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Glossary
A B C D E F G H I J K L M N O P Q
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Altcoins
Altcoin is an abbreviation of Bitcoin alternative. Currently, the
majority of altcoins are forks of Bitcoin with usually minor changes to
the proof of work (POW) algorithm of the Bitcoin blockchain.The most
prominent altcoin is Litecoin. Litecoin introduces changes to the original
Bitcoin protocol such as decreased block generation time, increased
maximum number of coins and dierent hashing algorithm
ASIC
An Application Specic Integrated Circuit is a silicon chip specically
designed to do a single task. In the case of Bitcoin, they are designed to
process SHA-256 hashing problems to mine new bitcoins.ASICs are
considered to be much more ecient than conventional
hardware(CPUs, GPUs). Using a regular computer for Bitcoin mining is
seen as unprotable and only results in higher electricity bill
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Bitcoin
is a cryptocurrency that runs on a (1) global peer to peer network, is (2)
decentralised (no single entity can control it), its (3) open source
(wallet & transaction verication), (4) bypassing middlemen or central
authority, with (5) no issuer or acquirer, (6) anyone with a computer or
smartphone can use it
Bitcoin ATM
A cash point where people can trade at currency and bitcoins
Blockchain
Shared, trusted, public ledger of transactions, that everyone can inspect
but which no single user controls. It is a cryptographed, secure, tamper
resistant distributed database. It solves a complex mathematical
problem to exist. A blockchain is a perfect place to store value,
identities, agreements, property rights, credentials, etc. Once you put
something like a Bitcoin into it, it will stay there forever. It is
decentralized, disintermediated, cheap and censorship resistant.
Applications of Blockchain: Bitcoin(cryptocurrency),Namecoin (wants
to replace the entire DNS system of the Internet), orSia(adecentralized
cloud storage),Ethereum (Turing complete Virtual Machine where you
can run any smart contract); Any centralized service like eBay, Dropbox
can potentially be built in a decentralized way using blockchain
technology, considerably lowering transaction costs
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Block explorer
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Block reward
An amount of crypto-currency a miner receives for processing
transactions in a given block. Because creating (or mining) blocks is so
crucial to the security of the Bitcoin network and yet so hard, the
Bitcoin protocol includes a mechanism to encourage people to mine:
every time a block is added, the miner who found the block is given 12,5
BTC(this number will change at the next halving in 2020) as a block
reward
Chain linking
Chain linking is the process of connecting two blockchains with each
other, thus allowing transactions between the chains to take place. This
will allow blockchains like Bitcoin to communicate with other sidechains,
allowing the exchange of assets between them
Client
A software program a user executes on a desktop, laptop or a mobile
device to launch an application
Consensus(general)
A fundamental problem in distributed computing is to achieve overall
system reliability in the presence of a number of faulty processes. This
often requires processes to agree on some data value that is needed
during computation. The consensus problem requires agreement among
a number of processes for a single data value. Some of the processes
may fail or be unreliable in other ways, so consensus protocols must be
fault tolerant. The processes must somehow put forth their candidate
values, communicate with one another, and agree on a single consensus
value. The bitcoin blockchain uses electricity to ensure the security of
the system. It creates an economic system where you can only
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participate by incurring costs, Proof of work (POW). You do that for the
possibility of reward/bitcoin. If you spend money, and you play fair by
the rules, you get money back. If you cheat, you lose money. It doesnt
pay to cheat. This simple game theoretical equilibrium is the core of the
bitcoin consensus algorithm
Consortium blockchains
A consortium blockchain is a blockchain where the consensus process is
controlled by a pre-selected set of nodes; for example, one might
imagine a consortium of 15 nancial institutions, each of which operates
a node and of which ten must sign every block for the block to be valid.
The right to read the blockchain may be public or restricted to the
participants. There are also hybrid routes such as the root hashes of the
blocks being public together with an API that allows members of the
public to make a limited number of queries and get back cryptographic
proofs of some parts of the blockchain state. These blockchains may be
considered partially decentralized
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hash (4) infeasible to nd two dierent messages with the same hash
(5) deterministic so the same message always results in the same hash.
Cryptographic hash functions have many information security
applications, notably in digital signatures, message authentication
codes (MACs), and other forms of authentication. They can also be used
as ordinary hash functions, to index data in hash tables, for
ngerprinting, to detect duplicate data or uniquely identify les, and as
checksums to detect accidental data corruption
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Double Spending
Double-spending is the result of successfully spending some money
more than once. Bitcoin is the rst to implemented a solution in early
2009 which protects against double spending by verifying each
transaction added to the blockchain to ensure that the inputs for the
transaction had not previously already been spent
Ethereum
Ethereum is an open software platform based on blockchain technology
that enables developers to write smart contracts and build and deploy
decentralized applications(Dapps). The native token of the blockchain is
called Ether which is used to pay for transaction fees, miner rewards and
other services on the network. The main innovation of Ethereum is the
Ethereum Virtual Machine (EVM) which runs on the Ethereum network
and enables anyone to run any application. The EVM makes the process
of developing blockchain applications much easier. Before the
emergence of Ethereum developers had to develop a dedicated
blockchain for each application they wanted to create. This process is
time-consuming and resource-intensive. Ethereum will enable the
development of many applications on the same platform, making the
process much easier and accessible for developers. The Ethereum
Project, based in Switzerland, raised millions in seed money by pre-
mining and selling ethers to supporters & investors. As opposed to
Bitcoin, its scripting language isTuring-completeand full-featured,
expanding the kinds ofsmart contractsthat it can support. The
Ethereum project wants to decentralize the web by introducing four
components as part of its roadmap: static content publication, dynamic
messages, trustless transactions and an integrated user-interface
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Fiat currency
Any money declared by a government to be to be valid for meeting a
nancial obligation, like USD or EUR
Fork
The creation of an ongoing alternative version of the blockchain, by
creating two blocks simultaneously on dierent parts of the network.
This creates two parallel blockchains, where one of the two is the
winning blockchain. The winning blockchain gets determined by its
users, by the majority choosing on which blockchain their clients should
be listening
Genesis block
The very rst block in the block chain
Hardfork
A hardfork is a change to the blockchain protocol that makes previously
invalid blocks/transactions valid, and therefore requires all users to
upgrade their clients. The most recentexample of a hardfork in public
blockchains is the Ethereum hardfork which happened on July 21st,
2016. The hardfork changed the Ethereum protocol, therefore second
blockchain emerged(Ethereum Classic, ETC) which supports the old
Ethereum protocol. In order to continue existing ETC needs miners,
which would validate the transactions on the blockchain
Hashcash
is a proof-of-work system used to limit email spam and denial-of-service
attacks, and more recently has become known for its use in bitcoin (and
other cryptocurrencies) as part of the mining algorithm. Hashcash was
proposed in May 1997 by Adam Back
Halving
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IPFS
The InterPlanetary File System (IPFS) is a hypermedia distribution
protocol, addressed by content and identities. IPFS enables the creation
of completely distributed applications. It aims to make the web faster,
safer, and more open. IPFS is an open source project developed by the
team at Interplanetary Networks and many contributors from the open
source community. It is a peer-to-peer distributed le system that seeks
to connect all computing devices with the same system of les. In some
ways, IPFS is similar to the Web, but IPFS could be seen as a single
BitTorrent swarm, exchanging objects within one Git repository. In other
words, IPFS provides a high throughput content-addressed block
storage model, with content-addressed hyperlinks. This forms a
generalized Merkle DAG, a data structure upon which one can build
versioned le systems, blockchains, and even a Permanent Web. IPFS
combines a distributed hash table, an incentivized block exchange, and a
self-certifying namespace. IPFS has no single point of failure, and nodes
do not need to trust each other
LightNode
A computer on a blockchain network that only veries a limited number
of transactions relevant to its dealings, making use of the simplied
payment verication (SPV) mode
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Lightning Network
The Lightning network is a decentralized network using smart contract
functionality on the blockchain to enable instant payments across a
network of participants. The Lightning Network will allow bitcoin
transactions to happen instantly, without worrying about block
conrmation times. It will allow millions of transactions in a few
seconds, at low costs, even between dierent blockchains, as long as
both chains use the same cryptographic hash function. The Lightning
network will allow two participants on the network to create a ledger
entry, conduct a number of transactions between themselves and after
the process has nished, record the state of the transactions on the
blockchain. As for now, the bitcoin network is capable of processing up
to 7 transactions per second. The Visa payment network, for instance, is
believed to complete 45,000 transactions per second during a regular
holiday period. This protocol tries to solve the bitcoin scalability
problem
Merkle tree
The basic idea behind Merkle tree is to have some piece of data that is
linking to another. You can do this by linking things together with a
cryptographic hash. The content itself can be used to determine the
hash. By using the cryptographic hashing we can address the content,
and content gets immutable because if you change anything in the data,
the cryptographic hash changes and the link will be dierent. Bitcoin
uses cryptographic hashing, where every block points to the previous
one if you modify the block, the hash will change and will make the
block invalid
Mining(Bitcoin)
Mining is the process of adding transaction records to Bitcoins public
ledger of past transactions or blockchain. This ledger of past
transactions is called the blockchain as it is a chain of blocks. The block
chain serves to conrm transactions to the rest of the network as having
taken place. Bitcoin nodes use the blockchain to distinguish legitimate
Bitcoin transactions from attempts to re-spend coins that have already
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Oracles
Smart contracts on the blockchain can not access the outside network
on their own. Therefore oracles sit between a smart contract and the
external world, providing the data needed by the smart contract to
prove performance while sending its commands to external systems
Private Blockchains
a fully private blockchain is a blockchain where write permissions are
kept centralized to one organization. Read permissions may be public or
restricted to an arbitrary extent. Likely applications include database
management, auditing, etc. internal to a single company, and so public
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Proof of Authority(PoA)
A Proof of authority is a consensus mechanism in a private blockchain
which essentially gives one client(or a specic number of clients) with
one particular private key the right to make all of the blocks in the
blockchain
Proof of Stake
Proof-of-stake (PoS) is a method by which a cryptocurrency blockchain
network aims to achieve distributed consensus. While the proof-of-work
(PoW) method asks users to repeatedly run hashing algorithms or other
client puzzles, to validate electronic transactions, proof-of-stake asks
users to prove ownership of a certain amount of currency (their stake
in the currency). Peercoin was the rst cryptocurrency to launch using
proof-of-Stake. Other prominent implementations are found in
BitShares, Nxt, BlackCoin, NuShares/NuBits and Qora. Ethereum has
planned a hard fork transition from PoW to PoS consensus. Decred
hybridizes PoW with PoS and combines elements of both in an attempt
to garner the benets of the two systems and create a more robust
notion of consensus. With Proof of Work, the probability of mining a
block depends on the work done by the miner (e.g. CPU/GPU cycles
spent checking hashes). In the case of Bitcoin, with Proof of Stake, the
resource thats compared is the amount of Bitcoin a miner holds
someone holding 1% of the Bitcoin can mine 1% of the Proof of Stake
blocks. Instead of sacricing energy to mine a block, a user must prove
they own a certain amount of the cryptocurrency to generate a block.
The more stake you own, the more likely you are to generate a block. In
theory, this should prevent users from creating forks because it will
devalue their stake and it should save a lot of energy. Proof of Stake
sounds like a good idea, but ironically, there is the Nothing at Stake
problem. Since mining Bitcoins is costly, it is not smart to waste your
energy on a fork that wont earn you any money, however with Proof of
Stake, it is free to mine a fork
Proof of Work
POW system/protocol/function is an economic measure to deter denial
of service attacks and other service abuses such as spam on a network
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Public Blockchains
a public blockchain is a blockchain that anyone in the world can read,
anyone in the world can send transactions to and expect to see them
included if they are valid, and anyone in the world can participate in the
consensus process the process for determining what blocks get added
to the chain and what the current state is. As a substitute for centralized
or quasi-centralized trust, public blockchains are secured by crypto
economics the combination of economic incentives and cryptographic
verication using mechanisms such as proof of work or proof of stake,
following a general principle that the degree to which someone can
have an inuence in the consensus process is proportional to the
quantity of economic resources that they can bring to bear. These
blockchains are generally considered to be fully decentralized
Ring Signature
Ring signature is a cryptographic technology that could provide a
decent level of anonymisation on a blockchain. Ring signatures make
sure individual transaction outputs on the blockchain cant be traced. A
message signed with a ring signature is endorsed by someone in a
particular group of people. One of the security properties of a ring
signature is that it should be computationally infeasible to determine
which of the group members keys was used to produce the signature
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Satoshi
The smallest unit of Bitcoin, equal to 0.00000001 BTC
Satoshi Nakamoto
is a person or group of people who created the bitcoin protocol and
reference software, Bitcoin Core (formerly known as Bitcoin-Qt). In
2008, Nakamoto published a paper on The Cryptography Mailing list at
metzdowd.com describing the bitcoin digital currency. In 2009, they
released the rst bitcoin software that launched the network and the
rst units of the bitcoin cryptocurrency, called bitcoins
Smart contracts
are computer protocols that facilitate, verify, or enforce the negotiation
or performance of acontract, or that obviate the need for a contractual
clause. Smart contracts usually also have a user interface and often
emulate the logic of contractual clauses. Proponents of smart contracts
claim that many kinds of contractual clauses may thus be made partially
or fully self-executing, self-enforcing, or both. Smart contracts aim to
provide security superior to traditional contract law and to reduce other
transaction costsassociated with contracting
Sidechains
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are blockchains that are interoperable with each other and with Bitcoin,
avoiding liquidity shortages, market uctuations, fragmentation,
security breaches and outright fraud associated with alternative crypto-
currencies. Sidechainsarenew blockchainswhich are backed by
Bitcoins, viaBitcoin contracts, just as dollars and pounds used to be
backed by cold hard gold. You could in principle have thousands of
sidechains pegged to Bitcoin, all with dierent characteristics and
purposes and all of them taking advantage of the scarcity and
resilience guaranteed by the main Bitcoin blockchain, which in turn
could iterate to implement experimental sidechain features once they
have been tried and testedmore
Softfork
A softfork is a change to the bitcoinprotocol wherein only previously
valid blocks/transactions are made invalid. Since old nodes will
recognize the new blocks as valid, a softfork is backward-compatible.
This kind of fork requires only a majority of the miners upgrading to
enforce the new rules
Solidity
Solidity is a programming language designed for developing smart
contracts. Its syntax is similar to that of JavaScript, and it is intended to
compile into bytecode for the Ethereum Virtual Machine(EVM)
State Channel
State channels are interactions which get conducted o the blockchain
without signicantly increasing the risk of any participant. Moving these
interactions o of the chain without requiring any additional trust can
lead to signicant improvements in cost and speed. State channels work
by locking part of the blockchain state so that a specic set of
participants must completely agree with each other to update it
Swarm
Swarm is a distributed storage platform and content distribution
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service, a native base layer service of the Ethereum web three stack.
The primary objective of Swarm is to provide a decentralized and
redundant store of Ethereums public record, in particular, to store and
distribute dApp code and data as well as block chain data
Token
In the context of Blockchains, a token is a digital identity for something
that can be owned. Historically, tokens started as meta information
encoded in simple Bitcoin transactions, thereby taking advantage of the
Bitcoin blockchains strong immutability. At a protocol layer, tokens
were outsourced extensions to Bitcoins core protocol. Instead of being
integrated as a feature on a software level, those tokens were created
by misappropriating data elds in Bitcoin transactions (such as encoding
data in the amount or op_return eld). Today, modern tokens are
created as sophisticated smart contract systems with complex
permission systems and interaction paths attached. Smart contracts can
be understood as software agents, which act deterministically and
autonomously, within the scope of a given network, according to a
predened rule set. If the governance rules around issuance and
management of a token are suciently complex regarding how they
coordinate a group of stakeholders, token smart contracts may be
understood as organizations sui generis. The management rules may
reect those of known legal, organizational entities such as stock
corporations, but they do not have to
Testnet
a second blockchain used by developers for testing new versions of
client software without putting real value at risk
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block is generated with a successful hash, the information for all of the
transactions is included with the block, and all transaction fees are
collected by that user creating the block, who is free to assign those
fees to himself. Transaction fees are voluntary on the part of the person
making the bitcoin transaction, as the person attempting to make a
transaction can include any fee or none at all in the transaction. On the
other hand, nobody mining new bitcoins necessarily needs to accept the
transactions and include them in the new block being created. The
transaction fee is, therefore, an incentive on the part of the bitcoin user
to make sure that a particular transaction will get included in the next
block which is generated. It is envisioned that over time the cumulative
eect of collecting transaction fees will allow somebody creating new
blocks to earn more bitcoins than will be mined from new bitcoins
created by the new block itself. This is also an incentive to keep trying
to create new blocks even if the value of the newly created block from
the mining activity is zero in the far future
Turing completeness
A machine is Turing complete if it can perform any calculation that any
other programmable computer is capable of. All modern computers are
Turing-complete in this sense. The Ethereum Virtual Machine (EVM)
which runs on the Ethereum blockchain is Turing complete. Thus it can
process any computable function. It is, in short, able to do what you
could do with any conventional computer and programming language
Wallet
is a le that contains a collection of private keys and communicates with
the corresponding blockchain. Wallets contain keys, not coins. Wallets
require backups for security reasons.
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Whisper
Whisper is a part of the Ethereum p2p protocol suite that allows for
messaging between users via the same network that the blockchain runs
on. The main task of whisper will be the provision of a communication
protocol between dapps
51% attack
A condition in which more than half the computing power of a
cryptocurrency network is controlled by a single malicious miner or
group of miners. If he controls 51% of the network that makes him the
authority on the network, giving him the power to spend the same coins
multiple times, issue transactions that conict with someone elses or
stop someone elses transaction from being conrmed
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