CRYPTO terms Glossary‍

51% Attack

A cyberattack involving the capture of the majority (>50%) of a blockchain's computing power, either by one person or a group operating in coordinated fashion. When successful, the entity that launched the attack is able to perform certain prohibited tasks that can compromise the integrity of the blockchain, such as double-spending coins and preventing new transactions. Also known as a majority attack.

Note that the so-called Sybil attack, where peer-to-peer (P2P) networks are compromised by a threat actor creating multiple identities, is sometimes considered a type of 51% attack.

Algorithm

A set of rules employed by a computer to solve a particular task. Algorithms are used for transaction authentication, data encryption, digital signatures, and other important aspects of blockchain systems.

Altcoin

Short for "alternative currency," this name can be applied to any kind of digital currency except Bitcoin, the first to be developed.

Block

The basic unit of a blockchain. Every blockchain is composed of blocks arranged in sequential order, which makes it possible to determine which block was created before another on the chain. Each block contains data associated with a specific transaction as well as a unique hash.

Blockchain

A type of distributed ledger that consists of a series of blocks joined sequentially to enable transactions to be recorded in an unalterable manner. Every individual block contains the cryptographic hash of the previous block, making modifications of any given block impossible without altering all preceding blocks. Blockchains can be public (open to anyone) or private (open only to those with permission).

Bridge

A tool that enables tokens to be transferred from one blockchain to another.

Burn

Permanently disposing of a digital coin so that it can no longer be used.

CeDeFi

Short for centralized decentralized finance, this is essentially a system that combines traditional financial services and controls with decentralized applications. It is intended to expand access to DeFi tools to users who prefer to take advantage of the anti-fraud and regulatory protections associated with centralized financial systems.

Ciphertext

Data that has been encrypted (turned into unreadable form). Sometimes spelled cyphertext.

Consensus Mechanism

A method used by a blockchain to verify new blocks and prevent falsified data from being entered. Essentially, it allows the users of a blockchain to agree on the validity of a given transaction before it is officially recorded. Dozens of consensus mechanisms are in use across the blockchain world, with the two most common being proof of work (PoW) and proof of stake (PoS). Consensus mechanisms are sometimes called consensus protocols.

Cryptocurrency

Money in digital form. The value of cryptocurrency is determined by the activity of buyers and sellers, not banks or other centralized authorities. Cryptocurrency relies on web-based networks to store assets and ensure the integrity of transactions. Often called crypto for short.

Dapp

Short for decentralized application, this is a program that runs on a blockchain to provide users with certain functions or capabilities. Dapps rely on one or more smart contracts to function autonomously, without the need for human intervention. Sometimes rendered as dApp.

Decentralized Exchange (DEX)

A type of exchange that enables users to buy and trade digital assets on a peer-to-peer basis, without a third-party intermediary.

Decentralized Autonomous Organization (DAO)

A blockchain-based organization that runs on the basis of smart contracts rather than traditional hierarchical management.

DeFi

Short for decentralized finance, it refers to financial services performed on a peer-to-peer basis on blockchains. It is contrasted with, and forms an alternative to, centralized finance—i.e., the traditional world of banks and other institutions that manage the global financial marketplace. The distinguishing characteristics of DeFi include user anonymity, the absence of traditional intermediaries, and the reliance on smart contracts to execute transactions.

Decryption

The process of converting encrypted data (or ciphertext) back into its normal, readable state. Decryption is performed with an encryption key that is in the possession of the individual authorized to view the data.

Delegated Proof of Stake (dPoS)

A modification of the proof-of-stake consensus protocol, dPoS allows holders of the blockchain’s token to vote on “delegates” (nodes) that will be responsible for validating blocks.

Digital Signature

A string of data generated by a private key, and used to authenticate the identity of the user. It is frequently used, in conjunction with the associated public key, to verify a document supposedly issued by a specific party.

Distributed Ledger

A database that is shared and accessible by multiple users simultaneously. One of the fundamental features of the blockchain world, distributed ledgers are synchronized, allowing any changes (such as new blocks) to be made to all copies instantaneously.

Double Spend

The act of spending the same cryptocurrency twice by falsifying the blockchain. This is one of the fraudulent events that consensus mechanisms have been developed to prevent.

Encryption

The process of rendering sensitive data into coded form to avoid interception from unauthorized parties. Data that has been properly encrypted—called ciphertext—appears as randomized characters.

Fork

A fork occurs when a blockchain splits into two competing versions. Forks can be permanent or temporary. Also known as a chain split.Forks can be classified into two categories:  
‍Hard fork - This occurs when a group of nodes fails to upgrade in compliance with a rule change. As a result, these nodes keep validating in accordance with the old rules, and reject those blocks made in compliance with the new rules.
‍Soft fork - This also occurs when nodes fail to adopt a new rule, the difference being that in a soft fork, the old nodes accept blocks that the newer rule-compliant ones do not.

Gas

Fees charged by a blockchain, in its native currency, as compensation for the use of the network's computational power to carry out a transaction.

Genesis Block

The initial block in a blockchain.

Hash

A unique fixed-length string of characters created by an algorithm and associated with a particular block. Each block contains its own hash in addition to the one linked to the previous block. This serves to ensure the integrity of data by making alterations immediately detectable, as any modification to a block will also modify its hash. Commonly used hash functions include SHA-256 and MD5. Also called a cryptographic hash.

Initial Coin Offering (ICO)

A method of raising funds for a new cryptocurrency by putting up the first batch of coins for public sale.

MetaMask

One of the most popular online wallets, launched in 2016. MetaMask wallets can be connected to Avalanche.

Miner

An entity involved in the verification of blockchain transactions, an extremely important process for ensuring the integrity of the system. Miners contribute computational power at their disposal to “solve” new blocks in a manner compliant with the blockchain’s consensus mechanism.

Node

A computer connected to and capable of properly interacting with the blockchain network.

Non-Fungible Token (NFT)

A unique digital asset stored on a blockchain. In most cases, an NFT acts as essentially a certificate of ownership for an item that exists in the "real world." NFTs can be used to purchase or trade digital artwork, tickets to live events, web domains, music albums, and much more.

Oracle

A program that enables smart contracts to receive real-time data. By design, smart contracts cannot transmit API requests, so they are dependent on oracles to deliver time-sensitive information needed to trigger certain predetermined automated events.

Orphan Block

A block that has been verified but not accepted by the network. It often occurs when two miners solve a block at the same time. Also called a stale block.

Paper Wallet

Any kind of tangible document (e.g., a 2x4 card) that contains a user's private key. It is considered a type of cold wallet—i.e., an offline storage device. Paper wallets are sometimes preferred by users who are concerned about the security risks attached to "hot" wallets (see Wallet).

Peer to Peer (P2P)

Interactions involving two or more parties on a network where each user ("peer") is equally privileged, without the intervention of a third-party to mediate the activity.

Plaintext

Data that has yet to be encrypted or has been decrypted—in other words, it can be easily read through normal means.

Private Key

A string of random numbers and letters that enables access to cybercurrency associated with a specific wallet. A private key is a digital signature that functions much like a password, and should be kept secret by its proper owner. It can be used to generate a linked public key that may be safely sent to others for transaction purposes. Private keys are also known as secret keys.

Proof of Stake (PoS)

A type of consensus mechanism that requires miners to stake their own coins to earn a chance to validate a transaction. The PoS mechanism was devised as a less energy-intensive alternative to the older proof-of-work method.

Proof of Work (PoW)

A type of consensus mechanism that requires miners to invest a substantial amount of computing power to find a solution to a complicated mathematical problem. The "winning" miner is rewarded with cryptocurrency. The oldest consensus mechanism, PoW is still in wide use today.

Public Key

A string of random numbers and letters that a wallet owner can post in publicly accessible spaces to receive cryptocurrency from others, among other uses. Unlike private keys, they need not be kept secret. A public key cannot be manipulated or analyzed to reveal the corresponding private key.

Pump and Dump  

A fraudulent activity where a party artificially boosts the value of a cryptocurrency, usually by purchasing large quantities of it, and then sells ("dumps") the assets at a considerable profit.

Rug Pull

A type of fraud where a party collects funds from investors for a proposed crypto project (often a new token), only to disappear with the investors' money without delivering on promises.

Satoshi Nakamoto

The pseudonym of the mysterious—and, to date, never identified—creator of Bitcoin.

Smart Contract

A program on the blockchain intended to enable terms of agreement—similar to those associated with traditional contracts—to be executed automatically, without the need for a third-party intermediary, when specific agreed-upon conditions are met.

Solidity

The most popular programming language for creating smart contracts. It is heavily influenced by the C++, Python, and JavaScript languages.

Stablecoin

A low-volatility cryptocurrency that is tied to the value of another asset, such as gold, fiat currency, or another cryptocurrency.

Staking

Using a certain amount of cryptocurrency to validate a transaction in a proof-of-stake (PoS) blockchain.

Subnet

Short for “subnetwork,” this is a segmented, distinct area of a larger network. Subnets are useful for improving the routing of network data, among other benefits.

Time-to-Finality (TTF)

The amount of time necessary to ensure that a crypto transaction becomes irreversible. TTF is often used to gauge the speed and efficiency of a blockchain network.

Trustless System

A system where transactions do not require a centralized authority or knowledge of the other participants. This term is frequently used in reference to blockchains.

Validator

A participant in a proof-of-stake blockchain. Validators aid in processing transactions and maintaining the proper functioning of the blockchain.

Virtual Machine

Software that emulates a physical computer system, including its memory, network connections, and operating system. In the blockchain world, VMs are used to develop decentralized applications and smart contracts.

Vyper

The second most popular of the smart contract languages currently in use (behind Solidity). Based on the Python language, Vyper is designed to simplify the coding process.

Wallet

A storage solution, either in software or hardware form, where users can store their cryptocurrency private keys. There are two primary types of wallets:

‍Hot wallet - One that is currently connected to the internet in some way (and, therefore, conceivably vulnerable to cyberattacks).

‍Cold wallet - One that is not connected to the internet in any way. This method eliminates the possibility of data theft from hackers, but a cold wallet still requires the user to safeguard it properly.