A brief glossary of terms for beginners to familiarize with blockchain

20 June 2018

All individuals interested in blockchain technologies and cryptocurrencies need to have elementary knowledge of the basic terms and fundamental jargon used to denote and describe processes, operating principles and tools resident in blockchain and cryptocurrency industries. This is our selection of some useful glossary entries that everyone should understand.

Address: Blockchain systems at the core of all cryptocurrencies usually have public and private addresses required to identify the wallet where the money should be transferred from or to. Such addresses are in fact strings of alphanumeric characters, where the public addresses are provided to the party sending the money, and the private address is used to retain the holdings of cryptocurrency.

Altcoin: This is an abbreviated form for ‘Bitcoin alternative’. Bitcoin alternatives are cryptocurrencies mostly coming as forks of Bitcoin with some changes and new features added to the underlying blockchain. One of the major altcoins in the market is Litecoin.

ASIC: It is an abbreviation for ‘Application Specific Integrated Circuit’, an electronic chip developed to perform one task. In the context of cryptocurrency mining, the ASIC is used for processing special calculations for creating new coins and is considered as more efficient as compared to traditional components of the PCs, such as CPUs or GPUs, saving the time and energy.

Blockchain: It is a public ledger of transactions and other activity with the decentralization and immutability of actions put at the forefront of its key advantages and objectives. The ledger cannot be controlled by a single user and as such cannot be tampered or taken down by cyberattackers. Everything introduced into the blockchain network remains there forever. Scope of application for blockchain technologies includes a wide range of areas: cryptocurrencies, smart contracts, could storage, DNS and others.

Block: Blocks represent packages of permanently recorded data in the network. The data in the blockchain system is recorded using the files in the form of blocks, and a block is a small book of most recent transactions and actions, not introduced into the previous blocks. The blocks are added at the end of the overall chain (blockchain) and there is no possibility to tamper them, remove or rewrite. The blocks are created in the process called mining, where participants, known as miners, should solve complex mathematical tasks peculiar and unique for each new block. Miners compete with each other for solving the task, and, thus, to be the first to create a new block.

Consensus: Consensus is a special protocol used by the blockchains to complete processing of transactions and finish the procedure of validating and approving the records to be entered into the blockchain. Consensus protocols are used to ensure that the blocks, or ledgers, in the blockchain or distributed ledger system are exact copies of each other. Consensus protocols differ from one blockchain environment to another: thus, Bitcoin uses Proof-of-Work consensus protocol, where participants should spend their money on electricity and perform some actions to prove the validity of the actions.

Dapp: It is an acronym for ‘Decentralized application’, an application featuring open-source nature and operating autonomously with the data stored on the blockchain network. Dapps, as a rule, use cryptographic tokens or coins required to ensure access to the application.

Distributed ledger: Distributed ledger technology in most cases is placed on the same shelf with the blockchain, as distributed ledgers are ledgers storing data in their network using decentralized nodes. It is not necessary for the distributed ledgers to have their currency, and they may be private.

Fork: Forks represent branches of the blockchain created at some stage of the original blockchain existence. They are alternative versions of the blockchain running simultaneously with their parent network.

Hardfork: Hardforks are branches of the blockchain, where the transactions previously announced invalid are made valid and the opposite. In this fork all users and nodes should update their blockchain to the latest version.

Softfork: Softfork is a branch of the blockchain, where only previously valid transactions are announced as invalid, and it doesn’t require all nodes and users to upgrade to the latest version. Only major miners need to update to the new protocol to enforce it. Softforks are backward-compatible, meaning that old versions of the blockchain may be consulted and used.

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