A Blockchain Glossary for Beginners: Definitions of Crypto and Web3 Terminology

A

account

A public and private keypair that gives you access to, and control over, the tokens held under a specific address. The blockchain itself keeps track of what tokens are held in by each account; the tokens aren’t “in” the wallet or account, but we often talk that way because the metaphor makes sense.

In Ethereum-compatible blockchains, a Secret Recovery Phrase (SRP) can generate a number of accounts that approaches infinity. Each one of these accounts has its own keypair, but all of them can be controlled by the SRP.

Just like your Reddit account has a username (public) and password (private), so does your Ethereum account; the difference being that you are the custodian of your Ethereum keys, while Reddit holds your login information for their site. For additional security, you can use a password to encrypt your private key which would result in a username (public) and password (private) and password for that password (private + more secure). See also ‘keystore file’, ‘Secret Recovery Phrase’.

address

Used to send and receive transactions on a blockchain network, and to identify different users; also referred to as a ‘public key’. An address is an alphanumeric character string, which can also be represented as a scannable QR code. In Ethereum, the address begins with 0x. For example: 0x06A85356DCb5b307096726FB86A78c59D38e08ee

air-gapping

A method for securing computers in which the device does not connect to the internet or any other open networks. Many hardware wallets use air-gapping as a security mechanism to keep users’ private keys or Secret Recovery Phrase offline, and thus safer from any kind of attack.

airdrop

A token distribution method used to send cryptocurrency or tokens to wallet addresses. Sometimes airdrops are used for marketing purposes in exchange for simple tasks like reshares, referrals, or app downloads.

altcoin

As Bitcoin was the first cryptocurrency, the term ‘altcoin’ was created to refer to ‘any cryptocurrency other than Bitcoin’. The term is less used in Ethereum or smart contract-enabled blockchain communities. Many altcoins are forks of Bitcoin with minor changes (e.g., Litecoin). See also ‘fork’.

AML (Anti-Money Laundering)

A set of international laws enacted to diminish the potential for criminal organizations or individuals to launder money. These rules and laws are applied to cryptocurrencies with varying effects in different jurisdictions.

API (Application Programming Interface)

A predefined set of requests that one program can make to another in order to transfer information between them. When you hear someone saying that an application is “getting information from” another source, it’s often doing so through an API.

AppChain

As interest in using public blockchains for different applications has grown, developers have begun creating app-specific chains that are custom-made and optimized for their application’s needs; these are therefore known as appchains. An appchain is generally not a full-blown blockchain, but offers an optimized execution environment for the application, while still relying on an underlying “Layer 1” blockchain for consensus. Sometimes referred to as a “Layer 3”, or “L3”. See also: “blockchain trilemma”, “modular blockchain”, “Layer 2”.

ASIC (Application Specific Integrated Circuit)

ASICs are silicon chips designed to do a specific task. In ASICs used for mining cryptocurrencies, the ASIC will perform a calculation to find values that provide a desired solution when placed into a hashing algorithm.

attestation

Under the Proof of Stake mechanism (on Ethereum Proof of Work), every validator other than the one proposing a new block will provide an attestation, or vote, in favor of a block with which it agrees, hereby forming consensus and confirming the block and the transactions it contains. See also ‘Proof of Stake’.

B

Beacon Chain

The Beacon Chain was one element built in the infrastructure being built to scale Ethereum. It was the foundation for a transition from a Proof of Work (PoW) consensus mechanism to Proof of Stake (PoS). For more information, see this guide.

Bitcoin / bitcoin (BTC)

The first cryptocurrency based on a Proof of Work (PoW) blockchain. Bitcoin was created in 2009 by Satoshi Nakomoto — a pseudonym for an individual whose real identity is unknown — and the concept of cryptocurrency was outlined in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Use “Bitcoin” for the blockchain/network; “bitcoin” for the cryptocurrency. The plural of bitcoin is just bitcoin; the abbreviation is BTC, with a space: I have 250 BTC.

block

Think of a blockchain as consisting of a ledger that is being constantly updated, and those changes synced between any number of different nodes (in fact, “distributed ledger technology” is another phrase used to describe it).

After a certain number of transactions have been added to the ledger and consensus has been reached among the nodes that the transactions are valid, they are then cryptographically locked into a “block” and officially recorded. This “block” forms the basis for the next one; in this way, they are all linked together in a chain, hence–blockchain.

block height

The number of blocks connected together in the blockchain. For example, Height 0 would be the very first block, which is also called the Genesis Block.

block reward

The reward given to a miner or validator after it has successfully hashed a transaction block. Block rewards can be a mixture of coins and transaction fees. The composition depends on the policy used by the cryptocurrency in question, and whether all of the coins have already been successfully mined. The current block reward for the Bitcoin network is 12.5 bitcoins per block.

block time

When we talk about ‘block time’, we’re referring to how long it takes for a block of transactions (see ‘block’) to be confirmed by the network, either by miners under PoW or by validators under PoS. See also ‘Proof of Work’, ‘Proof of Stake’.

blockchain

A digital ledger comprised of unchangeable, digitally recorded data in packages called blocks. Each block is ‘chained’ to the next block using a cryptographic signature. Ethereum is a public blockchain, open to the world; its digital ledger is distributed, or synced, between many nodes; these nodes arrive at consensus regarding whether a transaction is valid before encrypting it, along with a number of other valid transactions, into a block. For more on blockchain technology, see here. See also ‘block’.

blockchain explorer

A blockchain explorer is an application, most often a website along with a corresponding API, that displays information about blockchain activity in a more human-friendly way. While a blockchain is designed to keep information forever, and be “readable by anyone”, finding the specific information you’re interested in may require indexing data off the blockchain–that is, sorting it according to given categories (sender address, token type, etc) into a separate database which can then be queried by the user; this essential function is provided by blockchain explorers. A prominent example is etherscan, which also offers explorers on a number of other networks.

blockchain trilemma

The “blockchain trilemma”, as the name implies, is a difficult decision based on three elements: decentralization, security, and scalability (or speed). These are three elements that are either necessary or desireable in public distributed networks, and often, designing a system that optimizes for one compromises on another.

bounty / bug bounty

A reward offered for exposing vulnerabilities and issues in computer code.

brain wallet

A blockchain account generated from a seed phrase or password or passphrase of your choosing. Humans are not capable of generating enough entropy, or randomness, and therefore the wallets derived from these phrases are insecure; brain wallets can be brute forced by super fast computers. For this reason, brain wallet are insecure and should not be used. See also ‘Seed phrase / Secret Recovery Phrase’.

bridge

A bridge is a tool built to move assets from one network to another. It’s also a verb, used to describe that action: “I bridged my ETH from Ethereum mainnet to Arbitrum.” Not all bridges are created equal, and you should be informed about what you’re doing before you use one. Read more about bridges on the ConsenSys blog, how to use them on the MetaMask Knowledge Base, or for a high-level discussion, see Vitalik Buterin’s landmark discussion on the topic.

BUIDL

Ostensibly coined (see what we did there) by Gitcoin’s Kevin Owocki. It reflects the Ethereum-focused mindset of not just investing in a cryptocurrency as a store of value, but rather investing in it as an ecosystem and a platform for public goods and software; it complements, in this sense, the now-infamous HODL.

bytecode

Bytecode is a “low-level” computer language, that is, meant to be processed by a computer, rather than a “high-level”, more human-readable, language. In Ethereum, higher-level Solidity is compiled into Ethereum bytecode, which is read by the Ethereum Virtual Machine (EVM).

Byzantine fault tolerance

A Byzantine fault, or failure, is one of the most difficult failures to deal with in computer systems; this is because it takes into account the possibility that the information used to determine the current state of the system may–or may not–be reliable.

While applicable in many realms of technology, this becomes of particular interest in public blockchain systems: how do we ensure that we can agree on the current state of the network when there is an incentive, often a significant financial incentive, to subvert the state of the network for one’s own profit? On a more basic level, if we’re coordinating a network running around the world on all kinds of different hardware and software, there are all kinds or problems that can occur that hinder the network’s ability to reach consensus on its current state. Therefore, a network that has been designed and implemented to be resistant to these sorts of failures, either due to malicious intent or technical failure, is said to be Byzantine Fault Tolerant.

Byzantium fork

A “hard fork” in the Ethereum network that occurred in October of 2017. For detailled information, see here; see also “hard fork”.

 

C

client (Ethereum or other compatible blockchain)

In computing in general, a ‘client’ is a program, running on a local computer, that is accessing data made available by a remote computer. In public blockchain networks, a ‘client’ is the software that actually does the work of syncing block data, confirming transactions, and participating in network consensus. A client usually includes a cryptocurrency software wallet. ConsenSys has supported efforts to maintain the Ethereum clients of Besu and Teku; see an up-to-date list of Ethereum clients here.

Codefi

Derived from “Commerce & Decentralized Finance”, Codefi, part of ConsenSys, is builds applications for commerce and financial use cases. 

coin

The term ‘coin’ has some nuances. Strictly speaking, a ‘coin’ could be defined as:

A fungible token (all of them identical) issued on a blockchain, either as the network’s transactional token, or through a smart contract deployed to that network.

Some people may use ‘coins’ as shorthand for ‘bitcoin’; the immortal aphorism ‘not your keys, not your coins’ refers to bitcoins. Another thing to keep in mind is that, while coins are put forward as some sort of representation of value, that value can vary wildly from one ‘coin’ to another. A coin may represent the value of the computational resources of the network, or it may be ‘pegged’ to represent fiat currency value, or it may float according to the value placed on immaterial resources like NFTs, membership, or digital goods, to name a few.

cold wallet / cold storage

An offline wallet that is never connected to the internet. These wallets protect cryptocurrencies from getting hacked online. For more information, check out MetaMask’s Hardware Wallet Hub.

confirmation

A confirmation happens when a network has verified a blockchain transaction. Under a Proof of Work (PoW) consensus mechanism, this happens through a process known as mining; under Proof of Stake (PoS), the process is known as validation. Once a transaction is successfully confirmed, it theoretically cannot be reversed or double spent. The more confirmations a transaction has, the harder it becomes to perform a double spend attack.

consensus

The process used by a group of peers, or nodes, on a blockchain network to agree on the validity of transactions submitted to the network. Dominant consensus mechanisms are Proof of Work (PoW) and Proof of Stake (PoS).

ConsenSys

Short for Consensus Systems, ConsenSys is the software engineering leader of the blockchain space. But you’re here, so you already knew that.

Constantinople fork

One of the “hard forks” made to the Ethereum network, in February 2019. For more detailed information, see here; see also “hard fork”.

contract

See ‘smart contract’.

crypto-

Even though this prefix is originally Greek, our current usage comes from cryptography. Technologies that are referred to with the blanket term of “crypto” tech are underlain by cryptographic tools and processes (such as public/private key pairs) that enable innovative functionality and security. Of course, “cryptocurrency” often gets shortened to simply “crypto”, so this emerging field is full of instances where something “crypto” is being added to or shortened. With the emergence of the term “Web3”, arguably a distinction has begun to be made between “crypto”, referring to DeFi and other financial use cases of the technology, while “Web3” refers to the transition of Internet-based activities to more decentralized practices and platforms.

crypto bounties

Bounties paid for in cryptocurrency. See also “bug bounties”.

crypto-compliance

A blanket term used to refer to ensuring crypto projects conform with applicable regulations and laws.

cryptoeconomics

The economic analysis of decentralized finance; notably, the MIT Cryptoeconomics Lab.

cryptoassets

A useful blanket term that covers on-chain assets: cryptocurrencies, NFTs, and other, still emerging, products.

cryptocurrency

Digital currency that is based on mathematics and uses encryption techniques to regulate the creation of units of currency as well as the verification of funds transfers. Cryptocurrencies operate independently of a central bank, and are kept track of through distributed ledger technology.

cryptography

In its broadest sense, cryptography is the art of ‘hidden writing’ — using some sort of code to encrypt writing. In modern times, it often refers to the application of this concept within computing, communication, and data transfer through computers and computer networks. Cryptography has been protected as free speech in the United States, and provides the technological foundation that allows blockchain networks to be public: despite the ledger being open and accessible by all, control over the state of the ledger and the ability to move assets on it is mediated through cryptographic tools, such as the Secret Recovery Phrase.

D

DAO

A Digital Decentralized Autonomous Organization (DAO, pronounced like the Chinese concept) is a powerful and very flexible organizational structure built on a blockchain.

Alternatively, the first known example of a DAO is referred to as The DAO. The DAO served as a form of investor-directed venture capital fund, which sought to provide enterprises with new decentralized business models. Ethereum-based, The DAO’s code was open source. The organization set the record for the most crowdfunded project in 2016. Those funds were partially stolen by hackers. The hack caused an Ethereum hard-fork which lead to the creation of Ethereum Classic.

decentralization

The transfer of authority and responsibility from a centralized organization, government, or party to a distributed network.

decentralized application (dapp)

An open source software application with backend (not user-facing) code running on a decentralized peer-to-peer network, rather than a centralized server. You may see alternate spellings: dApps, DApps, Dapps, and Đapps.

decentralized exchange (DEX)

A decentralized exchange is a platform for exchanging cryptocurrencies based on functionality programmed on the blockchain (i.e., in smart contracts). The trading is peer-to-peer, or between pools of liquidity. This is in contrast with a centralized exchange, which is more akin to a bank or investment firm that specializes in cryptocurrencies. Additionally, there are so-called on-ramp providers, who could be compared to currency brokers, exchanging traditional “fiat” money for cryptocurrencies, and do not hold customer’s funds “on deposit” the way a centralized exchange does. There are important technical and regulatory differences between these, which are constantly evolving.

DeFi

If cryptocurrency is Web3’s monetary system, its financial system is DeFi. This includes familiar concepts like loans and interest-bearing financial instruments, as well as so-called “DeFi primitives”, novel solutions like token swapping and liquidity pools.

deposit

In most web3 contexts, ‘depositing’ refers to the act of transferring some amount of token(s) to an address other than one’s own, most often to a smart contract controlled by a ‘protocol’, such as a decentralized exchange, video game or multiverse, DAO, etc. Generally, the user will receive something in return for their deposit, and the deposit can be claimed at the user’s discretion, or upon completion of given conditions. Compare with ‘stake’.

derive / derivation

To derive something is to obtain it from an original source. In the context of crypto-technology, we often discuss “deriving” wallets and accounts from seed phrases (aka Secret Recovery Phrases, or SRPs). This is literally true: the SRP represents a cryptographic key which is used to derive account addresses deterministically, meaning they will be derived the same way each time. Another, more technical, way of referring to this technology is to refer to “hierarchical deterministic” wallets.

Devcon

This is shorthand for the Ethereum Developers’ Conference.

difficulty

The concept outlining how hard it is to verify blocks in a blockchain network during Proof of Work mining. In the Bitcoin network, the difficulty of mining adjusts every 2016 blocks. This is to keep block verification time at ten minutes.

difficulty bomb

The difficulty bomb, along with the Beacon Chain and others, was a key element of Ethereum’s upgrade to Ethereum 2.0 and a Proof of Stake (PoS) consensus mechanism. As the name indicates, the difficulty bomb was a software mechanism that increased block verification difficulty, making it more expensive and difficult–eventually, prohibitively so–to mine a new block. Through economic incentive, and later, the raw limitations of computing power, this forced the shift to PoS consensus. See also ‘Proof of Stake’, ‘the Merge’.

digital asset

A digital commodity that is scarce, electronically transferable, and intangible with a market value.

digital identity

An online or networked identity adopted by an individual, organization, or electronic device.

digital signature

A code generated by public key encryption and attached to an electronically transmitted document in order to verify the contents of the document.

Distributed Denial of Service (DDoS) Attack

A type of cyber-attack in which the perpetrator continuously overwhelms the system with requests in order to prevent service of legitimate requests.

distributed ledger

A type of database which spreads across multiple sites, countries, or institutions. Records are stored sequentially in a continuous ledger. Distributed ledger data can be either “permissioned” or “unpermissioned”, determining who can view it. This term is used, often, to refer in general to public blockchain technology, as ‘crypto’ has come to mean ‘cryptocurrency’, ‘web3’ is the collective community, and ‘blockchain’, after all, is “just” the data structure used to sync the distributed ledger itself.

double spend

The ‘double spend’ is the benchmark security concern of blockchain networks: how do we ensure that someone doesn’t send the same transaction to two different entities, essentially “spending their money twice”? This is the cornerstone of the consensus mechanism, ensuring that all nodes of the network are “in agreement” about which assets are allocated to which addresses, on an ongoing basis, to prevent malicious actions such as a double spend.

E

EIP (Ethereum Improvement Proposal)

The EIP process is a public and open process through which suggestions are made as to how to change (and hopefully, improve) the way the Ethereum network functions as a whole; the official repository is here. Individual EIPs are referred to by the name assigned to them in the repository, for example, EIP-1559. Keep in mind that as it is an iterative, lengthy process, some EIPs never get fully approved, and some do, and many end up somewhere in a gray area of ‘partially implemented’. 

encrypted vs unencrypted keys

As discussed elsewhere, public and private cryptographic key pairs are one of the technologies that underpins cryptocurrencies and “crypto” tech in general. In MetaMask, an unencrypted private key is 64 characters long, and it is used to unlock or restore wallets. An encrypted key is also 64 letters long and is a regular private key that has gone through the process of encryption. Usually, encrypted private keys are kept within the extension or device they are encrypted by, and they remain out of sight from the user. This is meant to add another layer of security to keep a user’s wallet information safe.

By way of example: if the world ‘Apple’ was your private key, then it was encrypted three letters down the alphabet, your new encrypted key would be ‘Dssoh’. Since you know the way to encrypt this key, you could derive the original private key from it by reversing the method of encryption. 

encryption

Encrpytion, literally ‘in a hidden place’, is the art and science of encoding information to control who can read it, or how it is to be read. Encryption occurs in natural (human) languages, as well as in machine and computer languages. Highly complex, and therefore difficult to decipher, encryption is an essential element enabling blockchain networks to be simultaneously public and secure. 

Enterprise Ethereum Alliance (EEA)

A group of Ethereum core developers, startups, and large companies working together to commercialize and use Ethereum for different business applications. Website here.

entropy

In the context of cryptography, ‘entropy’ refers to ‘randomness’; generally, the more random something is (the more entropy it has), the more secure it is.

epoch

An epoch, in general, is a measure of time, or of blockchain progression, on a given blockchain. In Ethereum Proof of Stake, an epoch consists of 32 slots, each lasting 12 seconds, for a total of 6.4 minutes per epoch. There is additional functionality built upon the epoch measure in the Beacon Chain to help ensure security and proper operation of the Chain. 

ERC-20 Token Standard

ERC is the abbreviation for Ethereum Request for Comment and is followed by the assignment number of the standard. ERC-20 is a technical standard for smart contracts which is used to issue the majority of tokens (in particular, cryptocurrency tokens) extant on Ethereum. This list of rules states the requirements that a token must fulfill to be compliant and function within the Ethereum network.

ERC-721 Token Standard

As stated above, this is another standard for Ethereum smart contracts, which allows for the issuance of a non-fungible token: this is the standard that created what we all now know as an NFT. This token standard is used to represent a unique digital asset that is not interchangeable, as opposed to the ERC-20 (or other equivalent) standard, which issues identical, interchangeable tokens.

ether (ETH)

Ether is the native currency of the Ethereum blockchain network. Ether—also referred to as ETH (pronounced with a long “e”, like “teeth” without the “t”)—functions as a fuel of the Ethereum ecosystem by acting as a medium of incentive and form of payment for network participants to execute essential operations. The cryptocurrency of Ethereum has a lowercase e. The plural of ether is just ether; its abbreviation is ETH, with a space: I have 10 ETH. (nice!)

ether (denominations)

There are a number of denominations of the currency we know as ‘ether’ or ETH; for the definitive explanation, see the original Ethereum Homestead documentation here.

Ethereum

A public blockchain network and decentralized software platform upon which developers build and run applications. As it is a proper noun, it should always be capitalized.

Etherscan

A popular website for analyzing activity on the Ethereum blockchain. See ‘blockchain explorer’.

ENS

The Ethereum Name Service is a protocol, managed by a DAO, which assigns human-readable and easy-to-remember addresses to Ethereum addresses and assets, homologous to the traditional internet’s DNS.

ERC

Ethereum Request for Comment, or ERC, is a bit of a misnomer, as it is used to refer to suggestions for modifications that have already made it through the Ethereum Improvement Protocol (EIP) process and have been made standard on Ethereum. An ERC is, essentially, a set of standards for a given operation or topic on the Ethereum network. The authoritative list can be found here.

EVM (Ethereum Virtual Machine)

The EVM is a virtual machine that operates on the Ethereum network. It is Turing complete and allows anyone, anywhere to execute arbitrary EVM bytecode. All Ethereum nodes run on the EVM. It is home for smart contracts based on the Ethereum blockchain.

exchange

A place to trade cryptocurrency. Centralized exchanges, operated by companies like Coinbase and Gemini, function as intermediaries, while decentralized exchanges do not have a central authority.

F

faucet

A faucet is an application, sometimes a very simple website, other times more complex, that dispenses cryptocurrency. While some networks, especially those in early launch stages, offer “real Mainnet” tokens via faucets, it is much more common for a faucet to be present on a test network, or testnet. These faucets are used by developers to test out dapps or smart contracts before deploying them on Ethereum Mainnet, or users who want to practice an action on the blockchain with no risk. Tokens dispensed by a test faucet stay on the test networks and cannot be exchanged for mainnet equivalents.

fiat currency

Government-issued currency. For example, US Dollars (USD), Euros (EUR), Yuan (CNY), and Yen (JPY).

final, finality

A transaction is considered “final” once it can no longer be changed. In a sense, this happens once there are sufficient confirmations of the transaction, but for all intents and purposes, a transaction is final once the block that contains it is mined or validated. Keep in mind that this reflects a fundamental rule of blockchains: unlike traditional financial systems where charges can be “reversed”, there is no “undoing” a transaction on the blockchain. Once finality is reached, the transaction is immutable.

finney

A denomination of ether. See ether (denomination).

fork

‘Forking’ is a term that comes from the world of collaborative software development, and refers to the action of copying an existing application or set of code and modifying it to create an alternate version. At the blockchain protocol level, a ‘fork’ creates an alternative version of a blockchain. Forks are often enacted intentionally to apply upgrades to a network. Soft Forks render two chains with some compatibility, while Hard Forks create a new version of the chain that must be adopted to continue participation. In the instance of a contentious Hard Fork, this can create two versions of a blockchain network. See also “hard fork”.

G

gas

A measure of the computational steps required for a transaction on the Ethereum network. This then equates to a fee for network users paid in small units of ETH specified as gwei. See also “ether (denominations)”. For more on gas, see MetaMask’s user guide here.

gas limit

The gas limit is the maximum amount you’re willing to pay for any given transaction to go through the Ethereum network. Another way of looking at it is as a “rough estimate” of how much computing power your transaction will take.

gas price

The gas price is what it sounds like: the cost the network is paid for the computational work being performed in a given transaction. It is paid in units of ETH called gwei. Depending on network congestion, the gas price may vary significantly.

genesis block

The initial block of data computed in the history of a blockchain network.

gwei

A minuscule and common denomination of ETH, and the unit in which gas prices are often specified. See ‘ether (denominations)’ entry for more information.

H

halving

Many cryptocurrencies have a finite supply, which makes them a scarce digital commodity. For example, the total amount of bitcoin that will ever be issued is 21 million. The number of bitcoins generated per block is decreased 50% every four years. This is called “halving.” The final halving will take place in the year 2140.

hard fork

A hard fork occurs when there is a change in the blockchain that is not backward compatible (not compatible with older versions), thus requiring all participants to upgrade to the new version in order to be able to continue participating on the network. See also “fork”.

hardware wallet

A hardware wallet is a physical device that is used to store cryptographic keys, and generally, sign transactions. Some hardware wallets can be connected physically or through software to internet connectivity; others are ‘air-gapped’, receiving transaction requests and sending transaction approvals through a mechanism such as a QR code. The overall goal of using a hardware wallet to manage keys and signatures is to reduce the likelihood of your keys or Secret Recovery Phrase from being somehow stolen or compromised, due to being connected to the Internet. For more on hardware wallets, see MetaMask’s Hardware Wallet Hub. 

hash

In computing, ‘hashing’ is an operation performed on lists or sets of data to create a reliable index for that data. A particular datum, or a reference to it, is fed into an algorithm, which transforms the datum and returns a standardized, and generally unrecognizable, ‘hash’ of it, sometimes referred to as that datum or file’s “digital fingerprint.” Each block in a blockchain contains the hash value that validated the block before it, followed by its own hash value (this is how the continuity of the ‘chain’ is constructed). Hashes can be used to confirm that blockchain transactions are complete and valid. You may see references to the “transaction hash” or “tx hash”; this should be understood as “unique identifier of the transaction”.

HD wallet

Hierarchical Deterministic wallets were first created for Bitcoin, and enable the creation of a very large number of accounts based on an initial seed phrase. This technology was later adopted in Ethereum wallets; when restoring a MetaMask wallet from the Secret Recovery Phrase, for example, if you “create” accounts, they will be the same accounts as previously created from that same phrase; they are derived from it.

hexadecimal

Hexadecimal is a base 16, rather than base 10, counting system. Used all over Ethereum for a variety of things, a hexadecimal string is comprised of the numbers 0 1 2 3 4 5 6 7 8 9 and letters A B C D E F.

hot wallet / hot storage

A wallet that is directly connected to the internet at all times; for example, one that is held on a centralized exchange. Hot wallets are considered to have lower security than cold storage systems or hardware wallets.

Hyperledger

Hyperledger is an ecosystem of open-system tools, libraries, and products designed to enable and support enterprise-grade blockchain technology. In general, the products focus on creating solutions for permissioned blockchains–that is, non-public blockchains, with alternative consensus mechanisms other than Proof of Work (PoW) or Proof of Stake (PoS).

That said, there are use cases where such institutions would want to integrate with public blockchains, and for that reason Hyperledger Besu and Hyperledger Burrow are actively developed projects, the former being a Java-based Ethereum client, the latter being a smart contract platform which supports EVM bytecode.

I

Identicon / AddressIdenticon / AddressIcon

The colorful blob of colors that corresponds to your address in MetaMask. It is an easy way to see if your address is correct. More specifically, you can choose between jazzicons (created by the MetaMask team!) or blockies.

immutability

The inability to be altered or changed. This is a key element of blockchain networks: once written onto a blockchain ledger, data cannot be altered. This immutability provides the basis for commerce and trade to take place on blockchain networks.

Infura

Part of ConsenSys, Infura offers backend access to the Ethereum network over established HTTP and WebSockets technology. Prior to Infura, developers were obligated to run their own nodes of the networks with which they wanted to interact; Infura provides that access through a set of APIs. This enables developers of dapps and websites seeking to interact with the Ethereum blockchain to do so, and at scale. 

ICO

An Initial Coin Offering (also called ICO) occurs when a new token project sells advance tokens in exchange for upfront capital. These have been a vehicle for fraud and scams, and as such are subject to ever-evolving regulation and legislation.

internal transaction

An internal transaction on the Ethereum network is one that occurs between smart contracts, rather than between addresses. Notably, they are not included on the blockchain, and therefore do not incur gas fees, but they are often crucial to carrying out the action in question, and can be viewed on Etherscan. For more detail, see MetaMask’s article on the topic.

InterPlanetary File System (IPFS)

A decentralized file storage and referencing system for the Ethereum blockchain, and the internet as a whole. IFPS is an open source protocol that enables storing and sharing hypermedia (text, audio, visual) in a distributed manner without relying on a single point of failure. This distributed file system enables applications to run faster, safer and more transparently.

J

JSON-RPC

JSON-RPC is, quite simply, a method used to move data around computer systems, and predates public blockchain technology. It was chosen as a standard for moving data between blockchain networks and Internet browsers and wallets, with the result that these networks have come to be called ‘RPC networks’, despite JSON-RPC not being their defining technical feature.

K

keystore file

A keystore file is a special, encrypted version of a private key in JSON format. See also ‘private key’.

Know Your Customer (KYC)

A process in which a business must verify the identity and background information (address, financial details, etc.) of their customers. For example, current regulations and laws require banks and other financial institutions to keep and report customers’ personal information and transactions.

L

Layer 2

A Layer 2 network, or L2, is a blockchain that is built specifically to scale another network. For a full understanding of how this is achieved, see here. Some popular examples of this in the Ethereum ecosystem are Arbitrum, Optimism, and StarkNet. These chains are specifically built to handle a large number of transactions quickly by relying on Ethereum Mainnet for security functions, while optimizing for speed and scale. These networks are considered “scaling solutions” while not being part of Ethereum’s protocol-level scaling efforts. See also “blockchain trilemma”, “modular blockchain”, “Serenity”. Contrast with “sidechain”.

light client

In computing, a ‘client’ is a software that runs or accesses a program made available by a remote computer. With blockchain networks, then, clients are the programs that sync blockchain data and participate in network consensus.

A light client downloads only a small part of the blockchain, allowing users of low-power or low-storage hardware like smartphones and laptops to maintain almost the same guarantee of security as a full node, despite only downloading part of the entire network state.

Liquid Democracy (Delegative Democracy)

A government system where votes can be delegated or proxied to other individuals such as friends, politicians, or subject matter experts. For example, in a liquid democracy, Bernadette could give Ahmad her vote and Ahmad would then vote for both himself and Bernadette. Liquid democracy is used at times as a governance mechanism for Decentralized Autonomous Organizations (DAOs) wherein every participant is able to vote or delegate their vote to another individual.

liquidity

An asset is considered more ‘liquid’ if it can easily be converted into cash, and therefore, ‘liquidity’ refers to the availability of assets to a company or market.  Conversely, the harder it is to turn an asset into cash, the more illiquid the asset. For example, stocks are considered relatively liquid assets, as they can be easily converted to cash while real estate is considered an illiquid asset. The liquidity of an asset affects its risk potential and market price.

M

mainnet

The primary network where actual transactions take place on a specific distributed ledger. For example, The Ethereum Mainnet (capitalized in this case) is the public blockchain where network validation and transactions take place.

market cap

Short for ‘market capitalization’, this refers to the total value held in a particular industry, market, company, or asset. For a publicly traded company, the market cap is the total dollar market value of a company’s outstanding shares. For Bitcoin or Ethereum, the total market cap is a reflection of the current existing supply times the market price.

Maximal Extractable Value (MEV)

Originally known as Miner Extractable Value, MEV is a broad complex topic that refers to the inclusion, exclusion, and reordering of transactions within a block in order to extract more value from it, generally in excess of what a validator (or miner, on PoW networks) would earn from producing the block. MEV includes activities such as frontrunning, arbitrage, and what could be considered malicious actions to profit off of other users’ transactions. This is a very active topic of research that is changing rapidly.

memory pool

Often abbreviated as “mempool”. See “transaction pool”.

Merge, the

Finalized in September 2022, the Merge was the culmination of years of work involved in transitioning Ethereum from a Proof of Work consensus model, to Proof of Stake, all while keeping the network live. This was successful, and reduced the network’s carbon footprint by more than 99.9%.

Merkle Patricia trie

Often referred to simply as a “Merkle trie” (pronounced “tree”), a Merkle Patricia trie is a data structure in which a single hash code function (see ‘hash’) splits into smaller branches. In a similar way to a family tree, where a parent branch splits into child branches, which are then extrapolated into grandchild branches, a Merkle Patricia trie keeps a record of the filiation and history of each element. This type of data structure enables for faster verification on a blockchain network.

Mesh

ConsenSys Mesh is a network of loosely coupled, tightly aligned teams, products, and investments advancing the Ethereum ecosystem and the arrival of web3.

MetaMask

MetaMask, either in its mobile app form on iOS and Android, or in its browser extension form, is a tool to access and interact with blockchains and the decentralized web. It allows users to manage their digital identity and the permission of others to interact with that identity; its functions include that of a wallet, a dapp permissions manager, and access to token swaps. It is an open-source project that encourages developers from other projects to build on top of it through MetaMask Snaps.

mining

The process by which blocks or transactions are verified and added to a blockchain using a Proof of Work (PoW) consensus mechanism. In order to verify a block, a miner must use a computer to solve a cryptographic problem. Once the computer has solved the problem, the block is considered “mined” or verified. On Bitcoin or other PoW blockchains, the first computer to mine or verify the block receives bitcoin, or the equivalent network token, as a reward.

mnemonic phrase

This is an alternative way of referring to a Secret Recovery Phrase, also known as a ‘seed phrase’: a series of words that correspond to a very long cryptographic key, used to generate and control all the addresses of a crypto wallet.

modular blockchain

Bitcoin is an example of a monolithic blockchain: all of the functions of the network (consensus, execution, data availability, and settlement) are run on one chain. This has significant drawbacks (see “blockchain trilemma” for more). A modular blockchain, on the other hand, separates some or all of these functions into separate chains, each one optimized for its specific function, and relying on the other chains for the other functions.

Ethereum is currently moving towards modularization, both on a protocol level beginning with the Merge, which split consensus and execution into two chains, and at the level of “Layer 2” networks which provide optimized execution environments, and then “roll up” their data to Ethereum for its consensus functionality.

multi-signature wallet (multisig)

A crypto-asset wallet which requires multiple keys in order to access and transact. Typically, a specified number of individuals are required to approve or “sign” a transaction before they are able to access the wallet. This is different from most wallets, which only require one signature to approve a transaction.

N

node (full node)

Public blockchains consist of a network of computers which sync the network’s data, coordinate transaction requests, and participate in consensus regarding the validity of those transactions; each one of these computers is called a ‘node’. A full node is a computer that can fully validate transactions and download the entire data of a specific blockchain. In contrast, a “lightweight” or “light” node does not download all pieces of a blockchain’s data, and uses a different validation process.

NFT

When discussing Non-Fungible Tokens (NFTs), “fungibility” refers to an object’s ability to be exchanged for another. For example, an individual dollar is considered fungible, as one dollar is fully interchangeable with another. Artwork is usually deemed non-fungible, as paintings or sculptures are likely to be unequal between them in quality, value, or other attributes. A non-fungible token is a type of token that is a unique digital asset and has no equal token. This is in contrast to cryptocurrencies like ether that are fungible in nature.

NFT aggregator

In the initial wave of interest in buying and selling NFTs, a number of NFT marketplaces–websites where you can buy and sell NFTs–were created. As the market matured, aggregators appeared, which offer the user the ability to view available stock and price, buy, and sell across marketplaces from a single unified application. Similar to familiar web2 shopping portals, these have come to be known as NFT Marketplace Aggregators, or just NFT Aggregators.

nonce

The word ‘nonce’ has a few different meanings, and in different contexts, it ends up getting used a lot of different ways. Originally formed from a contraction of a phrase meaning “not more than once”, on the Ethereum Mainnet, “nonce” refers to a unique transaction identification number that increases in value with each successive transaction in order to ensure various safety features (such as preventing a double-spend). Note that due to its broader use in cryptography, you may encounter ‘nonce’ being used differently on other sidechains or decentralized projects.

O

ommer block

Under the Proof of Work (PoW) consensus mechanism, miners received rewards for being the first to mine a new block. However, at times a block would be mined just after, and in competition with, the last block. This block, known as an ommer and previously as an uncle, could get rolled into subsequent blocks and the miner of the original ommer would get a partial block reward. All of this functionality was deprecated as of the launch of the Beacon Chain.

on-ramp, off-ramp

Based on a metaphor from the American highway system, “on-ramp” refers to a tool, or a service provider, or the action, of converting fiat currency into tokens on a blockchain. Conversely, “off-ramp” refers to exchanging on-chain assets for their value in a given fiat currency. There are many providers of such services, and MetaMask users have access to them through the “Buy Crypto” feature.

optimistic rollup

A rollup that assumes the validity and good faith of transactions, and only runs a fraud proof in the case of fraud being alleged. See also ‘rollup’.

Oracle

Typically, an oracle is any entity or person that is relied on to report the outcome of an event. In a blockchain network an oracle (human or machine) helps communicate data to a smart contract, which can then be used to verify an event or specific outcome.

P

P2P (peer-to-peer)

P2P refers to interactions that happen directly between two parties, usually two separate individuals, and have been present in Internet technology in different ways for some time. These interactions are often coordinated through some sort of app or network, which can consist of any number of individuals. Public blockchains can be considered to have a high degree of P2P functionality, as individuals are able to transact or interact with each other without relying on an intermediary or single point of failure.

parity

In a general sense, to say that something ‘has parity’ with another thing means ‘equal in features or other important quality’, and is a phrase often used by software developers and computer scientists.

Parity Technologies is the name of a blockchain technology company that is developing a number of significant projects in the blockchain space. One of its first projects was an Ethereum client, known as Parity; its name was changed to Parity Ethereum, and then was spun out as a DAO-owned and operated project called Open Ethereum, which has also been deprecated. See also ‘client’.

permissioned ledger

A blockchain network in which access to ledger or network requires permission from an individual or group of individuals, as opposed to a public blockchain. Permissioned ledgers may have one or many owners. Consensus on a permissioned ledger is conducted by the trusted actors, such as government departments, banks, or other known entities. Permissioned blockchains or ledgers contain highly-verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties. A permissioned ledger is much easier to maintain and considerably faster than a public blockchain. For example, Quorum or Hyperledger Besu are permissioned ledgers that can be more easily set up for large enterprises. In contrast, the public Ethereum blockchain is a permissionless ledger which anyone can access.

Plasma

‘Plasma’ is a term that is used to refer to one of the solutions being built and deployed in order to securely scale the Ethereum network. A Plasma network functions similarly to an optimistic rollup, inasmuch as it relies on Ethereum Mainnet to maintain the record of transactions, and as the source for arbitration or fraud resolution. However, a Plasma network differs in other important technical ways from rollups, and is currently limited to simple operations, such as swaps and token transfers. More technical information is available here.

PoA, PoS, PoW

Acronyms standing for Proof of X consensus mechanisms: Authority, Stake, Work. The “o” is lowercase since you wouldn’t capitalize “of” when writing out the phrase. See also ‘consensus’, ‘Proof of Authority’, ‘Proof of Stake’, ‘Proof of Work’.

PoS/PoW Hybrid

A hybrid consensus model that utilizes a combination of Proof of Stake (PoS) and Proof of Work (PoW) consensus. Using this Hybrid consensus mechanism, blocks are validated from not only miners, but also voters (stakeholders) to form a balanced network governance.

private blockchain

A blockchain or distributed ledger that has a closed network wherein participants are controlled by a single entity. A private blockchain requires a verification process for new participants. A private blockchain may also limit which individuals are able to participate in consensus of the blockchain network. See also ‘permissioned ledger’.

private currency

A currency or token issued by a private individual or firm. Typically, the token or currency is limited to use within the network of that particular firm or individual. This is not to be confused with a “privacy cryptocurrency”, which are cryptocurrencies with specific privacy features, such as hidden user identities.

private key

A private key is an alphanumeric string of data that, in MetaMask, corresponds to a single specific account in a wallet. Private keys can be thought of as a password that enables an individual to control a specific crypto account. Never reveal your private key to anyone, as whoever controls the private key controls the account funds. If you lose your private key, then you lose access to, and control over, that account.

Proof of Authority (PoA)

A consensus mechanism used in private blockchains, granting a single private key the authority to generate all of the blocks or validate transactions.

Proof of Stake (PoS)

A consensus mechanism in which an individual node, or “validator”, validates transactions or blocks. Validators lock up a certain amount of cryptocurrency, such as ether, into a ‘stake’, in order to be able to participate in consensus. If the node validates a block (group of transactions) correctly, then the validator receives a reward. Conversely, if the validator behaves poorly by validating incorrect transactions or by not maintaining sufficient network connectivity, the cryptocurrency they staked can be ‘slashed’, or taken from them and put out of circulation (‘burned’). PoS requires a negligible amount of computing power compared to Proof of Work consensus.

Proof of Work (PoW)

A consensus mechanism in which each block is ‘mined’ by one of the nodes, or a group of nodes, on the network. The computational process involved in committing a series of transactions into a block on the network, known as ‘hashing a block’, is technically quite simple, and therefore subject to attack. Under PoW, each miner must solve a math problem to find a set, difficult variable in order to be able to propose their block to the network as the next to be ‘mined’. In effect, the process of hashing each block becomes a competition. This addition of solving for a target increases the difficulty of successfully hashing each block, and consequently the security of the network.

For each hashed block, the overall process of hashing will have taken some time and computational effort. Thus, a hashed block is considered Proof of Work, and the miner that successfully hashes the block first receives a reward, in the form of cryptocurrency. PoW is singificantly more energy-intensive than other consensus mechanisms, such as Proof of Stake.

protocol

Formally speaking, a ‘protocol’ is a set of rules governing how a process is carried out. This concept is used throughout public blockchain networks and web3 to refer to the way smart contracts execute their functionality in the same way regardless of the user. The products or services built on top of smart contracts are often referred to as ‘protocols’ by extension.

public blockchain

A globally open network wherein anyone can participate in transactions, participate in the consensus protocol to help determine which blocks get added to the chain, maintain and examine the contents of the chain.

public key

Public blockchain networks are just that: public. Their data is accessible and readable by anyone. In order to have any degree of usability when it comes to allowing users to do some things, like send transactions, but not others, like steal other peoples’ tokens, cryptographic technology is used. In particular, a design paradigm known as ‘public/private key pairs’ is employed to ensure users can interact with others on the network as they wish, while keeping their own account secure.

These key pairs consist of two long strings of alphanumeric characters. A public key can be derived mathematically from its corresponding private key, but the inverse is not true: it is mathematically impossible to derive a private key from its corresponding public key. This allows, for example, users to have a public wallet address that anyone can use to send them tokens, with the peace of mind that as long as they properly keep the corresponding private key safe, those tokens cannot be stolen. See also ‘private key’. 

R

relayer

In the field of Decentralized Finance (DeFi), a relayer is any party or entity which hosts an off-chain orderbook. Relayers help traders discover counter-parties and cryptographically move orders between them. 0x is an example of a popular Ethereum relayer protocol.

rollups

Rollups (pronounced “roll ups”) are one element in the set of tools and infrastructure being built as scaling solutions for the Ethereum network. They consist, in general, of networks which prioritize their ability to compute transactions and smart contract functionality, and then ‘roll up’ those transactions to Ethereum Mainnet for secure verification of their validity. There are different ways of approaching this problem from a technical point of view, namely Zero Knowledge, or ZK, rollups, and Optimistic rollups. Arbitrum and Optimism are prominent examples.  See the entries on both of these types of rollup for more, and more in-depth discussion here.

RPC

The Remote Procedure Call is a technology that is used to transfer data between endpoints. You may often see it referred to as JSON-RPC, which is its full name; see ‘JSON-RPC’ for further details.

rug pull

Similar to the traditional financial scam of a pyramid scheme, a ‘rug pull’ is a cryptocurrency or crypto-token based scam in which the creators of the token create hype, through injecting liquidity into their token, airdropping, and other schemes, and once investors pile in and boost the price of the token up to a certain point, the creators liquidate their (generally majority) share of the tokens, leaving their investors with next to nothing.

S

Satoshi Nakamoto

A pseudonymous individual or entity who created the Bitcoin protocol, solving the digital currency issue of the “double spend.” Nakamoto first published their white paper describing the project in 2008, and the first Bitcoin software was released one year later.

scalability

A change in size or scale to handle a network’s demands. This word is used to refer to a blockchain project’s ability to handle network traffic, future growth, and capacity in its intended application.

Seed (phrase) / Secret Recovery Phrase

The seed phrase, mnemonic, or Secret Recovery Phrase is a crucial part of public blockchain technology, originally created for Bitcoin, and goes by many names. However, they all refer to a set of ordered words which correspond to determined values. These values never change, and therefore the same string of words in the same order will always produce the same number–this is the underlying functionality that allows seed phrases to back up wallets. This is also where the name ‘hierarchical deterministic wallets’ comes from, as all the accounts in a given wallet are deterministically created from the seed phrase, and they are hierarchically controlled by it.

A Secret Recovery Phrase is exactly what it sounds like: something that is secret, and should be known only to the owner of the account. If the seed phrase is given to someone else, that person has complete control over the account; they can drain it of tokens and funds, execute transactions with it, etc.

self-executing

Functioning by itself, not controlled by any other party other than itself. Self-executing smart contracts cut costs and overhead by removing the need for an arbitrator and trust toward a third party. See also ‘protocol’.

Serenity

The Ethereum network is working on a series of technical upgrades that will allow massive increases in transaction throughput, amongst other things. The plan that outlined these changes was originally referred to as ‘Serenity’, although that name has become less popular, in favor of specific descriptions of the upgrades themselves.

serialization

The process of converting a data structure into a sequence of bytes. Ethereum internally uses an encoding format called recursive-length prefix encoding (RLP).

sharding

Sharding, in public blockchains, refers to splitting an entire network into multiple portions, called “shards.” Each shard would contain its own independent state, meaning a unique set of account balances and smart contracts. Sharding is currently being investigated and developed as one of the set of tools and solutions for scaling Ethereum. 

sidechains

A ‘sidechain’ refers to a chain that is connected to another (most often, to Ethereum) through a bridge, allowing assets to be transferred between them. In contrast to a Layer 2 network or a rollup, a sidechain is a full blockchain network in and of itself, and does not rely on Ethereum for consensus. It therefore must be evaluated independently in terms of its security, stability, and other features. See also “blockchain trilemma”, “modular blockchain”.

Note: Bridges exist for good reason; sending tokens from a sidechain to Ethereum mainnet or vice versa would result in token loss.

slashing condition

Under a Proof of Stake (PoS) consensus mechanism, a slashing condition is one that causes the validator’s deposit to be destroyed when they trigger it. See also ‘Proof of Stake’.

slot

A slot, under Ethereum Proof of Stake consensus, is a 12-second period of time during which a new block may (or may not) be proposed. Every 32 slots comprise an epoch. See also ‘epoch’.

smart contracts

Smart contracts are programs that have been published on a public blockchain, and can be used by anyone. While they often contain agreements or sets of actions between parties that emulate a traditional legal contract, they are not, in and of themselves, legal documents. Smart contracts are automated actions that can be coded and executed once a set of conditions is met, and are the dominant form of programming on the Ethereum Virtual Machine.

soft fork

A change to the blockchain protocol resulting in only previously valid blocks and transactions being made invalid. Since old nodes will recognize the new blocks as valid, a soft fork is backward-compatible. However, this can result in a potential divide in the blockchain, as the old software generates blocks that read as invalid according to the new rules. Contrast with ‘hard fork’; for more basic information regarding forks, see ‘fork’.

Solidity

The programming language developers use to write smart contracts on the Ethereum network. Try it out on Remix. See also ‘smart contract’.

stablecoin

A cryptocurrency whose value has been ‘pegged’ to that of something considered a ‘stable’ asset, like fiat currency or gold. It theoretically remains stable in price, as it is measured against a known amount of an asset which should be less subject to fluctuation. Always spelled as one word.

staking

On the Ethereum Proof of Stake network, those wishing to participate in consensus must first lock up, or ‘stake’, 32 ETH into a smart contract; this ETH may be ‘slashed’ (taken from them and ‘burned’, put out of circulation) in the event that their validator behaves maliciously or does not meet performance requirements. Similar Proof of Stake mechanisms are in operation on other networks, as well.

Although this is the canonical meaning of the word, similar actions taken at the level of a decentralized exchange (DEX) or another dapp are often called ‘staking’, though it would probably be more accurate and descriptive to just call this ‘locking up tokens’.

state

The set of data that a blockchain network strictly needs to keep track of, and that represents data currently relevant to applications on the chain.

state channels

State channels are part of the set of tools and platforms involved in scaling Ethereum. While a complex topic, state channels are essentially methods through which the current ‘state’ of the blockchain can be exported, and then based on that, any given number of transactions can take place off-chain, and then be moved back onto the main Ethereum chain.

swap

As the number of different blockchain projects and tokens has proliferated, the system by which users exchange one token for another has come to be known as swapping, and the individual action, a swap. Within MetaMask, users have access to a powerful aggregator showing them information about swaps across the ecosystem, this is MetaMask Swaps. 

szabo

A denomination of ETH. See also ‘ether (denominations)’.

T

testnet

A testnet is a blockchain network that mirrors, as closely as possible, the current conditions of a corresponding ‘main’ network. Testnets are used by developers to verify that their smart contracts and other functionality work as intended, before permanently recording their code to a live blockchain network (and often spending significant gas fees in the process!).

Tokens minted on testnets are not transferrable for their equivalent value on mainnets.

Testnet Kovan

An Ethereum testnet that uses Proof of Authority consensus, available through MetaMask; website here.

Testnet Rinkeby

An Ethereum testnet that uses Proof of Authority consensus, available through MetaMask; faucet here. Following the transition to Proof of Stake, Rinkeby scheduled its deprecation for the end of 2023. 

Testnet Ropsten

An Ethereum testnet that used Proof of Work, and, following the transition to Proof of Stake, was deprecated. 

token

A token represents an asset issued on an existing blockchain; the transfer of tokens and the addresses that currently hold them are the subject of the network’s consensus activities. There are many types of tokens; see also ‘ERC-20’ and ‘ERC-721’ entries.

Total Value Locked (TVL)

Total Value Locked, or TVL, is a common expression used in many contexts across the crypto ecosystem, so it’s important to pay attention to the specifics. In general, it refers to how much value, in tokens, has been deposited into something.

Most often, it refers to a protocol, which is an application on the blockchain, or a set of protocols. For example, a decentralized token trading platform might have a series of liquidity pools, which are protocols enabling swaps between tokens, and the platform may quote the “TVL” for all the pools combined. Alternatively, if a network uses proof of stake for their consensus mechanism, they may represent the TVL of all the tokens staked into that consensus protocol.

transaction block

A collection of transactions on a blockchain network, gathered into a set or a block that can then be hashed and added to the blockchain. See ‘hash’.

transaction fee

A small fee imposed on transactions sent across a blockchain network. These fees are used to pay network validators or miners for their participation in consensus, and thus ensure that a blockchain network is self-sustaining.

transaction pool

When a user submits a transaction to the Ethereum network–or many other networks based on Ethereum–the transaction goes into what’s know as a “transaction pool”, or “txpool” for short. This is essentially a queue of transactions that are waiting to be added to a block and recorded to the blockchain. There are mechanisms that determine which transactions are “picked up” and included in the next block, and there is currently a lot of research surrounding how this decision gets made (see “MEV”). In Bitcoin, the transaction pool was referred to as the “memory pool”, or “mempool”, and often these terms are used interchangeably.

trustless

‘Trustless’ is a term that gets used a lot in the decentralized web, and it deserves some explanation.

Traditionally, to call something ‘trustless’ would sound like a negative thing. In the context of decentralized technology, it has a more technical meaning: since everyone has a copy of the ledger of all transactions ever executed, there is no need for a centralized entity that ‘must be trusted’ as the source of truth. With public blockchain networks, data isn’t kept on some centralized server somewhere that could be hacked or changed arbitrarily; anyone can verify the transactions themselves. This is why the term ‘trustless’ was coined: there is no need for trust, although, in a way, the rules and assurances built into the blockchain provide the basis for greater trust between people, because the system is guaranteed to work the same for everyone.

Turing-complete

Any machine that can calculate on a level equal to a programmable computer is Turing-complete, or computationally universal. The Ethereum Virtual Machine, which processes smart contracts and transactions, is Turing-complete, despite not existing on a single physical computer.

V

validator

A participant in Proof of Stake (PoS) consensus. On Ethereum’s Proof of Stake network, validators need to stake 32 ETH in order to get included in the validator set. See also ‘staking’.

validity proof

The proof submitted along with certain types of rollups to prove that the transactions are valid. See also ‘rollups’.

Validium

One of the technologies developed for scaling of the Ethereum network; see more here.

W

Wallet

Wallets, on public blockchain networks, can be difficult to conceptualize: it would be fair to say, ‘a wallet is not a wallet’.

There are two things which are commonly called a wallet:

• Software that allows users to manage their private keys and interact with programs on the blockchain, such as MetaMask,
• The Secret Recovery Phrase (SRP) used to create accounts with which an end user transacts on a blockchain network

As regards MetaMask, it might be more accurate to call it an ‘identity manager’ or ‘permissions manager’; it goes far beyond holding, or representing the balance, of tokens, and allows users unprecedented control over how they interact with other parties on a computer network.

And in terms of the SRP: on Ethereum, what we call a ‘wallet’ is a list of words (the SRP), most often twelve, which are used to derive a very large number of addresses, each of which represents an account with its own public/private key pair, and each account can be displayed on block explorers and in MetaMask, and can be used to transact on the network.

To review:

Your SRP creates and controls your Wallet;
Your wallet contains public Addresses,
each of which is controlled by a Private Key,
And is represented in user interfaces as an Account.

Hopefully that clarifies things, and thus: ‘a wallet is not a wallet’.

web3 / Web 3.0

Web3, or Web 3.0, are terms used synonymously with “the decentralized web” and are often used to refer, broadly, to the blockchain and decentralized technology ecosystems and communities as a whole.

Z

zk-SNARKs

Zero-Knowledge Succinct Non-interactive ARguments of Knowledge are an incredible technology, and vital to the scaling of blockchain technology and the decentralized web. They are mathematically complex and can be daunting; this explanation from the Ethereum Foundation is a good primer.

zero address

The Zero Address is an address on the Ethereum network that is the recipient of a special transaction used to register the creation of a new smart contract on the network.

#

51% Attack

If more than half the computer power or mining hash rate on a network is run by a single person or a single group of people, then a 51% attack is in operation. This means that this entity has full control of the network and can negatively affect a cryptocurrency by taking over mining operations, stopping or changing transactions, and double-spending coins.