Blockchain Technology – Glossary

The words defined here belong to the article “What is BlockChain Technology? An Analysis”.

Bitcoin

Bitcoin is the first decentralised, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralised issuer.

Block

Blocks are packages of data that carry permanently recorded data on the blockchain network.

Blockchain

A blockchain is a shared ledger where transactions are permanently recorded by appending blocks. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain

Block Reward

A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.

Central Ledger

A ledger maintained by a central agency.

Consensus

Consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.

Cryptocurrency

Also known as tokens, cryptocurrencies are representations of digital assets.

Distributed Ledger

Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not have to have its own currency and may be permissioned and private.

Distributed Network

A type of network where processing power and data are spread over the nodes rather than having a centralised data centre

Digital Signature

A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity.

Ethereum

Ethereum is a blockchain-based decentralised platform for apps that run smart contracts, and is aimed at solving issues associated with censorship, fraud and third party interference.

Hash Function

A hash function is any function that can be used to map data of arbitrary size to data of fixed size. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes.

Mining

Mining is the act of validating blockchain transactions. The necessity of validation warrants an incentive for the miners, usually in the form of coins. In this cryptocurrency boom, mining can be a lucrative business when done properly. By choosing the most efficient and suitable hardware and mining target, mining can produce a stable form of passive income.

Node

A copy of the ledger operated by a participant of the blockchain network.

Peer to Peer

Peer to Peer (P2P) refers to the decentralized interactions between two parties or more in a highly-interconnected network. Participants of a P2P network deal directly with each other through a single mediation point.

Proof of Stake

A consensus distribution algorithm that rewards earnings based on the number of coins you own or hold. The more you invest in the coin, the more you gain by mining with this protocol.

Proof of Work

A consensus distribution algorithm that requires an active role in mining data blocks, often consuming resources, such as electricity. The more ‘work’ you do or the more computational power you provide, the more coins you are rewarded with.

Smart Contracts

Smart contracts encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network.

Transaction Fee

All cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block.