withdraw bitcoin. Some machines allow you to exchange fiat currency and bitcoin in both directions. Per end of May 2020 7948 bitcoin ATMs are available in 72 countries. Click here to go to a global bitcoin ATM map.
Bitcoin Improvement Proposals (BIPs) are design documents providing information on a new feature for Bitcoin, its processes or its environment. The BIP must provide a rationale for the feature and a concise technical specification. The author is responsible for building consensus on the BIP within the community. The complete list of BIPs can be found here.Synonyms
A block in the blockchain is composed of a header and a set of data (i.e. a batch of valid transactions for the bitcoin blockchain). The header contains metadata about a block. There are three different sets of metadata: 1) The previous blockhash, linking a block to the previous block in the chain, 2) The Merkle root, used to summarize all transactions in that block in an efficient manner, 3) Mining competition information: difficulty, timestamp and nonce. The average time to create a new block is 10 minutes and the block size limit is 1MB. This limits the rate at which the bitcoin blockchain network can process transactions.
When a miner succesfully validates a new block he gets a block reward. The block reward consists of two components: 1) The transaction fees of all transactions in that block and 2) the block subsidy. Typically the block subsidy is the largest part of the block reward and the contribution of transaction fees is negligible. Many people talking about the block reward actually mean block subsidy. The block subsidy is also a controlled way to increase the amount of coins in circulation. The block subsidy of the Bitcoin blockchain is reduced by 50% after each group of 210,000 mined blocks through a process called "halving".Synonyms
Mining rewardRelated terms
Blockchain is a chain of blocks. Each block contains a set of transactions or other data validated by computers in the network called 'nodes'. A process called hashing is used to ensure that the transactions in a block are recorded in an immutable manner and that all blocks stay linked together in a specific order. All the nodes in the network share the same copy of the data, also called a distributed ledger. Through a process called mining the nodes compete to be the next to add a block to the chain so they receive a reward.Related terms
Casper represents a group of projects that will deliver Ethereum 2.0 in 2020. The change from Ethereum 1.0 to Ethereum 2.0 is a change in the consensus mechanism: Proof of Work (PoW) will be replaced by Proof of Stake (PoS).
Cloud mining is a service to mine cryptocurrency without having to buy and configure hardware, provide power, etcetera. You just need an internet connection and a credit card to buy hashing power online. It's similar to participating in a mining pool. However, in this set-up both the hardware and the data center location are not yours. Benefits are that you don't need to invest in hardware, arrange for hardware maintenance or provide power. Besides, it's easier to mine mutiple cryptocurrency. However, the service costs will be substracted from the block rewards earned and you must be pretty sure about the company's reputation providing the mining service.
A coin is a digital asset that runs on its own blockchain. Like Bitcoin runs on the Bitcoin blockchain, like those altcoins that run on a fork of the Bitcoin blockchain, like Ether runs on the Ethereum blockchain, etcetera. A digital coin is typically used as a real-life coin - as money. You can use is to transfer money (in exchange for something), to store money (save it for later use) or as a unit of value (to price goods and services). The terms coin and token are often confused.Related terms
Founded in 2012, Coinbase is a US-based Digital Cryptocurrency Exchange (DCE). They allow customers to trade cryptocurrencies for other assets such as fiat money or other digital currencies. Some stats (April 2020): $150B+ traded, 30 M+ users, 30+ fiat currencies.
Cold wallets have no connection to the internet. As such they are not exposed to online threats such as hackers and malware. Cold wallets are less convenient for traders and frequent users because funds are more difficult to access. Hardware wallets and paper wallets are examples of cold wallets.Synonyms
Cold storageRelated terms
CPU miners use their PC's CPU to execute mining tasks. CPU's are designed to quickly switch between different tasks rather than to be very good at a specific task (which is what you need for mining). CPU mining was initially allowed for bitcoin, but was removed as a feature when the required hashing rate increased. As a consequence the cost of CPU mining became higher than the mining reward. Some cryptocurrencies are designed for profitable CPU mining such as Monero and Bytecoin. Occasionally, CPU mining can still be profitable for new promising coins.Related terms
CRUD is an acronym for Create, Read, Update and Delete. CRUD are the four basic functions of persistent storage (i.e. any data storage device that retains data after power to that device is shut off). A blockchain, by design, only allows Create and Read operations. Because blockchain wants to guarantee immutability of data Update and Delete operations are not allowed. To "change" a value, another transaction has to be appended. Changing a value from 1 to 4 in a database means update a record from 1 into 4. "Changing" a value from 1 to 4 on the blockchain means (simplified) create the transaction +3.
Cryptocurrency is the digital version of banknotes, and can be used as an asset to trade amongst peers. Currency ownership is typically stored in a digital decentralized ledger, without the need for a central authority like a bank. Cryptography is used to secure transactions, regulate the amount of new coins and verify transfer of ownership. Bitcoin (2009) is the first decentralized cryptocurrency.
A cryptographic hash function is a special type of hash function. The ideal cryptographic hash function has the following properties: 1) the hash value can be quickly computed for any given input, 2) using the same input always delivers the same output (deterministic), 3) a unique input always provides a unique output (collision resistance), 4) the input cannot be retrieved using the output (one-way function) and 5) a minor change in the input leads to a major change in the output (avalanche effect). There's a multitude of cryptographic hash functions that vary in compliance with the ideal cryptographic hash function. Typical applications of cryptographic hash functionsare signature generation and verification, verification of message integrity and proof of work.Related terms
A currency is money, in the form of banknotes or coins, used as a medium of exchange. A more broader definiition of currency defines it as a system of money in common use. This definition relates to US dollars used in the United States, Euro used in Europe, Yen in Japan, etcetera. There are two classifications of monetary systems: fiat money and commodity money. The value of commodity money is guaranteed by commodities such as a government's physical gold reserves. The value of fiat money is based on the value of a nation's economy.
DAO stands for decentralized autonomous organization. A DAO is like a company without a CEO or a management hierarchy. Its business rules are captured in smart contracts running on the blockchain. Hence it doesn't need offices, people and it can run on a global scale which makes a DAO very cost efficient. A future DAO could be one that enables autonomous transportation. Imagine a user being able to purchase a taxi ride with an autonomous vehicle that will automatically recharge thereafter, pay for the consumed power and send the remainder the price for the taxi ride automatically to the owner of the vehicle.Related terms
The DAO was meant to be meant to be a venture capital fund for blockchain projects based on DAO principles. The essence was that anyone with a project could pitch for funding. Anyone with DAO tokens could vote for projects. Projects could obtain funding in this way. Investors would receive rewards if projects turned out to be succesful. The ICO of The DAO, running on the Ethereum blockchain, was very succesful and gathered 12.7 million ETH. Soon after, a hacker exploited a code loophole and stole 3.6 million ETH. To protect the investors and punish the hackers a hard fork was made. Because of that we now have the Ethereum and the Ethereum Classic blockchain.Related terms
A decentralized application (dAPP) is an application that runs on distributed systems such as Bitcoin or Ethereum. dAPS on the Ethereum blockchain are often referred to as smart contracts. As opposed to typical applications that have their back-end code running on a central server, dAPPs have their back-end code running on a decentralized peer-to-peer network. Typical dAPP characteristics are: open source, decentralized, incentivized through tokens and applying a consensus mechanism.Synonyms
A database is an organized collection of data, typically stored in a computer system. A Database Management System (DBMS) acts like an interface between users, applications and the database itself. Because of the close connection between the two the term database is also used for the combination of database and its DBMS. Databases were introduced in the 1960's and have evolved greatly ever since. Ledger data is typically stored in a database.
Delegated Proof of Stake (DPoS) is a consensus mechanism that was first proposed in 2014 by Daniel Larimer (founder of Steemit, Bitshares and EOS). DPoS is considered an extension of the Proof of Stake model. In DPoS the stakeholders vote for and elect a fixed number of delegates. The voting power of the stakeholders is proportional to the amounts of coins they own. The delegates are then repeatedly and in random order selected to add blocks to the blockchain and receive the corresponding block rewards. Delegates who misbehave or fail to produce blocks will be expelled by the community. DPoS is much quicker and much more energy efficient compared to Proof of Work.Synonyms
Dust transactions are transactions that only involve a very small amount of Bitcoin (or other cryptocurrency). Knowing that 1 Bitcoin consists of 100 million Satoshi, a transaction ranging from 1 to a few thousand Satoshi is considered a dust transaction. Dust transactions may slow down the network because mining effort is spent on transactions that cannot be completed because the transaction fee is higher than the transaction amount itself. Dust transactions are also used by hackers. Using the pseudonymous nature of the blockchain they launch dust attacks in an attempt to reveal the identities of users.
An ERC is an Ethereum Request for Comment. ERCs are documents cointaining technical standards to comply with for ERC-based tokens. An ERC document can be proposed by any developer and is vetted by the Ethereum community through a process called Ethereum Improvement Proposal (EIP). The complete list of ERCs and their statuses (last call, draft, final, abandoned) can be found on the EIP overview page.Synonyms
Ethereum Request for CommentRelated terms
The large majority of ICO tokens issued on the Ethereum blockchain is based on ERC20. It's a standard for fungible tokens introduced by Fabian Vogelsteller and Vitalik Buterin on 19 November 2015. The ERC-20 standard describe 6 functions and aims to provide a standard interface for any token on Ethereum to be re-used by other applications such as wallets and exchanges. Details on the standard can be found here.Related terms
ERC223 aims to resolve a bug in ERC20. If you transfer tokens to a smart contract using the wrong function it results in these tokens being burnt. In order to prevent this ERC223 was proposed. The ERC223 proposal can be found here. A list of coins using the ERC223 standard can be found here.Related terms
ERC621 is an extension of the ERC20 standard. In ERC20 the amount of tokens in circulation is immutable and set during a single token emission event. ERC621 adds two functions to increase and decrease the total amount of coins in circulation. The recommendation is that only a limited amount of roles such as the contract owner can use these functions. This standard does introduce some level of centralization and is still in draft phase. Details on this standard can be found on Github.
ERC721 is a standard for non-fungible tokens (NFTs). NFTs can represent ownership over unique digital or physical assets such as houses (physical) or collectable cards (digital). ERC721 provides basic functionality to track and transfer NFTs by means of a standard API. The status of this standard is final and details can be found here.Related terms
In ERC20, if you transfer tokens to a smart contract using the wrong function it results in these tokens being burnt. Like ERC223, the ERC777 standard aims to resolve this same bug in a different manner. ERC777 has the status final in the list of Ethereum Improvement Proposals.Related terms
Ether is a utility token. It represents a financial value and can be used to pay for services running on the Ethereum network. Ether can be obtained by accepting Ether in exchange for services, mining Ether and buying Ether. Like Bitcoin it is considered a cryptocurrency. Other than Bitcoin, there's an infinite supply of tokens and its primary function is to act as fuel in Ethereum's ecosystem of smart contracts and decentralized applications (dApps), rather than a sole exchange of cryptocurrency value.Synonyms
ETH, Ethers, Ether tokens
Ethereum Improvement Proposals (EIPs) are design documents providing information on a new feature for Ethereum, its processes or its environment. The EIP must provide a rationale for the feature and a concise technical specification. The author is responsible for building consensus on the EIP within the community. EIPs can be separated in a number of types such as Networking, Interface and ERC.Synonyms
EVM code is the binary code representing a smart contract that can be executed by an Ethereum Virtual Machine (EVM). Smart contracts are typically written in Solidity. A compiler then translates the Solidity code into code that can be executed by an EVM, i.e. the EVM code.Synonyms
FIat currency is a currency that a government has declared to be legal tender, like the US Dollar and the Euro. The government controls the supply and you can pay taxes with it. Cryptocurrency, like Bitcoin or Litecoin, is not legal tender and not backed by government or bank (It's decentralized and global).An algorithm controls the supply and you can't pay taxes with it (but you may have to pay taxes on it). Both type of currencies can be used to purchase goods and services. The value of both is determined through factors such as demand, supply and scarcity.
Chain splitRelated terms
An FPGA is a Field Programmable Gate Array. It's a microchip that can be reprogrammed to execute a specific task, being a specific hashing algorithm in the context of cryptocurrency. FPGA mining is faster compared to GPU mining and more flexible compared to ASIC mining.Related terms
Gas is required to enable transactions on the Ethereum blockchain. There are three main transaction types: 1) transfer Ether from one party to another, 2) create a smart contract and 3) interact with a smart contract. Every transaction implies an activity by each node in the network requiring energy. Gas is required to compensate for the consumed energy. The principle behind gas is to have a stable value for the cost of a transaction.Related terms
Gas cost intends to represent a real and stable value for computation time on the Ethereum blockchain. An overview of required units of gas per operation can be found in column G of a yellow paper by Gavin Wood. The table shows that the cost of a transaction is 21,000 units and 32,000 units for the creation of a smart contract.Related terms
Gas fee is the effective amount paid for the execution of a transaction or smart contract function. It's the gas price expressed in Gwei multiplied by the gas limit. Expressed as a formula: gas fee (Gwei) = gas price (Gwei/unit) x gas limit (Unit).Related terms
The gas limit sets a maximum amount on the units of gas a user is willing to pay for a transaction or completion of a smart contract function on the Ethereum blockchain. It limits what a transaction or function can charge to the user. As such it protects the users against high fees due to a bug in a smart contract. For example, because a transaction keeps circulating within a smart contract. The gas limit should always be set high enough to compensate for the fixed amount required by a transaction. Else, a transaction runs out of gas meaning the transaction can't be completed AND the user looses the gas fee. Unused gas will be returned (unless the transaction fails).Related terms
The gas price represents how much a unit of gas may cost expressed in another currency such as Gwei (a denomination of Ether). Because the price of Ether is volatile, the gas price fluctuates as well in order to keep the real cost of gas stable. When the price of Ether goes up, the gas price is expected to go down and vice versa. Visit ETH Gas Station for recent gas prices. The gas price a user is willing to pay has an influence on the speed at which the transaction will be processed by the miners on the Ethereum blockchain.Related terms
The very first block in a blockchain. It's the only block in a chain that does not reference a previous block. The genesis block is almost always hardcoded into the software. The Bitcoin genesis block was mined on January 3, 2009 and contains 50 Bitcoin (BTC).Synonyms
Block 0 (for modern versions of Bitcoin) or block 1 (for very early versions)
A gossip protocol is a protocol used in peer-to-peer networks to disseminate information between all nodes. A node will sent new information ("gossip") to a fixed number of random nodes. Each receiving node will do exactly the same upon receipt of the information. Because the way information is spread amongst nodes is similar to how a virus spreads amongst humans, this protocol is sometimes also referred to as the epidemic protocol. Many variants of the gossip protocol are implemented. These are based on a push mechanism (sending new information to other nodes), a pull mechanism (asking other nodes to share new information) or a hybrid form. Hashgraph is a distributed ledger technology that relies on a gossip protocol.Synonyms
CPU miners use their PC's GPU to execute mining tasks. A GPU (Graphics Processing Unit) is designed to handle a large number of repetitive tasks, because this is required for video processing. As a consequence, the mining efficiency is also significantly higher compared to CPU mining.Related terms
Gwei is the most commonly used denomination of Ether (ETH). The smallest denomination of Ether is Wei. To get a feel for the order of magnitude: 1 Ether equals 1 billion Gwei and 1 Gwei equals 1 billion Wei. Gas prices on the Ethereum blockchain are typically expressed in Gwei. Each denomination of Ether is also linked to a nickname based on influential figures in the world of cryptography. Shannon is the nickname for Gwei referring to Claude Shannon, an electrical engineer, mathematician and cryptographer also known as the "father of intormation theory".Synonyms
The Bitcoin halving event reduces the block subsidy by 50%. For the first 210,000 mined blocks miners earned 50 BTC block subsidy per block. For the next 210,000 mined blocks 25 BTC and so on. The most recent Bitcoin halving event took place in May 2020. Currently the blocksubsidy is 6.25 BTC per block. This process continues until all BTC have been issued and the maximum supply of 21 million BTC is in circulation. Because the halving events are linked to fixed amounts of released blocks and the average time for a new block to be released is 10 minutes, this also means that future Bitcoin halving event dates can accurately be predicted.
A hardware wallet is a specific type of cold wallet. All wallets do not contain cryptocurrency. They contain the public and private key that a user needs to receive and spend cryptocurrency. All cold wallets store these keys offline, disconnected from the internet. A hardware wallet is about storing these keys on a secure hardware device. A hardware wallet is a very popular and safe method when trading cryptocurrency. KeepKey, TREZOR and Ledger are three market leaders selling hardware wallets.Related terms
A hash is simply the output value of a hash function.Synonyms
Hash value, hash code, digest
A hash collision is when a cryptographic hash function produces the same output value given two distinct input values. The bigger the potential set of inputs and the shorter the length of the output string, chances are a collission may occur. But the cryptographic hash functions used in blockchain are typilcally designed to be collision resistant which means this event is very unlikely to happen.
A hash function is a mathematical function that takes a data string of arbitrary length as an input and provides a string of fixed length as an output. The values returned by a hash function are called hashes. One of the conventional applications of hashing is indexing and locating items in databases. Simply, because it's easier to find the shorter hash value than the longer string. Cryptographic hash functions are typically used in situations with higher information security requirements such as cryptocurrencies and other blockchain applications.
Hashcash is an early example of a Proof of Work algorithm. Satoshi Nakamoto refers to it in his whitepaper and used it as the basis for Bitcoin's Proof of work algorithm. Hashcash was proposed by Adam Back in 1997 and described in more detail in 2002. Like Dwork and Naor who worked on a similar approach in 1992 he wanted to combat junk mail. He required senders to perform a small amount of work before sending an e-mail. For a legitimate user the corresponding cost would be close to zero, but for a spammer the costs would quickly add up.
Hashgraph is a patented distributed ledger technology (DLT) developed by Leemon Baird in 2016. The main difference with blockchain based DLT's is its speed. Blockchain processes about 3-5 transactions per second. The Hedera hashgraph processes 10,000 transactions per second. The hashgraph consensus algorithm has been validated as asynchronous Byzantine Fault Tolerant. The algorithm operates through two main techniques: 1) A gossip protocol called "Gossip about gossip" and 2) Virtual voting. Originally, hashgraph technology was implemented in a private permissioned environment. Hedera hashgraph is a public implementation of hashgraph technology.
A hot wallet refers to a wallet that is online and somehow connected to the internet. Hot wallets are convenient for traders and frequent users because they are easy to set-up and funds are quickly accessible. Using a hot wallet also exposes the owners to online threats such as hackers and malware. Software wallets are examples of hot wallets.Related terms
Something that is immutable will never change or cannot be changed. Immutability is a key characteristic of blockchain technology. Transactions that have been confirmed and recorded on the blockchain cannot be altered anymore. This enables collaboration between users that do not know or trust one another. Instead of trusting people, you now trust the recorded data and the protocol creating the recorded data.Related terms
Initial Coin Offerings (ICO) are a popular fundraising method for new cryptocurrency ventures. Typically the start-ups exchange their tokens for either bitcoin (BTC) or Ether (ETH) and sometimes fiat currency. Investors participate with the hope and expectation that the token they receive will be successful. Many ICO's though have been the vehicle for scams and fraud, partially due to the lack of regulation. Although ICO's are sometimes compared to IPO's (Initial Public Offering) they are different in the sense that you do no get any kind of ownership in the company in return for your investment. In order to issue a cryptocurrency token or coin you can build a blockchain from scratch and issue a native token. The majority of ICO events though took place on the Ethereum blockchain using the ERC-20 token standard.
IPFS is short for InterPlanetary File System. IPFS is a protocol designed to empower the distributed web. As opposed to today's internet the content isn't stored on a central location, but content pieces are distributed to multiple computers. The distributed set-up makes the internet faster, safer and more open. Faster because content comes from multiple places concurrently. Safer because it's no longer reliant on a central server only. More open because there's no central server that can be blacklisted. IPFS is a decentral protocol that queries a distributed network with the question "Who can deliver me this content?". HTTPS, empowering today's internet, is a central protocol that queries a specific server with the question "Can you give me the content?".
Unlike many other leading hashing functions (like SHA-256) Keccak-256 has not been designed by the NSA. Ethereum and Monero are top 20 cryptocurrency coins that use this algorithm. Monero does not use Keccak-256 for Proof of Work, but for block hashing, transaction hashing, multisig and some other functions.
Litecoin is an altcoin and ranks number 7 (June 2020) in the global top 10 by market capitalization. Litecoin was announced in 2011 on a popular Bitcoin forum. Comparing Bitcoin and Litecoin shows: 1) both are based on Proof of Work, 2) a Litecoin block is confirmed about 4 times faster, 3) Litecoin can supply 4 times more coins, 4) Bitcoin uses the SHA-256 algorithm, Litecoin uses the Scrypt algorithm
Within the blockchain industry Market cap = Current price x circulating supply. Because cryptocurrency prices are highly volatile the market reflects only the relative value of a coin and not the total amount of money in the market. The formula is similar to the one that determines the market value for publicly traded companies: Share price x number of shares outstanding.Synonyms
A mempool is a waiting room for bitcoin transactions that have not yet been included in a block. Each full node manages its own mempool. A node only will only store valid transactions in the mempool (e.g. the node validates signatures). When more transactions are offered than can be stored in the mempool, the node will prioritize those with a higher transaction fee. When the node receives the latest mined block it will remove all the transactions in that block from its mempool. The mempool was introduced in a Bitcoin Improvement Proposal (BIP 35). It serves multiple purposes such as informing miners looking for transactions with higher transaction fees or users who look for an indication of expected confirmation times.Synonyms
A mining pool is a group of cryptocurrency miners combining their compute resources over a network. These miners share the block rewards in proportion to the compute power they contribute. Pooled mining started when the difficulty increased and the chance for individual miners to earn a block reward decreased. In a mining pool a coordinator ensures each miner uses different values for the nonce, thus optimizing the combined compute power. The coordinators are also responsible for splitting the rewards based on the contributed work. There's several methods to calculate contributed work per miner such as Pay-per-share (PPS) and Pay-per-last-N-shares (PPLNS). In theory, the 4 largest bitcoin mining pools could join forces and execute a 51% attack. However, this is not deemed likely as prices would plummet and subsequently the value of all the coins they mined. Slushpool is the world's first mining pool and has mined over 1,000,000 BTC ever since.
A mining rig is a computer used to mine bitcoin or other cryptocurrencies. Large amounts of mining rigs grouped together are called mining farms. Initially, mining rigs where "standard" computers. Performance was determined by CPU and GPU power. Over time, more sophisticated decidated mining rigs where developed.Related terms
Mt. Gox was a Bitcoin exchange launched in July 2010 and based in Japan. At its peak in 2013 and 2014 it was handling more than 70% of all global Bitcoin transactions worldwide. The company suffered from multiple security incidents. In February 2014 Mt. Gox filed for bankruptcy after the announcement that 850,000 Bitcoins were missing and likely stolen. In 2018 Japanese courts changed the case from bankruptcy to a civil rehabilitation case which is still running today. The domain mtgox.com was originally purchased in 2007 by Jed McCaleb, co-founder and CTO of the altcoin Ripple. The site was originally intented as a trading platform for enthousiasts of the Magic card game (MtGox is an acronym for Magic: The Gathering Online eXchange). In 2010 McCaleb repurposed the site as a Bitcoin exchange and sold it to Mark Karpelès (CEO of Mt.Gox) in February 2011 .
A multisignature wallet is a wallet that requires more than one private key to operate. There's a variety of applications - for M of N wallets - based on the required and possible number of private keys. A 1-of-2 wallet may be practical for a couple where both persons have access to shared funds. A 2-of-2 wallet could be used as a two-factor authentication wallet where one private key may be stored on your laptop and the other private key may be stored on your mobile device, etcera.Synonyms
A native token is a token that runs on its own blockchain and is native to that network. Typically native tokens are also used as an incentive for block validation. Both BTC (Bitcoin) and ETH (Ethereum) are examples of native tokens. Important to mention here is that the tokens running on top of the Ethereum blockchain, for example the ERC based tokens, are not native tokens.
A blockchain consists of blocks of data,. These blocks are stored on nodes. Nodes can be any kind of compute device and are all connected via a peer-to-peer network. In essence, they validate new blocks, they store transaction history and spread transaction history to other nodes.Related terms
When mining a block, miners are competing to be first to find the correct nonce value for that block. FInd the correct nonce means find a nonce that, when used as an input for a cryptographic hash function, produces an output that meets a certain requirement (called difficulty). Because there's no simple relation between input and output miners can only, as quickly as possible, try as many different nonces as possible. This is actually a lot of work. This is also why the consensus mechanism to mine a block is called Proof of Work.
An on-chain transaction is a transaction that happens on the blockchain. Via these transactions value, for example cryptocurrencies, can be exchanged between participants (nodes) on the network. All transactions are recorded on the blockchain and are visible to all participants on the network.Related terms
Oracles serve as bridges between a smart contract running on the blockchain and the outside world, enabling the exchange of data and hence significantly increase the potential of smart contracts. Blockchain oracles can be classified based on their qualities: Direction of information (inbound or outbound), Information origin (hardware or software) and Trust (centralized or decentralized). A single temperature sensor that measures the temperature in a truck during transportation of frozen foods is considered a centralized inbound hardware oracle. The key challenge with oracles (called "the oracle problem") is that if an oracle is compromised the smart contract relying on it is also compromised. If the smart contract governing the frozed food transportation is designed to pay when the temperature remained below a treshold value, the temperature sensor has to be accurate.
Except for the genesis block, a block in the blockchain always references the previous block, called the parent block. An orphan block is a block whose parent block is unknown or non-existent. Today these blocks no longer exist because orphan blocks are no longer possible since the release of Bitcoin Core version 0.10.0 on 16 February 2015. The term orphan block is still in use today. But people almost always mean "stale block" when they say "orphan block". An orphan block and a stale block are two different things.Related terms
A paper wallet is a specific type of cold wallet. All wallets do not contain cryptocurrency. They contain the public and private key that a user needs to receive and spend cryptocurrency. All cold wallets store these keys offline, disconnected from the internet. A paper wallet is about printing these keys on a piece of paper. A paper wallet is now considered an obsolete and unsafe method, but it was popular in the early days of Bitcoin.Related terms
A peer-to-peer network is a group of devices, called nodes, that collectively store and share data. Typically, all nodes are equal and execute similar tasks. Peers are members of a distributed decentralized network connected over the internet. Peer-to-peer systems became popular because of the music sharing application Napster (1999). Today peer-to-peer systems are at the core of most cryptocurrencies sharing transaction data and storing currency ownership.Synonyms
A currency issued by a private organization such as a commercial business or non-profit enterprise is called a private currency. There are multiple types of private currencies such as local paper money, private gold and silver exchanges and digital currencies. Examples of digital currencies are e-Cash, virtual currencies and cryptocurrencies.
Proof of Activity is a consensus mechanism that was first proposed in 2014 by Bentov, Lee, Mizrahi and Rosenfeld. It's a hybrid approach that combines elements of Proof of Work and Proof of Stake in a two-step process. Step 1: Proof of Work in which miners compete to find the block and earn the block reward. Step 2: Proof of Stake selects someone (a staker) who is allowed to validate the block. The idea behind Proof of Activity is that it adds a second line of defense against a 51%-attack, because an attacker, in order to be succesful, would need to own more than 51% of the network's mining power and own more than 51% of the coins staked in the network. Espers and Decred are cryptocurrencies usinig the Proof of Activity protocol.
Proof of Authority (PoA) is a consensus mechanism that was introduced in 2017. The name was proposed by Gavin Wood (co-founder of Ethereum). In the algorithm a limited number of nodes, called validators, are responsible for validating transactions. Validators have to reveal their identity and be compliant with a large set of requirements. In return they get power and block rewards. Benefits of the algorithm are: higher transaction rates, reduced network power consumption, increased resistance to 51%-attacks and no need for sophisticated mining equipment. The price of these benefits is that it's no longer a trustless network (one of the core principles of blockchain) because users need to trust the validators. PoA use cases are: Giveth, GoChain and POA network.Synonyms
Proof of Burn (PoB) is a consensus mechanism that was first proposed by Iain Stewart in 2012. The concept is that miners burn coins by sending them to an address ("eater address") where these coins can never be retrieved. The more coins they burn, the bigger the chance they are chosen to mine the next block. Proof of Burn is like Proof of Work, but without the energy waste. Instead of buying and using a mining rig, the miner invests a similar amount of money in coins to be burnt. Burning more coins is like buying a stronger mining rig. It improves the chances on profit in the long run. A PoB use case is Counterparty's cryptocurrency XCP.Synonyms
Proof of Capacity is a consensus mechanism that was first proposed in 2015. The algorithm uses the available hard drive space on your computer to mine free coins. The process consists of two steps: plotting and mining. During the first step (plotting) a range of possible solutions is plotted on your hard drive. Some solutions solve the mining puzzle quicker than others. During the second step (mining) your fastest solution is compared to that of others. The miner with the fastest solution wins and gets the block reward. Due to the low power consumption of hard drives this system is much more energy efficient than Proof of Work. Burstcoin is a PoC use case.Synonyms
PoC, Proof of Space, PoSpace
Proof of Elapsed Time (PoET) is a consensus mechanism that was developed by Intel® in 2016 and relies on Intel®'s Software Guard Extensions (SGX) Programming Reference. In each round of consensus, each network participant is requested to wait for a randomly generated period of time before creating a new block. The first that propagates a new block together with the proof that the waiting time was indeed respected is considered the winner of that round. The method is very energy efficient and of great use in permissioned networks. On the other hand it relies on SGX technology developed by a third party (ntel®). PoET is used in Hyperledger's Sawtooth.Synonyms
Proof of Stake is a consensus mechanism that was first proposed in 2011 by a forum member called QuantumMechanic. Like Proof of Work its aim is to validate transactions on the blockchain. In a Proof of Stake network nodes are called validators. Validators stake an amount of their coins by "locking" them in the system so they can't be used for other purposes. The bigger and the older your stake, the bigger changes to get selected to create the next block. If you get selected you don't earn any block reward, you only receive the transaction fees related to the data in that block. If you cheat by adding false transactions in the new block you run the risk of loosing your stake.
Proof of Work (PoW) is the consensus mechanism powering the Bitcoin blockchain. Early PoW versions are Hashcash by Adam Back (1997) and Reusable Proof of Works (2004) by Hal Finney who was also the recipient of the first Bitcoin transaction. Bitcoin's PoW is described in the whitepaper by Satoshi Nakamoto (2008). In Proof of Work certain nodes in the network, called miners, work hard to solve a complex puzzle. The miner who solves the puzzles first gets the block reward and the transaction fees of the transactions in that block. The method is called Proof of Work since each validated block also includes the outcome of the puzzle (called block hash) which proofs that the corresponding work was done. In addition to Bitcoin, PoW also powers many other coins such as Litecoin, Ethereum, Bitcoin Cash and Monero.Synonyms
Blockchain transactions are made from one address to another. The address is the pseudonym for the owner of that address. If the address will be ever linked to your identity, than automatically all transactions can be traced back to you because all transactions are publicly available on blockchain. As such Bitcoin transactions are pseudonymous. Only cash transactions are anonymous.
For any kind of currency (fiat or crypto) to act as a global medium of exchange it must be possible to divide the currency into smaller subdivisions (e.g. a US dollar and a cent, or a British Pound and a penny). The smallest unit of a Bitcoin is 0.00000001 BTC . To honor the creator or creators of Bitcoin, Satoshi Nakamoto, this smallest unit is called a Satoshi. 1 Bitcoin thus equals 100 million Satoshis. In theory, this smallest unit can be adjusted in the future via an update of the Bitcoin software.Synonyms
An anonymous person or group of people who developed Bitcoin. In August 2008 Satoshi Nakamoto registered the domain name bitcoin.org and released the whitepaper "Bitcoin: A Peer-to-Peer Electronic Cash System" in October 2008. The genesis block of Bitcoin was mined in January 2019.
Scrypt is an algorithm used in many cryptocurrencies. In 2011, Litecoin was the first one to use Scrypt. Compared to the SHA-256 algorithm (used by Bitcoin) it's faster and easier to operate. It can be run on a CPU and is less energy-intensive. What differentiates the Scrypt algorithm from the SHA-256 algorithm is that it is memory intensive. Originally, this offered protection against the hashing power of ASIC miners, allowing individual CPU and GPU miners to succesfully mine these coins. Over time ASIC chips were developed that could deal with the Scrypt algorithm as well.
Secure Hash Algorithms (SHAs) are a family of cryptograhic hash functions designed to keep data secure. The hash function transforms data into a hash value, i.e. a fixed-size string that looks nothing like the original. They are designed to be deterministic one-way functions, meaning that the same input will always result in the same output and that it's virtually impossible to retrieve the input value once you know the output value. A common application of SHA is password encryption. The main categories are SHA-0 (1993), SHA-1 (1995), SHA-2 (2001), SHA-3 (2015). Each categorie is designed to be more secure than its predecessor.Synonyms
In a Security Token Offering (STO) the token is positioned as a security. The security token represents an investment contract in an underlying asset and hence it must comply with regulatory governance. Initial Coin Offering (ICO) related tokens are positioned as utility tokens, which means they are positioned for usage rather than an investment. As a consequence compliance requirements are much lower for ICO's than for STO's. But from an investor point of view the STO's are more safe than the ICO's because of the compliancy requirements. An STO can be considered as a hybrid form of an IPO (Initial Public Offering) and an ICO.Synonyms
SHA means Secure Hash Algorithm. The SHA-256 algorithm is part of the SHA2 family that consists of 6 cryptographic hash functions. SHA-256 produces a 256-bit (32 bytes) hash value. It's usually represented as a hexadecimal number of 64 characters. In essence, SHA-256 converts an input of arbitrary length into an output of fixed length (64 characters). In the bitcoin network SHA-256 is used as the Proof of Work algorithm and in the creation of bitcoin addresses. The SHA2 standard has been designed by the United States National Security Agency.
A Software Development Kit (SDK) is a collection of tools that helps developers to create programs for a specific device or OS (Operating System). An SDK typically contains software, manuals, sample code, examples of special hardware and much more. SDKs usually contain APIs (no APIs contain SDKs)Synonyms
API (Application Programmable Interface)
Three common types of software wallets are web wallets, desktop wallets and mobile wallets. Because these are all connected to the internet they are also referred to as hot wallets. A web wallets allows users to trade cryptocurrencies via a browser and does not require software to be downloaded and installed. A desktop wallet requires software to be downloaded and installed locally on a desktop. Desktop wallets are considered more safe than web wallets. A mobile wallet is similar to a desktop wallet, but the software is designed specifically for use on smartphones.
Solidity is a popular programming language for implementing smart contracts, mostly on the Ethereum blockchain. The Solidity language is a tool you can use to generate machine level code that can execute on the Ethereum Virtual Machine (EVM).
A stale block is a well-formed block which is no longer part of the longest blockchain. When two miners generate a new block simultaneaously they start to propogate that block to their neighbouring nodes. Due to the geographic spread in a distributed network the new block does not immediately arrive at all nodes. Hence, we have two competing blockchains. The first chain that becomes the chain with the highest combined difficulty is the "longest" chain. That chain is propogated to all nodes and the other chain is disregarded. The latest block of the rejected chain is called a stale block. Transactions that were part of that block flow back into the mempool. The miner of that block does not get the block reward nor the transaction fees.Related terms
TCP is short for Transmission Control Protocol, and IP for Internet Protocol. TCP and IP are foundational controls of the Internet Protocol Suite. Hence, this suite is commonly known as TCP/IP and it specifies how data should be packetized, addressed, transmitted, routed, and received. TCP/IP is organized in four abstraction layers: Link layer, Internet layer (including IP), Transport layer (including TCP) and the Application layer.
A testnet is a separate blockchain used by developers, researchers and projects for testing purposes. The coins mined on the testnet do not represent real value. The main blockchain (mainnet) and the testnet are two separate networks, so coins cannot be exchanged between these networks. A mainnet may have multiple testnets serving different purposes. For example, known Ethereum testnets are Ropsten, Kovan and Rinkeby. Ropsten uses Proof of Work. Kovan and Rinkeby are using Proof of Authority. The testnet of Ethereum 2.0 is called Beaconscan.com.
Each block in a blockchain contains a timestamp. The main function of a timestamp is to calculate the difficulty, not to determine the order of blocks. Using the timestamp, nodes are able to determine the required difficulty to ensure the 2016 block period lasts 10 minutes. To avoid manipulation by miners who insert the timestamp into blocks, timestamps must comply with certain rules.
Timestamping is also a method to create Proof of Existence for important documents or files. In step 1 you create a digital fingerprint (hash) of the document. In step 2 you get that hash added to a block with a certain timestamp. Hence, you've created Proof of Existence for a certain document linked to a point in time.
Unlike coins, tokens do not run on their own native blockchain, but on an existing blockchain. Most tokens are based on the Ethereum or NEO blockchain. In essence, they represent a unit of value issued on top of a blockchain. A common classification of tokens is based on their functionality: Security tokens and Utility tokens. Security tokens represent ownership of a digital or physical asset. Utility tokens provide access to a product or a service.Related terms
UTXO is an acronym for Unspent Transaction Output. Let's break that down in two parts: 1) Unspent and 2) Transaction Output. The Transaction Output refers to the transaction that put cryptocurrency into your wallet. Unspent refers to whether or not that cryptocurrency is still there or was already spent again. The value of your wallet is the sum of all your UTXO. Think of it like your physical wallet where ATM withdrawals filled up your wallet with cash and purchases have partially emptied your wallet again.
A cryptocurrency wallet can be used to receive and spend cryptocurrency. The cryptocurrency itself is stored on the blockchain. However, the wallet contains the cryptographic keys required to exchange cryptocurrencies with other wallets. The public key is required to receive cryptocurrency and the private key to send cryptocurrency.Related terms
Wei is the smallest denomination of Ether. Like a Satoshi is for Bitcoin, or a cent is for Dollar. These denominations are typically used when referring to transaction costs expressed as gas fees. In exponential notation 1 wei = 1 e-18 ETH. More details on the denomination can be found on Github.