📜 Glossary First! 📜
In continuing with bucking tradition and formats, I am putting the most useful piece of the thesis in the way of introduction first — it was the last of the appendices in the first publication. I’ve cleaned up a few grammar bits that snuck into the original, and tried to make sure everything here is still current to my understanding. If there are any errors in explanation, please let me know so I can edit!
Anyone who has been in crypto for any length of time will know that it’s difficult to converse without understanding some of the terms and language that are sometimes highly technical, cultural, or both. This is meant to be a simple explainer for some of the most frequent terms that come up in my writing, and the crypto space more generally.
📜📜 Technical Glossary 📜📜
(Partially adapted from QBIC’s Open Source Blockchain Primer)
Application Specific Integrated Circuit (ASIC)
These are computer chips designed to accomplish a single task, in this context for mining cryptocurrencies. The creation of ASICs is the furthest progression of the mining arms race, which tends to go from CPU to GPU to ASIC development. This has also caused a large increase in the overall network hashrate, and also created much more centralization in mining. ASIC manufacturer Bitmain also runs a number of mining pools, which has caused concern by some that they could reach the threshold for a 51% attack on the network. Since Bitcoin employs consensus algorithms, any single entity gaining control of more than 51% of the network’s computational power becomes a large security risk. The cryptocurrency Monero has taken a stance against the development of ASICs and centralization and has proposed that they will alter their hashing algorithm each time they become aware of an ASIC developed, and have already forked their algorithm once.
Bitcoin Maximalist or Maximalism
Used to describe someone in the community that has unwavering faith in Bitcoin as the only viable blockchain technology, to the point of simply ignoring or writing off all other uses of the technology. Sometimes used to poke fun at someone, not often regarded as a flattering description. This is also applicable to other platforms or projects beyond Bitcoin.
Blocks
Data-containing records, linked and secured using an encrypted method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it.
Block Height
Block Height alludes to the number of Blocks connected in a Blockchain. For example a Block Height of 0 would be the first block (also known as the genesis block) in a blockchain.
Block Reward
The incentive offered to miners as each block in a blockchain is validated and appended to the chain. Usually paid out in the coin or token used in the system (Bitcoin miners are paid in Bitcoin, Ethereum miners are paid in Ether). Not present in all blockchain systems.
Confirmation
Bitcoin blocks are made every ten minutes. This means for Bitcoin, you need to wait (at least) ten minutes for a transaction to be entered into a block and confirmed. Other blockchains may have different rates of block production. For some purchases or transactions, trading parties may require multiple block confirmations prior to the confirmation of a transaction.
CPU
Central Processing Unit, the processor hardware in a computer. Sometimes used to mine cryptocurrency, though often the weakest computing power is gained from these in comparison to GPUs and ASICs.
Crypto
Shorthand for both cryptocurrency and cryptography.
Encryption
The process of encoding or scrambling a message or information in such a way that only authorized parties can access it and those who are not authorized cannot.
GPU
Graphics Processing Unit, also known as a video card. Processes video in a computer, and is commonly used as cryptocurrency mining hardware.
Hard Fork
A hard fork, or forking, is a type of blockchain evolution. There are 3 main types of forking protocols. The first occurs when two miners mine two different blocks at the same time, temporarily splitting the blockchain into 2 different versions called “Orphan blocks”. This type of forking is quickly rectified and is a common part of blockchain proliferation.
The second type of forking occurs when miners do not simultaneously update as the system does, resulting in two chains at a “fork”.
The third occurs when a disagreement among developers about the progress of the blockchain results in a separation, and creation of 2 distinct blockchains. Examples are Ethereum Classic and Ethereum, and the many Bitcoin forks (e.g. Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond).
Hash
The hash is a generic term referring to a wide array of cryptographic algorithms. Usually they turn an input, a string of letters, into an output. With Bitcoin, every ten minutes a letter is added to this sequence, making a new output for that block and time stamping that block. The next block begins with a reference to the previous hash. This way every hash is linked, timestamped and validated by the previous block in the chain. To break any new block by adding fake transaction, you need to break every previous block at once. Bitcoin uses Secure Hashing Algorithm (SHA) 256. With current technology, it is still computationally cost-ineffective to break SHA-256, though this may change over time with technological advancements.
Hashrate
In cryptocurrency mining, the rate at which the hardware running the mining software can solve the hashing functions assigned to it. Hardware placed on different hashing algorithms will perform differently, and overall performance is most directly related to the overall hashpower of the blockchain network being mined on. For example, as of August 2018 the Ethereum network’s highest average network hashrate was 295911.9974 GH/s (etherscan.io).
Initial Coin Offerings (ICO)
An ICO is a fundraising tool that often offers a trade of future digital tokens in exchange for cryptocurrencies.
Ledger
Collection of an entire group of similar accounts in double-entry bookkeeping. Also called book of final entry, a ledger records classified and summarized financial information from journals (the ‘books of first entry’) as debits and credits, and shows their current balances.
Mining
Creating a new block requires running, and validating, a block through a hash. This is a computer-intensive process. For your work, you receive a cryptocurrency reward, most commonly the token that is used within the platform the mining was done on. Mining is one of the biggest innovations of Bitcoin, as it incentivizes work from many parties, by rewarding those who participate in the decentralized system. Not all blockchain platforms or tokens require mining, though it is a common aspect of many blockchain systems. Early on, blocks can be mined by solo mining, but as difficulty rises on blockchains, miners often migrate to mining pools.
Mining Pools
Groups of individual miners that contribute smaller amounts of computational mining power to a main pool. The pool divides tasks among miners and distributes block rewards to the registered wallet addresses of those who contributed computational power for each block produced, based on the amount of hashrate they contributed to the pool when it was produced.
Node
A computer that is connected to the blockchain network, and stores a copy of the entire blockchain ledger for verification purposes. Nodes can also broadcast and validate transactions, and may also mine the coin or token used in the network they are connected to.
Peer to Peer (p2p)
Peer to peer or p2p in this context is a type of network connection characterized by two or more devices connected to each other and sharing computing resources or data directly and/or throughout the network without the need for central coordination between hosts. P2p networking can also share tasks or workloads between peers on the network, and is considered a distributed form of organization. Peers in a distributed network can be both suppliers and consumers of available distributed resources.
Public Key
Access to a public key enables encryption, but does not enable the decryption of transaction information.
Private Key
A private key secures the funding and prevents its unauthorized movement. In other words, a private key is required to move funds.
Proof of Stake (PoS)
Proof of stake is an alternative way to determine consensus similar to proof of work (PoW). The process in PoS is called forging or minting instead of mining. While there is still decentralized power to confirm transactions, the “minter” that adds each block is chosen as a result of holding their stake (possession of currency or a token). The minters still process the changes and retain transaction fees, however there is typically no block reward in a PoS system. The main goal of proof of stake is to improve the efficiency of blockchains. There are several examples currently in use, such as NEO, Decred, PIVX.
Proof of Work (PoW)
The original hashing algorithm of Bitcoin, specific nodes that have access to computational hardware (often CPUs, GPUs, or ASICs). These nodes compete to complete the verification of blocks appended to the blockchain. Since hashing is difficult and takes considerable computational power, an incentive is built into the PoW system called the block reward, which awards the successful miner with the amount of new Bitcoin or other currency created with each block produced.
That’s it for now, though I’m happy to add additional terms if they are needed!
