glossary

Glossary

Blockchain: A decentralized digital ledger that records transactions across many computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.

Block: The smallest unit of a blockchain, which contains a record of transactions or data. Each block is connected to the previous one, forming a chain. Mining: The process by which transactions are verified and added to the blockchain ledger. This process also involves the creation of new coins or tokens as a reward for the miner.

Cryptocurrency: A digital or virtual currency that uses cryptography for security and operates independently of a central bank. Bitcoin is the most well-known cryptocurrency.

Decentralization: The distribution of power away from a central authority. In blockchain, this means the ledger is not maintained by any single entity but is distributed across a network of computers.

Smart Contract: A self-executing contract with the terms of the agreement directly written into lines of code. These are executed by the blockchain, making them immutable and transparent. A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible. They are composed of code and stored on a blockchain.

Consensus Mechanism: The process used to achieve agreement on a single data value among distributed processes or systems. Blockchain uses consensus models like Proof of Work (PoW) or Proof of Stake (PoS) to agree on the validity of transactions.

Proof of Work (PoW): A consensus mechanism that requires a participant node to solve a computationally difficult puzzle to prevent anybody from gaming the system. It's used by Bitcoin.

Proof of Stake (PoS): An alternative to PoW, PoS requires users to hold and stake their tokens to participate in the consensus process. It’s seen as more energy-efficient than PoW.

Token: A digital asset used within a specific blockchain ecosystem. Tokens can represent various assets or utilities. Wallet: A software program or hardware device that stores private and public keys for cryptocurrency transactions. It allows users to send, receive, and monitor their crypto assets.

Public Key: A cryptographic key that can be disseminated publicly and is used to verify a digital signature or encrypt a message.

Private Key: A secret key, known only to the owner, used to decrypt messages encrypted with the corresponding public key or to create a digital signature. Distributed Ledger Technology (DLT): A digital system for recording asset transactions in which the transactions and their details are recorded in multiple places at the same time, unlike traditional databases.

Initial Coin Offering (ICO): A fundraising method used by new projects, where new tokens are issued to investors. Hash Rate: The speed at which a computer is completing an operation in the blockchain network. It is a critical security measure in blockchain networks. Node: A computer connected to a blockchain network, which supports the network through validation and relaying of transactions.

Smart Contracts Detailed Explanation:

Code and Agreements: The core of a smart contract is its code, which is a set of rules and conditions. These are written in programming languages such as Solidity (for Ethereum). The code defines the conditions to which all parties agree, and the blockchain enforces these conditions.

Autonomy and Decentralization: Once deployed, smart contracts operate autonomously without the need for intermediaries. This feature arises from the decentralized nature of blockchain technology, where no single entity controls the data.

Security and Immutability: Smart contracts benefit from the high level of security inherent to blockchains. Once a contract is deployed, it cannot be altered, ensuring the terms remain unchanged.

Efficiency and Cost-Effective: They eliminate the need for intermediaries, reducing transaction costs and increasing efficiency.

Blockchain: A blockchain is a distributed ledger that is completely open to anyone. Once data (like a smart contract) has been recorded inside a blockchain, it becomes very difficult to change it.

Ethereum: A blockchain platform famous for its native cryptocurrency, Ether (ETH), and for its functionality to execute smart contracts. It provides a platform for creating decentralized applications (DApps). Gas (Ethereum): In the Ethereum network, gas is a unit that measures the amount of computational effort required to execute operations. Each smart contract execution requires a certain amount of gas, depending on its complexity.

Solidity: A high-level, contract-oriented programming language used for implementing smart contracts on various blockchain platforms, mainly Ethereum.

Decentralized Application (DApp): These are digital applications or programs that exist and run on a blockchain or P2P network of computers instead of a single computer, and are outside the purview and control of a single authority.

Oracle: In the context of smart contracts, an oracle is a system that feeds data to the blockchain that can't be sourced from the blockchain. For instance, it could provide real-world data like temperature, price feeds, etc., necessary for the execution of a contract.

Immutable: This term describes something unchanging over time or unable to be changed. Once a smart contract is deployed to the blockchain, its code and conditions cannot be altered.

Distributed Ledger: Unlike a centralized database, a distributed ledger has no central data store or administrative functionality. In a distributed ledger, each node processes and verifies every item, thereby generating a record of each item and creating a consensus on each item’s veracity.

Transaction: In blockchain, a transaction is a record of a smart contract execution or cryptocurrency exchange, which is recorded on the blockchain ledger. Consensus Mechanisms: These are protocols that make sure all nodes in the blockchain are synchronized with each other. They are fundamental to manage the agreement on the state of the blockchain.

Interoperability: The ability to share and access information across different blockchain systems, enhancing the capabilities and efficiencies of smart contracts and blockchain networks. Cryptocurrency: Digital or virtual currencies that use cryptography for security and operate independently of a central bank; often used as a medium for financial transactions in smart contracts.

Wallet: A blockchain wallet is a digital wallet that allows users to manage their cryptocurrencies. Wallets are used to store, send, and receive digital currency and interact with smart contracts.

Token: Tokens are a type of privately issued cryptocurrency which are often used as part of the decentralized services offered by a specific project or organization on the blockchain.

Decentralization: Refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network, foundational to blockchain and smart contracts.