This comprehensive blockchain and cryptocurrency glossary provides definitions that break down the principles of DLTs, smart contracts, consensus algorithms, and more. Designed for tech-savvy users and those looking to dive deeper into the blockchain ecosystem, this guide will familiarize you with the basics and inner workings of a technology that is redefining finance, identity systems, and decentralized networks.
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51% attack: A scenario in which a single actor or group controls over 50% of the mining power in a Proof-of-Work (PoW) network. With this majority control, they could potentially manipulate the blockchain by rewriting transaction history, preventing new transactions from confirming, and even double spending, thus undermining the network’s integrity and trustworthiness.
A
Account: A unique address on a DLT associated with a user for storing, sending, and receiving cryptocurrencies or tokens. Accounts are managed with a pair of cryptographic keys: a private key for secure control of funds and a public key for receiving transactions.
Adam Back: British computer scientist and cryptographer, creator of the Hashcash proof-of-work system, a foundational element of Bitcoin’s protocol, and an influential figure in the cryptocurrency field.
Airdrop: A method for distributing free tokens to raise awareness of a project or reward loyal users, typically based on transaction history or ownership of specific assets during a given period.
Altcoin: Any cryptocurrency that is an alternative to Bitcoin, encompassing a wide variety of coins and tokens with diverse features and use cases, such as Ethereum, Tezos, or Monero.
AML (Anti-Money Laundering): A set of regulatory measures designed to prevent the use of financial transactions for money laundering, ensuring funds are not involved in illegal activities.
Amir Taaki: A prominent British developer in the cryptocurrency space, known for his work on Bitcoin’s code and as the creator of Dark Wallet, a tool designed to enhance privacy in Bitcoin transactions.
Andreas Antonopoulos: Educator, author, and leading advocate of Bitcoin and decentralization, renowned for his book Mastering Bitcoin and for promoting Bitcoin’s understanding and adoption globally.
Antminer: A brand of ASIC mining hardware produced by Bitmain, specialized in mining Bitcoin and other PoW-based cryptocurrencies with high efficiency.
API (Application Programming Interface): A set of rules and protocols that enables different software systems to interact, often used in DLTs to connect with exchanges and other crypto platforms.
Arbitrage: An investment strategy that takes advantage of price differences for the same asset across different markets, buying in one market and selling in another to make a profit.
Asymmetric cryptography: An encryption method using a pair of keys (public and private) to securely encrypt and decrypt data, critical in decentralized networks for ensuring authentication and privacy.
ATH (All-Time High): The historical peak price of a digital asset, used as a benchmark for evaluating the asset’s profitability and performance over time.
Atomic swaps: Technology allowing the direct exchange of cryptocurrencies across different blockchains without intermediaries, relying on smart contracts for secure, trustless transactions.
Automated market maker (AMM): A DeFi protocol facilitating asset exchanges without the need for specific buyers or sellers. AMMs use algorithms to manage liquidity pools, where users deposit funds to support transactions and earn a small fee in return.
ASIC (Application-Specific Integrated Circuit): A custom-designed integrated circuit optimized for cryptocurrency mining in specific algorithms, like the SHA-256 used in Bitcoin, for maximum efficiency.
B
Baking: The process of creating and validating new blocks on the Tezos blockchain, similar to mining in other networks. Validators, known as “bakers,” ensure the security of transactions and are rewarded for their contributions to the network’s stability and security.
Bear market: A prolonged period of declining asset prices, often accompanied by negative investor sentiment and market pessimism.
Bear trap: A deceptive market movement where prices drop temporarily, leading investors to believe a longer decline will continue. This prompts asset sales, only for prices to rebound shortly after, often trapping sellers with losses.
Bitcoin: The first decentralized cryptocurrency, launched in 2009 by the pseudonymous Satoshi Nakamoto. Bitcoin operates on a blockchain, where transactions are public, irreversible, and secured by mining. Although transaction details are visible, user identities remain pseudonymous. Bitcoin introduced true digital scarcity, establishing itself as a revolutionary decentralized asset in the digital economy.
bitcoin (lowercase): Refers to the monetary unit of bitcoin, representing specific amounts of the asset (e.g., “1 bitcoin”).
Bitcoin Core: The original software client for Bitcoin and the primary reference software for operating nodes, executing updates, and maintaining the Bitcoin network.
Bitcoin Pizza day: Celebrated on May 22, this event marks the first recorded Bitcoin transaction in 2010, when Laszlo Hanyecz paid 10,000 BTC for two pizzas, signifying Bitcoin’s first real-world use.
Bitmain: A Chinese company specializing in producing ASIC mining hardware like the Antminer series, making it a leading entity in Bitcoin mining.
BIP (Bitcoin Improvement Proposal): A technical document proposing new features or modifications to the Bitcoin protocol, subject to review and approval by the Bitcoin community and developers.
Blakley’s Secret Sharing (BSS): A cryptographic algorithm by George Blakley (1979) for dividing a secret into parts using geometry in an n-dimensional space. In this scheme, the secret forms at the intersection of hyperplanes, each defined by one of the created parts.
Block explorer: A tool for exploring and verifying blockchain data, like transactions, blocks, and addresses. Block explorers provide real-time monitoring and enhance network transparency.
Block height: The sequential number assigned to each block in a blockchain, indicating its position within the chain. This measure aids in tracking transactions and determining a block’s age.
Block reward: The incentive miners or validators receive for confirming a new block, contributing to the network’s maintenance and security.
Block size: The maximum amount of data a blockchain block can contain, typically measured in bytes, which limits the number of transactions in each block.
Block time: The average time required to mine or validate a block. This interval determines how often blocks are added to the blockchain and affects transaction confirmation speed.
Block validation: The process by which a block of transactions is verified and approved by network nodes or validators, ensuring compliance with the consensus rules.
Blockchain: A decentralized, distributed ledger technology where transactions are recorded in sequentially linked blocks. Each block holds verified transaction records, creating an immutable chain of data. Blockchain underpins cryptocurrencies and decentralized applications, facilitating secure value and data transfers without intermediaries.
Blockandcapital: A recruitment company specializing in the technology sector, recognized for its expertise in the ecosystem. Blockandcapital supports tech companies in finding qualified talent and contributes to industry growth through consulting and recruitment services.
Boneh-Lynn-Shacham (BLS) signature: A digital signature scheme allowing multiple signatures to be verified as one, reducing processing load in distributed networks. BLS signatures are essential for high-efficiency transaction validation.
Bounty: A reward for completing specific tasks, such as identifying security vulnerabilities, developing software, or promoting a project. Bounties encourage community involvement in project development and improvement.
Brain wallet: A type of wallet generated from a mnemonic phrase memorized by the user, allowing access without a physical device. Brain wallets are vulnerable if the phrase is weak or predictable, risking asset security.
Bridge: A protocol that connects different blockchain platforms, enabling the transfer of assets or information and fostering interoperability between DLT ecosystems.
Bull market: A period marked by a sustained upward trend in digital asset prices, often characterized by optimism and positive investor sentiment.
Bull trap: A market scenario where prices temporarily rise, attracting buyers, only to fall afterward, leading to losses for those who bought during the increase.
Bulletproofs: A cryptographic scheme that verifies transaction integrity without revealing the transaction amount, enhancing privacy by eliminating the need for trusted third parties.
Byzantine Fault Tolerance (BFT): The capacity of a distributed system to operate effectively even if some nodes fail or act maliciously, a crucial property in DLT consensus mechanisms.
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Calldata: Raw data sent within a transaction, typically on the Ethereum blockchain, to convey information or instructions to a smart contract. It is a form of temporary storage that is not retained on-chain after execution, reducing storage costs.
CBDC (Central Bank Digital Currency): A digital form of currency issued and regulated by a central bank. Unlike decentralized cryptocurrencies, CBDCs are government-controlled and represent a digital counterpart of a nation’s fiat currency.
Centralized exchange (CEX): A platform serving as an intermediary for cryptocurrency buying and selling, managing users’ funds and transactions. Centralized exchanges offer high liquidity and a broad range of assets, but users must trust the entity to securely manage their assets and data.
Centralized network: A network governed by a single entity that makes decisions and controls data storage. This structure provides streamlined management but also concentrates control and risk in one point, which can lead to vulnerabilities.
CFD (Contract for Difference): A financial derivative allowing investors to speculate on an asset’s price movement without owning it. Investors agree to exchange the difference in the asset’s value from the start to the end of the contract, with profit or loss depending on price fluctuation.
Chainanalysis: A company specializing in forensic analysis of DLT networks. It uses advanced tools to trace transactions and detect suspicious or illegal activities, assisting financial institutions and regulators in fraud and anti-money laundering (AML) investigations.
Checksum: A numerical value generated by an algorithm to verify data integrity. In cryptography, a checksum confirms that an address or file has not been altered or tampered with, enhancing security.
Child pays for parents (CPFP): A method by which a transaction with a low fee can be prioritized by creating a “child” transaction with a higher fee. This incentivizes miners to include both the parent and child transactions in the same block, speeding up confirmation.
Coinjoin: A privacy protocol that allows multiple users to combine their transactions into a single transaction, making it challenging to trace sources and destinations and enhancing privacy.
Cold storage: A secure way of storing cryptocurrency offline, typically using hardware wallets or paper wallets, to reduce hacking risks by avoiding an internet connection.
Cold wallet: A type of wallet used in cold storage that remains disconnected from the Internet, significantly lowering the risk of cyber attacks by keeping private keys offline.
Confirmation: The process by which a transaction is verified and added to the blockchain, securing its validity and making it immutable. Once confirmed, a transaction is considered final and cannot be reversed.
Consensus algorithm: A mechanism in decentralized networks to reach agreement on the state of the network and validate transactions. Consensus algorithms ensure nodes in the network agree on transaction validity, preserving the network’s integrity. Examples include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
CPU (Central Processing Unit): The main processor in a computer, which executes instructions and performs essential tasks. In cryptocurrency mining, CPUs can be used to solve certain consensus algorithms, although they are generally less efficient than specialized hardware like ASICs or GPUs.
Cross-chain: Technology enabling interoperability between different DLTs, allowing the exchange of assets or information between distinct networks and enhancing the utility of cryptocurrencies and decentralized applications (DApps).
Crowdfunding: A financing method where projects raise funds through small contributions from a large number of people. In cryptocurrency, crowdfunding often rewards contributors with tokens or other digital assets related to the project.
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DAG (Directed Acyclic Graph): A data structure that organizes information in a sequence without cycles, optimizing the storage and parallel processing of transactions. In DLTs like IOTA and Hedera Hashgraph, a DAG allows multiple transactions to be processed concurrently without sequential blocks, improving network scalability and efficiency.
Danksharding: A scalability proposal for Ethereum that fragments the network into “shards” or segments, each capable of processing transactions in parallel. This off-chain workload distribution significantly boosts the network’s capacity and transaction speed.
DAO (Decentralized Autonomous Organization): An organization autonomously managed through smart contracts and decentralized decision-making. DAO participants vote on decisions based on rules codified in smart contracts, eliminating the need for a central authority and promoting transparency.
dApps (Decentralized Applications): Applications running on DLTs that operate without intermediaries. dApps utilize smart contracts to automate processes, ensuring transparency and autonomy, making them alternatives to traditional centralized applications.
Data blob: A fragment of raw data stored either on a DLT or external storage solutions. Blobs manage large data quantities without overloading the main network, improving efficiency.
DCA (Dollar-Cost Averaging): An investment strategy of spreading capital over several regular purchases of an asset to minimize volatility effects, reducing the impact of price changes and optimizing the average purchase cost.
DDoS (Distributed Denial of Service): An attack where multiple systems send overwhelming traffic to a server or network, causing it to crash. DDoS attacks are a common threat to online services, including some decentralized networks.
Decentralized exchange (DEX): A platform allowing direct cryptocurrency exchanges between users without intermediaries. Decentralized exchanges provide greater privacy and control over funds, though liquidity may be lower compared to centralized exchanges.
Decentralized network: A network without a single control point; nodes participate in consensus and data storage in a distributed manner, enhancing resistance to censorship and centralized failures.
DeFi (Decentralized Finance): A financial ecosystem using smart contracts to enable traditional financial services such as lending, trading, and insurance, without centralized intermediaries. DeFi provides an open, permissionless alternative to the traditional financial system.
Deposit contract: An agreement in which a user locks assets into a smart contract, often for activities like staking or securing future transactions on decentralized platforms.
Digicash: A pioneering digital money system founded in 1989 by David Chaum. Digicash developed electronic payment systems using cryptography to protect users’ privacy and secure transactions, making it one of the first digital money initiatives.
Digital asset: A digital representation of value, including cryptocurrencies, tokens, or other digital instruments that can be stored and transferred on decentralized platforms like DLTs.
Digital Identity (DID): A unique identifier allowing users to manage their online identity independently of a central authority. DIDs enhance privacy and security through decentralized enrollment technologies.
Digital signature: A cryptographic method guaranteeing the identity of the signer and the integrity of a message or transaction. Digital signatures ensure that only private key holders can authorize actions, providing authentication and non-repudiation in decentralized systems.
Distributed Hash Tables (DHT): A distributed data storage structure allocating and locating data across a network without a central server. DHTs enable nodes to share data and resources, making them ideal for distributed applications.
Distributed Key Generation (DKG): A cryptographic process where multiple parties collaboratively generate a private key without needing a central authority. Ideal for decentralized escrow or shared governance, DKG enhances security and privacy.
Distributed Ledger Technology (DLT): A technology allowing data storage, updates, and sharing across a distributed network of nodes without a central server. DLTs, such as blockchain or DAG, ensure transparency, immutability, and security in information management.
Double spend: The risk of spending the same asset multiple times in cryptocurrency systems. Blockchains prevent double-spending by using consensus mechanisms that verify each transaction’s uniqueness and record it immutably.
DSA (Digital Signature Algorithm): A digital signature method that authenticates the integrity and origin of messages or digital documents, ensuring they have not been altered. DSA is essential for security in distributed networks.
Do Your Own Research (DYOR): A reminder emphasizing the importance of independent research before making financial decisions, especially in cryptocurrency investments.
Dumping: A strategy involving the mass sale of an asset, causing a rapid price decline. In cryptocurrency, dumping can significantly impact price stability, leading to losses for investors holding the asset.
E
Eclipse attack: A blockchain network attack in which a node is isolated and only connected to nodes controlled by the attacker. This compromises the node’s access to accurate information and opens the possibility for data manipulation.
ECDSA (Elliptic Curve Digital Signature Algorithm): A digital signature algorithm based on elliptic curve cryptography, widely used in cryptocurrencies like Bitcoin to ensure transaction authenticity and validity. ECDSA provides high security and efficiency with smaller key sizes.
EdDSA (Edwards-curve Digital Signature Algorithm): An advanced version of the Elliptic Curve Digital Signature that enhances efficiency and security over ECDSA. Used in cryptocurrencies like Monero, EdDSA offers faster verification and strong resistance to attacks, making it suitable for privacy-focused applications.
Elliptic Curve Cryptography (ECC): A cryptographic method using elliptic curves to generate secure keys in a compact space. ECC provides high security and efficiency, making it a popular choice in blockchain and distributed systems for secure data encryption.
Enterprise Ethereum Alliance (EEA): An organization of companies and institutions advocating for the adoption of Ethereum technology in the enterprise sector. The EEA develops standards and solutions for Ethereum that address the unique requirements of businesses.
Entropy: A measure of randomness used to generate secure, unpredictable cryptographic keys. Higher entropy enhances security, as it reduces the likelihood of guessing or replicating generated keys.
Erebus attack: An attack strategy that threatens decentralization by monopolizing communication channels between nodes, allowing the attacker to influence the main network and potentially manipulate information flow.
Ether: The native cryptocurrency of the Ethereum network, used to pay transaction fees and execute smart contracts. Ether is essential for Ethereum’s operation, providing an economic incentive for network validators.
Ethereum (ETH): An open-source blockchain platform for developing smart contracts and decentralized applications (dApps). Known for its security and ability to support diverse applications, Ethereum is one of the most prominent DLTs. Its native cryptocurrency, Ether (ETH), is used to pay transaction fees and run smart contracts.
Ethereum classic (ETC): The original Ethereum blockchain version, maintained after a hard fork in 2016 due to a major hack. Ethereum Classic upholds the principle of immutability, retaining the original transaction history and rejecting updates applied to Ethereum (ETH).
Ethereum Improvement Proposal (EIP): A formal proposal for changes or new features in the Ethereum network. EIPs are evaluated and discussed by the community and developers, and, if approved, are implemented to enhance network functionality.
Escrow: A contract or account holding assets temporarily under third-party supervision or through a smart contract. The assets are only released when agreed-upon conditions are met, as in purchase or service agreements.
Ewasm: A proposed virtual machine for Ethereum based on WebAssembly, aimed at improving Ethereum’s performance and compatibility. Ewasm is designed to replace the current Ethereum Virtual Machine (EVM), offering greater flexibility and faster development capabilities.
F
Faketoshi: A derogatory term used to describe individuals who falsely claim to be Satoshi Nakamoto, the creator of Bitcoin. Common in the crypto community, this term identifies those who attempt to gain credibility or influence by assuming Satoshi’s identity.
Farming: A DeFi activity where users deposit or lock assets in smart contracts to earn rewards, often in the form of additional tokens. By providing liquidity to specific pools, participants help enhance asset exchange efficiency, earning passive income through fees and rewards in return.
Faucet: A tool that distributes small amounts of cryptocurrency for free, allowing users to test and familiarize themselves with platforms without financial risk. First introduced on the Bitcoin blockchain, faucets give users a low-risk way to learn about cryptocurrencies.
Fibonacci: In technical analysis, the Fibonacci sequence is applied to identify support and resistance levels in asset prices using specific mathematical ratios, such as 0.236, 0.382, and 0.618. These ratios can help predict potential reversals and trend shifts in price movements.
Fiduciary money: Currency issued by a government that derives its value from trust in the issuing authority, like the dollar or the euro. Unlike commodity-backed money, fiduciary money lacks physical backing but relies on government stability and credibility.
Finney attack: A Bitcoin double-spending attack where a miner privately creates a valid transaction and releases it just after making a payment, deceiving the recipient into accepting an invalid transaction.
Flash crash: A sudden, brief drop in an asset’s price followed by rapid recovery. Flash crashes are typically triggered by algorithmic trading errors or extreme reactions to unexpected events, causing temporary volatility.
Flash loan attack: A DeFi exploit where an attacker uses flash loans to temporarily manipulate an asset’s price, profiting by influencing price oracles or liquidity pools.
FOMO (Fear of Missing Out): The psychological tendency driving investors to buy assets out of fear of missing out on profit opportunities. In crypto markets, FOMO can lead to impulsive actions and increase price volatility.
Fork: A blockchain protocol divergence resulting in a new chain version. A hard fork creates an incompatible version, while a soft fork is backward-compatible. Forks enable significant changes to network rules or functionality.
Fraud proof: A verification mechanism in solutions like Optimistic Rollups that identifies and penalizes fraudulent activity, ensuring transaction validity.
Front running attack: A transaction manipulation tactic where an actor (e.g., a miner or privileged user) observes pending transactions and executes them first to gain an advantage, often seen in DeFi.
FROST: A cryptographic protocol enabling the secure creation of multisignatures. FROST allows multiple participants to sign without revealing their private keys, making it suitable for decentralized custody or governance systems where secure collaboration is critical.
FUD (Fear, Uncertainty, and Doubt): A tactic aimed at creating negative sentiment around a project or asset by spreading fear, uncertainty, and doubt. FUD can sway investor opinion and drive down asset prices.
G
Game theory: The study of decision-making strategies in scenarios where outcomes depend on the choices of multiple participants. In DLTs, it informs the design of consensus and security mechanisms that deter malicious behavior.
GameFi: A blend of “game” and “finance,” GameFi integrates financial mechanisms into Play-to-Earn (P2E) video games using distributed ledger technologies (DLTs). This category of decentralized applications (dApps) allows players to earn rewards in the form of digital assets with real value, transforming the gaming experience and establishing a cryptocurrency-based economy beyond the virtual realm.
Gas: A unit measuring the computational cost of executing transactions or smart contracts on a DLT. In Ethereum, gas is paid in “Gwei,” a sub-unit of ether, with prices fluctuating based on network congestion, incentivizing users to optimize resource usage.
Gasper: A consensus protocol that merges Proof of Stake (PoS) with final confirmation for block validation. Implemented in Ethereum 2.0, Gasper enables validators to securely and efficiently approve blocks, enhancing security and scalability by optimizing transaction confirmation in distributed networks.
Gavin Andresen: A software developer who took over leadership of the Bitcoin project following Satoshi Nakamoto’s departure. He played a key role in developing the protocol and expanding the Bitcoin developer community.
Genesis block: The first block in a blockchain that establishes initial parameters and marks the network’s inception. This block serves as the foundation for all subsequent blocks and has no predecessors. In Bitcoin, the genesis block was created by Satoshi Nakamoto in 2009, marking the beginning of the blockchain.
Gobernance: A collection of collective decision-making mechanisms for altering or updating the protocol of a DLT. Participants, which may include validators, miners, and users, vote on proposed improvements to ensure that changes reflect the community’s needs. In decentralized systems like DAOs, smart contracts automate the governance process.
GPU (Graphics Processing Unit): A processor designed to perform multiple operations in parallel, making it ideal for computationally intensive tasks such as proof-of-work (PoW) cryptocurrency mining. GPUs enhance the efficiency of hash calculations, contributing to transaction validation and network security.
Gwei: A subunit of ether, Ethereum’s native cryptocurrency, used to measure and pay the gas fees required for executing transactions and smart contracts on the Ethereum network. One Ether is equal to 1,000,000,000,000 Gwei.
H
Hal Finney: A pioneering cryptographer and early adopter of Bitcoin, Hal Finney collaborated directly with Satoshi Nakamoto during the initial testing of the protocol and executed the first Bitcoin transaction, significantly contributing to the technical validation of the system.
Halving: A scheduled event in some blockchains, such as Bitcoin, where the block reward is halved after a specified number of blocks are mined. This event occurs approximately every four years in Bitcoin and reduces the issuance of new coins, thereby controlling cryptocurrency inflation.
Hard fork: A protocol change that introduces an upgrade incompatible with previous versions, resulting in the creation of two independent chains. Hard forks may be implemented to make significant improvements or arise from community disagreements about the project’s direction.
Hardware wallet: A physical device specifically designed to securely store cryptocurrency private keys offline, minimizing the risk of hacking and providing an additional layer of protection for funds.
Hash: A cryptographic function that converts data of any size into a fixed-length value, used to ensure the integrity and security of information in distributed systems. Hashes allow transactions to be verified without exposing full data, enhancing both efficiency and security.
Hashrate: A measure of computing power in a Proof of Work (PoW) network, indicating the number of hash operations performed per second. A higher hashrate increases network security and stability by making double-spending attacks more difficult.
Hashcash: A 1997 proposal by Adam Back to reduce email spam using Proof of Work (PoW). This system influenced Bitcoin’s PoW algorithm, which requires miners to solve complex mathematical problems to validate transactions and secure the network.
Hash Timelock Contracts (HTLCs): Smart contracts that secure transactions by locking funds until certain conditions are met, such as revealing a specific hash key or reaching a time limit. This mechanism allows for secure, trustless exchanges between parties.
HD wallet: A wallet that utilizes a hierarchical deterministic (HD) algorithm to generate a series of private and public keys from a single seed phrase. This structure simplifies the management and backup of multiple addresses, as only the seed phrase is needed to recover all associated keys and funds, enhancing both security and convenience.
HODL: A term popularized in the cryptocurrency community that means to “hold” a cryptocurrency rather than sell it, regardless of market fluctuations. It originated from a typo on the Bitcointalk forum and represents a long-term investment strategy.
Hot wallet: An internet-connected digital wallet used to store and manage digital assets in DLTs. Hot wallets facilitate frequent transactions but are less secure than cold wallets, which are kept offline.
Hyperledger: A set of open-source projects led by the Linux Foundation to promote the use of DLTs in enterprise environments. Hyperledger enables the creation of private and customizable networks tailored to the specific needs of various industries.
I
ICO (Initial Coin Offering): A crowdfunding method in which new cryptocurrencies or tokens are issued in exchange for capital. ICOs allow startups to raise funds for projects related to blockchain technology, allowing investors to participate from the very beginning.
Impermanent loss: Temporary loss experienced by liquidity providers in decentralized exchanges when the value of their assets fluctuates. This risk is inherent in providing liquidity in exchange pools and affects profits compared to holding assets without moving them.
InterPlanetary File System (IPFS): Decentralized storage protocol that allows users to store and access content efficiently, eliminating reliance on centralized servers and improving file availability.
Input: Data or information entered into a system to perform a specific action, such as a transaction on a blockchain.
IOT (Internet of Things): A network of connected devices that share data. Combined with distributed ledger technologies, IoT enables the automation of processes through smart devices.
Issuance: The process by which new units of a cryptocurrency or token are created and put into circulation. In most cases, issuance is governed by an algorithm that determines the amount and frequency of new coin creation, thereby limiting inflation and maintaining the scarcity of the asset.
J
Jamesson Lopp: A cryptocurrency and blockchain expert recognized for his expertise in security and privacy, as well as his contributions to the development of advanced solutions within the cryptocurrency space.
Jeff Garzik: A software developer and early contributor to the Bitcoin code, Jeff Garzik has worked on several significant projects within the blockchain ecosystem.
Just a Bunch of Keys (JBOK): A strategy that employs multiple cryptographic keys to enhance the security and management of digital assets. Each key serves a specific purpose, facilitating asset management and providing protection against loss of access.
K
Keccak-256: A cryptographic hash algorithm from the Keccak family, selected by NIST as the SHA-3 standard. It produces a 256-bit hash value and is renowned for its high security and collision resistance, making it particularly suitable for blockchain applications.
Keylogger: A software or hardware tool that records a user’s keystrokes, often used to capture sensitive information, such as passwords, without the user’s consent.
Key pool: A collection of cryptographic keys stored in a wallet that facilitates the creation and management of new addresses for securely receiving and sending cryptocurrency.
Know Your Customer (KYC): An identity verification process mandated by financial institutions and cryptocurrency exchange platforms to comply with regulations and prevent money laundering.
L
Latency: The amount of time it takes for a transaction or message to be processed and confirmed on the network.
Lagrangian Polynomial Interpolation: A mathematical technique that constructs a polynomial that passes through a given set of points. In cryptography, it is used in threshold signature systems and secret recovery to ensure privacy during shared custody processes.
Layer 0 (L0): The technological foundation of a distributed ledger technology (DLT) that supports communication and interconnection between different chains and applications, facilitating interoperability.
Layer 1 (L1): The primary layer of a DLT responsible for processing and validating transactions. L1 is essential for the network’s security and functionality.
Layer 2 (L2): Solutions built on top of L1 to enhance transaction scalability and efficiency, enabling higher transaction volumes without compromising security.
Layer 3 (L3): The layer of applications and services that interact with L1 and L2 to provide additional functionality and improve the user experience in the cryptocurrency ecosystem.
Ledger: A digital register where all transactions of a DLT are stored. Ledgers can be public or private and are fundamental to the transparency and security of the network.
Lending: The process of lending digital assets in exchange for interest. In DeFi, lending allows users to earn a return on their assets without having to sell them.
Liquid Network: An L2 blockchain network designed for fast and private transactions between cryptocurrency exchanges, facilitating Bitcoin’s scalability through efficient transfers.
Liquidity mining: A DeFi strategy where users provide liquidity to a protocol in exchange for token rewards, incentivizing participation in the platform.
Light client: Software that allows users to connect to a DLT without downloading the entire network history. Light clients verify transactions with a minimal amount of data, facilitating access with fewer resources.
Lightning Network: An L2 scalability solution for Bitcoin that enables instant, low-cost transactions across payment channels, reducing congestion on the main blockchain.
Libp2p: A set of protocols that enables the creation of distributed networks in a modular fashion. Libp2p facilitates communication between nodes in decentralized networks, providing a robust and adaptable infrastructure for DLT applications.
Liquidity aggregator: A tool or protocol that consolidates liquidity from various exchanges or pools, optimizing price and spread for the user by searching for the best available deal in real time.
M
Main Network or Mainchain: The primary chain where all transactions and data are officially recorded. The main chain is responsible for the security and authenticity of assets on the network.
Malware: Malicious software or code designed to damage, spy on, or compromise the security of systems and networks. In DLT, malware can include programs that steal private keys, mine cryptocurrencies without authorization (cryptojacking), or redirect transactions to attackers’ wallets.
Market capitalization: The total value of an asset or cryptocurrency in circulation, calculated by multiplying the current price by the total supply. It serves as an indicator of an asset’s size and position in the market.
Market depth: A measure of the number of buy and sell orders for a particular asset in a market, indicating its liquidity and the impact of large orders on its price.
Market maker: A participant or entity in a market that facilitates the buying and selling of assets without significantly affecting the price, thereby providing liquidity. In DeFi, automated market makers (AMMs) perform this function through smart contracts.
Memecoin: A cryptocurrency inspired by memes, typically with little intrinsic value. Although they often start as humorous, some manage to achieve significant popularity and market value.
Mempool: A temporary storage area where pending transactions wait to be validated and included in a block. In cases of network congestion, mempools can accumulate transactions, leading to increased transaction fees.
Merkle Tree: A tree data structure used to verify the integrity of large amounts of data, such as transactions in a block. It allows verification of whether a specific transaction is included in a block without analyzing the entire block.
MetaMask: A digital wallet available as a browser extension that facilitates interaction with decentralized applications (dApps) on Ethereum-compatible networks. MetaMask enables users to manage tokens, perform transactions, and connect to DeFi services.
Metcalfe’s Law: A principle stating that the value of a network is proportional to the square of the number of users. In DLT networks, this law explains how value increases as more people adopt the technology.
Metaverse: A digital space where users interact in virtual environments, often in 3D. In this space, cryptocurrencies and digital assets like NFTs enable users to buy, sell, and own virtual goods.
MICA: The European Union’s Markets in Crypto-Assets Regulation, designed to regulate the issuance of crypto assets and stablecoins, protect investors, and ensure market stability.
Mining: The process of validating and recording transactions in DLT networks using consensus algorithms such as Proof of Work (PoW). Mining requires computational power and rewards miners with new cryptocurrencies and transaction fees.
Mining pool: A group of miners who combine their computational power to increase the likelihood of finding a block, sharing the rewards among themselves.
Mixer: A service that blends cryptocurrencies to enhance transaction anonymity. Mixers combine funds from multiple users, making it difficult to trace the origin and destination of those funds.
Monero (XMR): A privacy-focused cryptocurrency that utilizes ring signatures and stealth addresses to keep both user identities and transaction amounts confidential.
MTGOX: A Japanese cryptocurrency exchange that was one of the largest in the industry until it went bankrupt in 2014 following a massive hack. Its collapse underscored the importance of security in exchanges.
Multi-signature: A security mechanism that requires more than one key to authorize a transaction, helping to protect funds and distribute control among multiple participants.
Multiparty Computation (MPC): A cryptographic protocol that enables multiple parties to collaborate in computing a function without sharing private data. In DLT, MPC allows for the management of keys and transactions without compromising privacy.
N
Network congestion: A situation in which a distributed ledger technology (DLT), especially a blockchain, becomes overloaded with transactions, resulting in delays in confirmations and an increase in transaction fees.
Nick Szabo: A cryptographer and computer scientist known for his work on smart contracts and contributions to the creation of Bitcoin. He invented “bit gold,” a precursor to modern cryptocurrencies.
Nocoiner: A person who does not own any cryptocurrencies and tends to criticize and reject them, often due to missed opportunities to invest in their early stages.
Node: A device or program that participates in the verification of transactions and blocks in a DLT network, ensuring its decentralization and operability.
Nonce: A value that is used only once in mining to modify the hash value and meet the difficulty requirements for a specific block.
Non-Fungible Token (NFT): A unique digital asset that represents ownership of specific items, such as artwork, music, or game items. Because it is stored on a DLT, its authenticity and scarcity are guaranteed.
NXT: The first platform built from scratch and the first to implement a proof-of-stake (PoS) consensus model, launched in 2013. Its initial coin offering (ICO) was limited to raising 21 BTC and pioneered advanced features, unlike other projects at the time, which were mostly copies of Bitcoin.
O
Off-Chain: Processes or transactions that occur outside the main network, reducing the load on it and optimizing the cost and speed of certain operations.
On-Chain: Transactions and data that are stored directly on the main network, allowing for public verification by all nodes and ensuring transparency and security.
Open source: Software with source code available for review, modification, and public distribution. Many DLT and cryptocurrency projects adopt this philosophy to promote transparency and collaboration.
OpenSea: A decentralized marketplace where NFTs are bought, sold, and exchanged, allowing users to access a wide variety of digital assets.
Optimistic Rollup: A Layer 2 scalability solution that processes transactions outside of Layer 1 and confirms them collectively, optimizing efficiency without compromising security.
Orphan block: A valid block that is not included in the main chain because another block was confirmed first. These blocks are isolated from the main chain and do not become part of the official transaction history.
Output: The result of a transaction, representing the funds transferred to a new address or account.
Over The Counter (OTC): Private transactions between buyers and sellers that occur outside of traditional markets, typically involving large transactions.
P
Paper wallet: A physical wallet that contains printed private and public keys on paper and is stored offline to protect assets from online threats.
Patricia Trie: A data structure that optimizes the storage and verification of information in Proof of Stake (PoS) systems and smart contracts.
Peer-to-Peer (P2P): A network model in which users interact directly with one another without intermediaries. In DLT, this enables transactions without the need for centralized entities.
PGP (Pretty Good Privacy): Data encryption software that protects privacy in emails and files. It uses public key cryptography and is a popular tool for secure communications.
Phishing: A cyberattack that tricks users into revealing confidential information, such as passwords or account details, by posing as a trusted entity.
Play to Earn (P2E): A business model within the gaming industry that allows players to earn real-world rewards by participating in games. These rewards can include cryptocurrencies, non-fungible tokens (NFTs), or other digital assets. This model not only increases player engagement but can also provide a potential revenue stream.
Ponzi scheme: A fraudulent investment strategy that pays early investors with the money of new investors. It is unsustainable and ultimately harms those who join at the end.
Portfolio: A collection of assets held by an investor, including cryptocurrencies, NFTs, and other financial products. Diversification within a portfolio helps to reduce risk.
Premining: The initial distribution of cryptocurrencies to developers or investors before the public launch of the project. This practice can be controversial regarding transparency and fairness.
Private Blockchain: A blockchain with restricted access, managed by a specific entity. Unlike public blockchains, only authorized users can perform transactions and access data, ensuring greater control and privacy for the managing entity.
Private key: A password required to manage and access cryptocurrencies or tokens in a wallet. The private key is essential for security and must be kept completely secret.
Proof of Stake (PoS): A consensus algorithm in which validators are chosen based on the amount of assets they hold, rather than competing for computing power.
Proof of Work (PoW): A consensus algorithm that requires miners to solve complex mathematical problems to validate transactions and secure the network.
Pseudo-anonymity: A state in which a user’s identity is not fully public, but their activities can still be tracked through transactions. While users are not fully identified, the transparency of DLT allows for some level of tracking.
Public key: The address generated from the private key that is used to receive funds. The public key can be freely shared with others to facilitate the sending of cryptocurrencies or tokens to the user.
Pump and Dump: A manipulation strategy in which the price of an asset is artificially inflated to attract investors, and then the asset is sold en masse, causing its value to plummet.
R
Ransomware: A type of malware that restricts access to a victim’s systems or files until a ransom is paid, typically in cryptocurrencies. This form of attack represents an increasing threat to both the private and public sectors.
Re-entrance attack: A vulnerability in smart contracts that allows an attacker to make multiple calls to the same function before the initial transaction is completed, potentially resulting in the unauthorized extraction of funds.
Replace by Fee (RBF): A mechanism that allows users to replace an unconfirmed transaction with another transaction that has a higher fee, incentivizing miners to prioritize the latter for confirmation.
Replay attack: A technique that enables a valid transaction to be duplicated on another chain, particularly during a hard fork. This can lead to security issues for the affected networks.
Return on Investment (ROI): A financial metric that evaluates the profitability of an investment by comparing the profit earned to the capital invested, typically expressed as a percentage.
Ring signature: A cryptographic technique that anonymizes a signer’s identity within a group of potential signers without revealing the actual signer. It is commonly utilized on the Monero blockchain to protect user privacy and facilitate untraceable, secure transactions.
RingCT (Ring Confidential Transactions): A technology used in privacy-focused networks such as Monero that conceals transaction amounts through the use of ring signatures, ensuring both anonymity and confidentiality.
Roadmap: A strategic development plan for a project or platform that outlines the milestones and objectives to be achieved over a specified timeframe. Roadmaps are often employed in technology projects to communicate future upgrades and developments.
Rollback: The process of reverting a network to a previous state following a failure or critical attack. This procedure is implemented to restore the integrity and security of the network in the event of significant issues.
Rollups: Layer 2 (L2) scalability solutions that aggregate multiple transactions into a single transaction, thereby reducing the load on the main network. There are primarily two types: Optimistic Rollups and ZK Rollups, each offering distinct advantages for various use cases.
RSA (Rivest-Shamir-Adleman): An asymmetric encryption algorithm that uses a pair of keys to encrypt and decrypt data. RSA is widely utilized in digital security for authentication and information signing.
S
Sandwich attack: A strategy in which an attacker places two transactions around a user’s transaction. First, the attacker executes a transaction that increases the price of an asset the user intends to purchase. After the user completes their purchase, the attacker executes another transaction to sell the asset at a higher price.
Satoshi: The smallest unit of Bitcoin, equivalent to 0.00000001 BTC. Named after Bitcoin’s creator, it enables microtransactions on the network.
Satoshi Nakamoto: The pseudonym of the individual or group behind the creation of Bitcoin, responsible for publishing the white paper in 2008 and launching the network in 2009. The true identity of Satoshi Nakamoto remains unknown.
Scam: A form of fraud or deception prevalent in the cryptocurrency sector, often involving fake projects or platforms designed to defraud users and steal their funds.
Schnorr: A digital signature algorithm that provides enhanced efficiency and security compared to ECDSA. It enables signature aggregation, improving scalability and privacy in distributed ledger technologies (DLTs).
Scrypt: A Proof-of-Work (PoW) mining algorithm used by certain cryptocurrencies, such as Litecoin. It requires less processing power than SHA-256, making it more accessible for home hardware.
SEC (Securities and Exchange Commission): The U.S. regulatory agency responsible for overseeing financial assets, including cryptocurrencies and tokens.
Security token: A digital asset that represents an interest in a traditional financial asset, such as stocks or real estate, and must comply with securities regulations.
Seed Phrase: A sequence of words used to recover a wallet. It is crucial for ensuring access to and recovery of funds if the private key is lost.
Segregated Witness (SegWit): A Bitcoin update that separates transaction signature data, reducing transaction size and increasing block capacity.
Self-custody: A practice that grants users full control over their assets and private keys without relying on third parties or centralized exchanges, enhancing security and sovereignty over funds.
SHA (Secure Hash Algorithm): A family of cryptographic hashing algorithms designed to ensure data integrity by generating unique, fixed-size outputs from any input data.
SHA-256: A 256-bit hashing algorithm within the SHA family utilized in Bitcoin for data mining and verification, known for its resistance to tampering.
Shamir Secret Sharing (SSS): A cryptographic technique that divides a secret into pieces such that only a specific combination of those pieces can reconstruct the original secret.
Sharding: A scalability technique that divides the network into independent fragments to run transactions in parallel, enhancing performance.
Shitcoin: A colloquial term used to describe cryptocurrencies lacking clear value or purpose, perceived as low-quality or useless.
Sidechain: A parallel chain connected to the main network that facilitates asset transfers and offers additional functionalities or greater scalability without compromising the main chain’s security.
Signature aggregation: A technique that combines multiple signatures into a single signature, optimizing space and improving efficiency.
Silk Road: A dark web marketplace that facilitated the exchange of goods and services, including illegal activities, using Bitcoin as a payment method.
Synchronization: The process by which a node updates itself to reflect the current state of the network by downloading recent transactions and blocks.
Slashing: A penalty imposed in some Proof-of-Stake (PoS) networks for validators who act maliciously or fail to comply with network requirements, impacting their participation.
Smart contract: A self-executing program that automatically performs transactions when specified conditions are met, without the need for third-party intervention.
Snapshot: A copy of the state of a network or wallet at a specific moment in time, used to verify balances and track events like forks or airdrops.
Soft fork: A backward-compatible upgrade of a DLT that introduces new rules or enhancements without requiring all nodes to upgrade.
Solidity: A programming language used to write smart contracts on Ethereum and other platforms compatible with the Ethereum Virtual Machine (EVM).
Spread: The difference between the bid and ask prices of an asset in a market. In crypto assets, the spread can serve as an indicator of liquidity and demand for a token.
Spot: The current price of an asset in the market, as opposed to its future price or the price of a contract.
Spyware: A type of malware that collects user information without the user’s consent, potentially compromising their privacy.
SSL (Secure Sockets Layer): A security protocol that encrypts communications between a browser and a server, protecting data during transmission.
Stablecoin: A type of cryptocurrency whose value is pegged to another stable asset, such as a fiat currency (e.g., dollar or euro), a commodity (e.g., gold or silver), another cryptocurrency, or an algorithm that adjusts the coin’s supply based on real-time demand.
Staking: A process in Proof-of-Stake (PoS) networks where users lock their assets to support the network and earn rewards in cryptocurrency for their participation.
State channels: A scalability solution that allows users to transact off-chain, recording only the initial and final states on the blockchain. This approach optimizes transaction speed and reduces costs on the network.
Status root: A value that summarizes the current state of a DLT, such as the balance of each account in a specific block, enabling the verification of stored data integrity without reviewing each transaction.
Stealth Addresses: Unique addresses generated for each transaction that enhance privacy by concealing the recipient of a transfer.
Supply: The total amount of a cryptocurrency currently in circulation. This can be fixed or adjusted over time according to the rules of the protocol.
Swap: The exchange of one digital asset for another on a decentralized exchange (DEX) or through a smart contract, eliminating the need for a centralized intermediary.
Swarm: A decentralized storage approach that distributes data across multiple nodes, offering a distributed alternative to centralized storage solutions.
Synthetic assets: Digital derivatives that replicate the value and behavior of another asset without requiring direct ownership. They are common in DeFi, providing access to traditional or less common assets without intermediaries.
Sybil attack: An attack on decentralized networks where an individual creates multiple fake identities or nodes to manipulate the system, gaining disproportionate influence and potentially disrupting consensus decisions, compromising the network’s security and functionality.
Symmetric cryptography: An encryption method that employs the same key for both encryption and decryption. While faster, it is generally less secure than asymmetric cryptography in decentralized applications.
T
Tamper-proof: A property of certain systems or data that makes them resistant to tampering or unauthorized manipulation, which is a fundamental characteristic in distributed ledger technologies (DLTs).
Taproot: An upgrade to the Bitcoin network that enhances the privacy and efficiency of complex transactions by bundling multiple signatures into a single one, thereby reducing transaction size and storage costs.
Tangle: A distributed ledger technology specific to the IOTA network that operates without blocks or miners. Based on a directed acyclic graph (DAG), Tangle enables each transaction to support and verify previous ones, eliminating fees and achieving high scalability. In this system, nodes enhance network security and speed through mutual verification.
Testnet: An experimental version of a network where developers can test updates and new features without affecting the main network. Testnets allow for experimentation without the risk of losing real assets.
Tezos: A smart contract platform distinguished by its capability for automatic updates through an on-chain governance mechanism, eliminating the need for forks to implement improvements.
The Merge: A significant event in Ethereum’s history where the main network (L1) transitioned from a Proof of Work (PoW) model to a Proof of Stake (PoS) model, aimed at enhancing sustainability and reducing energy consumption.
Threshold Signature (TSS): A cryptographic technique that enables multiple parties to collaboratively create a single shared signature without requiring a single private key. TSS is valuable in decentralized custody and governance systems where shared trust and tamper resistance are essential for protecting funds or privileges.
Ticker: An abbreviated symbol that represents a cryptocurrency on exchanges. For example, Bitcoin’s ticker is BTC, while Ethereum’s ticker is ETH.
Timelock: A feature that restricts the use or transfer of an asset until a specified time condition is satisfied. It is commonly used in smart contracts and security mechanisms, such as Hashed Time-Locked Contracts (HTLCs).
Timestamp: A date and time mark indicating when a transaction or event occurred. Timestamps ensure the chronological order of data within the network.
Token: A digital representation of an asset. Tokens can vary in type, such as utility tokens, security tokens, or stablecoins, each serving different purposes and exhibiting distinct characteristics.
Token burn: The process of permanently removing certain tokens from circulation by sending them to an inaccessible address. This method is typically used to decrease the total supply, thereby increasing the scarcity and potentially the value of the remaining tokens.
Tokenization: The process of representing a physical or digital asset by a token in a DLT. This allows for easier transfer and trading of assets without intermediaries.
Tokenomics: The set of economic characteristics and rules governing a token’s behavior and value within its ecosystem. It encompasses factors like supply, demand, use, and distribution of tokens.
TOR (The Onion Router): An anonymous network that uses multiple layers of encryption to protect users’ privacy and anonymity during internet browsing. It is popular among cryptocurrency users for safeguarding their identities online.
To the moon: A popular expression in the cryptocurrency community that refers to the belief or hope that the price of an asset will rise exponentially.
Transaction fee: The fee users pay to have their transactions included and processed by miners or validators. Fees can vary based on network congestion and demand.
Transactions per second (TPS): A metric that measures a network’s capacity to process transactions in one second. It serves as a key indicator of a DLT’s scalability and efficiency.
Traceability: The ability to track the complete history and origin of an asset or transaction within a DLT, from its creation to its current state. This feature enhances transparency and accountability across the network, enabling stakeholders to verify asset provenance and transactional integrity.
Trezor: A brand of hardware wallet that allows users to securely store their cryptocurrencies on a physical device, disconnected from the internet, thus protecting against security threats.
Trustless: A characteristic of DLTs and smart contracts where transactions and operations can be performed without the need for participants to trust each other, thanks to cryptographic verification.
Turing-complete: A property of certain smart contract programming languages, such as Solidity, that allows for any type of mathematical calculation to be performed, enabling the programming of complex applications.
U
Uniswap: Una plataforma de intercambio descentralizado basada en contratos inteligentes que permite a los usuarios intercambiar tokens sin intermediarios. Utiliza un modelo de creador de mercado automatizado (AMM) para crear mercados de liquidez automatizados.
Unspent Transaction Outputs (UTXO): Un modelo en el que cada transacción genera saldos no gastados que pueden ser utilizados en transacciones futuras. Los UTXOs permiten una contabilidad eficiente de los fondos sin la necesidad de mantener un historial completo de cada transacción.
Utility Token: Un tipo de token que proporciona acceso a servicios, funcionalidades o privilegios dentro de un ecosistema específico, como en aplicaciones de finanzas descentralizadas (DeFi) o en el ámbito de los videojuegos.
V
Validator: A node within a consensus network, like Proof-of-Stake, responsible for verifying transactions, signing them, and adding new blocks to the blockchain. Validators are essential for maintaining the security and integrity of the network.
Validity proof: A cryptographic mechanism used in ZK-rollups to ensure that off-chain transactions are executed correctly. This proof allows the network to confirm the validity of transactions without requiring every single transaction to be processed on the blockchain.
Vanity address: A personalized cryptocurrency address that includes specific characters or patterns chosen by the user, often for aesthetic or branding purposes.
Vesting: A method of gradually distributing tokens or assets over a set period to promote long-term commitment and alignment with project goals. This system is frequently used in reward structures or when allocating tokens to project founders.
Virtual Machine (VM): An execution environment that enables smart contracts to operate on a blockchain without relying on physical hardware. For instance, Ethereum utilizes the Ethereum Virtual Machine (EVM) to run contracts within its ecosystem.
Volatility: A measure of how much the price of an asset, particularly cryptocurrencies, fluctuates over time. High volatility indicates significant price swings, which can present both opportunities and risks for investors.
Vyper: A programming language designed for writing smart contracts on the Ethereum platform. Unlike Solidity, Vyper prioritizes simplicity and security, making it easier to audit and understand contracts.
W
Wallet: A digital wallet designed to securely store, send, and receive cryptocurrencies. Wallets come in various forms, including software applications on internet-connected devices and physical hardware devices, each offering different levels of security and accessibility.
Web 1.0: The first generation of the Internet, characterized by static web pages and limited user interaction. This phase primarily enabled users to retrieve information without dynamic content or social engagement.
Web 2.0: The second generation of the Internet, defined by increased user interaction, social networking, and user-generated content. This era brought about platforms such as blogs, social media, and collaborative applications that allow users to engage with and contribute to online communities.
Web 3.0: The next evolution of the Internet, focusing on decentralization and the use of technologies like distributed ledger technology (DLT). Web 3.0 emphasizes user privacy, data ownership, and the development of applications that operate without intermediaries.
WebAssembly: A portable binary instruction format that enables high-performance execution of applications across web browsers and other platforms, facilitating rapid and efficient application development.
Whale: An individual or entity that holds a substantial amount of a cryptocurrency, capable of influencing its market price through large transactions. Due to their significant financial resources, whales can impact supply and demand dynamics by executing sizable buy or sell orders.
White paper: A comprehensive technical document that outlines the details of a project, including its underlying technology, objectives, economic model, and overall vision. White papers serve as foundational resources for potential investors and users.
Withdrawals: The process of transferring funds from one platform, network, or wallet to another, typically a user’s wallet or bank account. Withdrawals often require security confirmations to ensure the safety of the transaction.
Wrapped tokens: Digital assets that represent cryptocurrencies on different networks, enabling interoperability. For example, Wrapped Bitcoin (WBTC) is an Ethereum token that represents Bitcoin, allowing it to be utilized in Ethereum-based applications.
Y
Yellow paper: A formal technical document that provides in-depth details and specifications of a protocol, algorithm, or technology. Yellow papers often include rigorous mathematical formulations and technical explanations, serving as a foundational resource for developers and researchers.
Yield farming: An investment strategy in decentralized finance (DeFi) where users deposit their assets into liquidity pools or other financial services to earn returns. These returns typically come in the form of interest or rewards for providing liquidity, participating in governance, or using other DeFi protocols.
Z
ZK-Proofs: Zero-knowledge cryptographic proofs that enable the verification of information without disclosing its contents. This ensures privacy and security by allowing one party to prove knowledge of a fact to another party without revealing the actual information itself.
ZK-Rollups: Layer 2 (L2) scaling solutions that aggregate multiple off-chain transactions into a single transaction to reduce the amount of data published on the main chain. They utilize zero-knowledge (ZK) proofs to verify the validity of state changes while keeping sensitive information confidential.
ZKEVM: A virtual machine that integrates Ethereum features with zero-knowledge (ZK) proofs, allowing for the execution of smart contracts in a secure and scalable environment. This enhances both privacy and performance for decentralized applications.
ZKSYNC: A Layer 2 (L2) scaling solution that employs ZK-rollups to process transactions on the Ethereum network efficiently and cost-effectively. It aims to reduce congestion and lower fees while maintaining security through zero-knowledge proofs.
ZK-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge): A form of zero-knowledge cryptographic proofs that enable the verification of transactions without revealing sensitive data, requiring minimal interaction between the parties involved. They are designed for efficiency and succinctness.
ZK-STARKs (Zero-Knowledge Scalable Transparent Arguments of Knowledge): Advanced zero-knowledge cryptographic proofs that verify the authenticity of transactions without disclosing underlying data. Unlike ZK-SNARKs, ZK-STARKs do not rely on initial trust setups, offering enhanced transparency and scalability in computation.
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