A Gentle Dictionary of Common Blockchain and Proof-of-Stake Concepts

The gentle dictionary is one of our community initiatives. It represents the beginning of our technical content, which will be translated into Spanish and Chinese. We will port this dictionary to am imteractive web-based tool in the short future. The following lists of concepts are a sample of the upcoming website. Feedback would be much appreciated!

Stiftsbibliothek — Credit: Wikipedia

(For the motivations behind this project, see “Our Commitment to the Growth of a Diverse and Sustainable Blockchain Community”)

Common Blockchain Concepts

This is a list of of basic concepts that are applicable to all blockchain interpretations, depending on the terminology chosen by different projecs, the naming of the concept might vary. In this article, the concepts are introduced with order, aiming to construct a “storyline” and hopefully making it easier to understand and remember.

The definitions have this structure:

#. Concept (abbreviation) (subject): Brief definition might include other concepts. Examples (if applicable)

The subject refers to the field from which the concept borrows the definition. The most common subjects are:

• Computer Science
• Cryptography
• Blockchain

One could argue that the taxonomy of concepts is disputable, for example there are concepts both defined in computer science as well as in cryptography, and there researchers that do not consider blockchain to be its own field.

However, with the purpose of making this glossary as easy to read as possible, we will be using the classification, with the note in mind that some of the concepts might belong to more than one field and that blockchain might not yet be a field by itself.

1. Blockchain (computer science): A distributed digital ledger (bookkeeping software that is run on multiple computers at the same time). Normally represented as a constantly growing list of blocks.
2. Distributed (computer science): Run, controlled by many peers or nodes.
3. Decentralised (computer science): A system where there is no central authority controlling it. Whereas public blockchains strive to achieve decentralisation, not every blockchain is decentralised.
4. Block(s) (computer science): A type of data structure. The format, in which a collection of records (e.g. transactions) is structured and stored. They may contain a hash (link to the previous block), a timestamp, and transaction data.
5. Hash (cryptography): In blockchain, a hash is the result of values being inputed to a hash function or hashing algorithm. Example: the hash of a bitcoin block, e.g. block 534444 is 00000000000000000012ff6b14f186d7b7c41d8e585a40d79f1164dcd92f8b36.
6. Algorithm (computer science): Is a system, software, that is designed to receive certain input and produce outputs. For example: a hashing algorithm takes a text and produces a hash.
7. Hash Function, Hashing Algorithm (cryptography): are algorithms design to input data and produce a hash. Examples: SHA-256 (used by Bitcoin) or SHA3 (Ethereum).
8. Chain (blockchain): Referring to the fact that every new block has a link to the previous one, creating a chain of blocks.
9. Final, Finality (computer science): Once data has been finalised, it cannot be modified, maintaining a single and consistent state of the world across nodes.
10. Public Blockchain (blockchain): No central authority can grossly influence or control who can become a validator or a miner. Example: Bitcoin and Ethereum.
11. Private Blockchain (blockchain): Validators or miners are vetted by the owner of the network. Examples of private chains are blockchains built and run by banks or other organisations.
12. Double-spending (blockchain): An error that occurs when an amount of currency is used more than one time.
13. Broadcasting, broadcasted (computer science): Once a block has been mined or validated, the information of this event is sent to all the nodes of the network.
14. Mining, to mine blocks (blockchain): The process of creating blocks on a Proof-of-Work (PoW) blockchain.
15. Node(s), Peer(s) (computer science): Computer or active electronic device that is connected to a blockchain network and that follows its protocol. There are two types: validating and non-validating.
16. Miners, Validators (blockchain): Peers or nodes that participate in the consensus and in block creation. In PoW systems, they are called miners, whereas in PoS systems they are referred as validators (the specific term might vary protocol to protocol).
17. Non-Validators (blockchain): Every other node or peer in the network that does not participate in the consensus nor in block creation.
18. Full Node (clockchain): Every other node or peer in the network that does not participate in the consensus nor in block creation, but does store the entire history of records for different purposes such as serving light clients.
19. Light Client(s) (blockchain): Software, applications oriented to end users that indirectly interact with a blockchain either writing or reading data, normally relying on the services that full nodes offer.
20. Protocol (computer science): Set of rules and process(es) that a computer or electronic device has to follow in order to stay connected to a blockchain network.
21. Peer-to-Peer (p2p) (computer science): a choice of system architecture where tasks are distributed across participants, peers, that are equally priviledged.
22. Consensus Protocol (computer science): Set of rules and process(es) that determine how nodes reach agreement on a single view of the world.
23. Consensus Algorithm (blockchain): Methods designed to achieve automatic agreement in the process of decision-making in a system where many peers are participating. Examples: in Proof-of-Work (PoW) consensus is determined by Nakamoto Consensus and example Tendermint’s Proof-of-Stake is called Tendermint Consensus.
24. Proof-of-Work (PoW) (blockchain): Algorithm to determined who is allowed to participate in consensus. In a PoW system, validators spend computing power to solve mathematical puzzles in order to mine blocks (create blocks). Whichever node solves the puzzle first, gains the right to mine the next block and earn the rewards. Just like Bitcoin and Ethereum, most public blockchains rely on PoW.
25. Proof-of-Stake (PoS) (blockchain): Algorithm to determine who is allowed to participate in consensus. In a PoS system, validators (validating nodes) must set aside a portion of wealth, which they will automatically lose if they deviate from the protocol. What rule is implemented to determine which is the next validator that proposes the next block varies case by case.
26. Cryptocurrency (blockchain): Also known as token(s) or coin(s). A digital asset that relies on cryptography to secure transactions. Examples: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTE).
27. Wallet (blockchain): An application, end-user oriented software, designed to hold and manage cryptocurrencies, meaning that a user can use it. to manage private and public keys of one more multiple cryptocurrencies.
28. Public Key Cryptography (cryptography): Also known as asymmetric cryptography, refers to the cryptographic protocol used to generate the private and public key sets that form an account for a cryptocurrency. For such accounts, in order to enable a transaction, both keys are necessary for generating the signature. The private key should only be known by the owner of the account and the public key, also known as the address, is disclosable. Example: In Bitcoin, public keys or addresses is a alphanumeric string of 34 characters, and private keys are alphanumeric strings of 64 characters.
29. Hardware, Cold Wallet (blockchain): A wallet that resides in a physical device and not connected to the Internet when unused. Example: Ledger Nano S or Trezor.
30. Online, Hot Wallet (blockchain): A wallet that is always connected to the Internet. Example: Any wallet offered by exchanges.
31. Custodial Wallet (blockchain): A wallet offered as a service, private keys in which are known and controlled by a third trusted party. Example: Coinbase or Kraken wallet.

Proof-of-Stake Specific Concepts

1. Proof-of-Stake (PoS) (blockchain): In a PoS system, validators (validating nodes) must set aside a portion of wealth, which they will automatically lose if they deviate from the protocol. What rule is implemented to determine which is the next validator that proposes the next block varies case by case. Example: Tendermint’s consensus algorithm is a PoS system, where the next block proposer is based on round-robin.
2. To Stake, To Bond: To set a portion of wealth aside, denominated in the respective tokens depending on the protocol, as an insurance to participate in the network’s consensus.
3. Delegated Proof-of-Stake (DPos): A variant of PoS systems, where validators can receive tokens from delegators with different purposes, depending on the protocol and its economics. In DPoS, delegators do not have their delegations at stake. Example: Tezos.
4. Nominated Proof-of-Stake (NPoS): Another variant of PoS systems, delegators have their delegations at stake. Example: Cosmos, with Tendermint Consensus.
5. Delegator: A physical person or entity that chooses to lend the tokens to a validator, normally in return of a portion of the earned rewards.
6. Validator: A physical person or entity that runs block validation for one or more networks. Could also be offred as a public service.
7. Byzantine Fault Tolerance (BFT) (computer science term): A system is Byzantine Fault Tolerant when it is resistant by design to Byzantine generals problem.
8. Byzantine Generals Problem (BGP) (computer science term)*: The risk of, in a system where the agreement of all the participants in a plan is needed, one of the participants (known as Malicious Byzantine Actor) chooses to break the agreement and consequently causing the system to fail.
9. Malicious Byzantine Actor (MBA) (computer science term): Peer or node that decides to deviate from the protocol, causing the system to fail.
10. Being slashed: Validators that act maliciously, deviating from the protocol, and causing errors such as double-signing, are punished by losing their security bond or stake.
11. Rewards: Amount of tokens that are asigned to a validator for every validated block as a retribution for participating.