Blockchain Glossary/Cryptocurrency Glossary
Glossary
[This Blockchain Glossary/Cryptocurrency Glossary is in progress. Unlike a typical crypto glossary, with short, often decontextualized definitions, this one seeks to add deeper historical explanation and contexts.]
Altcoins
Alternative to Bitcoin, generally a term used to refer to all coins other than Bitcoin. Given how Ethereum grew quite large in 2021 as the number two to in capitalization, appreciated to half the size of Bitcoin (Ethereum $450 billion to Bitcoin's $875 billion), some use the term to refer to all but Bitcoin and Ethereum. The all but Bitcoin is more historically consistent and seems the better definition. Some of largest altcoins in early 2022--all more than $20 billion--include fellow decentralized app platforms (to Ethereum) Cardano, Solana, and Avalanche, and one focused on interoperability, Polkadot, as well as several stable coins like Ripple. Many altcoins, unlike Bitcoin, are green, because they rely on Proof-of-Stake rather than Proof-of-Work as a consensus model.
Bit Gold
A 1998 cryptocurrency with many similar elements to the later Bitcoin. Bit Gold was articulated and outlined in a paper by its inventor Nick Szabo, but never developed beyond conception and a sketching of it in writing. Some believe Szabo to actually be Bitcoin's anonymous creator, but Szabo has repeatedly denied that he is Satoshi Nakamoto. See discussion of this issue in the timeline section of this website (year 1998 of course). Bit Gold drew on the same timestamping and public-key cryptographic principles that Bitcoin did.
Bitcoin
The first cryptocurrency project to be launched and first crypto to be traded. In 2008 Satoshi Nakamota (a pseudonym) wrote Bitcoin's White Paper (plan and model), a nine-page document. Bitcoin was trading in 2009, a time when it was priced at well less than a penny. It hit a high of over $68,000 in 2021. It essentially was created to be a decentralized, digital money or cash, anonymous on a public blockchain ledger.
To date (in 2022), Bitcoin has been more of a store of value property than a large-scale currency of exchange. It is not designed in a way it could scale to process transactions at a rate to meet societal needs. It is thousands of times slower than Visa, or some later "Proof-of-Stake" altcoins (later digital currencies) in transaction and authorizing speeds. Solano, for instance, is designed to process transactions 10,000 times faster than Bitcoin (1 million percent faster) and is swiftly moving toward this in practice.
Bitcoin draws on timestamping and public key cryptography foundations (uses NSA-spawned and published Secure Hash Function-256) and a "Proof-of-Work," model, halving at algorithmic determined timings, and algorithmically defined limit on total coins (21 million) to appropriate real-world mining analogies and structures. As such it is often referred to as digital gold and some use it as a non-government diversification tool and investment hedge much like gold.
Bitcoin operates on decentralized governance model. It contains over 14,000 nodes on its network and thus is quite decentralized and highly secure. Optimal decentralization is debatable as high decentralization inhibits scaling and speedy transactions and authorizations, while lesser decentralization aids with scale but may leave systems more vulnerable to security breaches. Following from this, Bitcoin is highly secure but does not scale well. Its security is achieved through its Proof-of-Work, and it being highly decentralized. Outside of potentially a more advanced future level of quantum computing, at least a decade or more out, making it susceptible to a fifty-one percent attack, there are no foreseeable security vulnerabilities.
Block
In the cryptocurrency sense, this refers to a set of transaction data on a networked ledger or database. Generally, the ideal with cryptocurrencies is a decentralized public ledger. Blocks are linked a blockchain. Blocks are limited to about a megabyte and tend to be 3,000 or 4,000 transactions. Blocks are mined by different types of consensus models such as Bitcoin's Proof-of-Work or Cardano's, Solano's (and soon to be converting Ethereum's) Proof-of-Stake, and coins are awarded based on an established algorithm of the model.
Blockchain
A technology in which blocks of data on a database or ledger are cryptographically linked sequentially. The cryptography, using one-way hash functions that are easily solved in one direction but impervious to inversion or reverse engineering, coupled with chronological structuring, result in a disproportionately large and immediately recognizable change of data on all subsequent blocks on the blockchain. This facilitates the security and immutability of data.
Cypherpunks
The term cyberpunk emerged to describe a late 1960s and 1970s science fiction movement on the digital future, cypherpunk was coined as a play of this (computer scientists love their puns, even more than historians, such as me, who also like them) by a privacy-focused group of computer scientists, popularized by Eric Hughes' 1993 Cypherpunk's Manifesto. The writings on the right to privacy in the computer age by Alan Westin, Arthur Miller, and other legal scholars, public key crypto and the NSA and government battling strong crypto in the community, the Data Encryption Standard (DES) and NSA's heavy hand with subverting privacy all fueled notions that privacy had to be protected by programmers and developers coding systems. The major tool of course being crypto, and cypherpunks believed it required being extremely proactive. Connected online, the group grew.
Some/many cypherpunks became especially interested in anonymous digital currency. Satoshi Nakamoto (Bitcoin founder, pseudonym) Hal Finney, Julian Assange (of Wikileaks fame), Jude Milhon, Adam Back, and David Chaum, were among the notable participants in this community. Much of cryptocurrency developments are attributable to either cypherpunks or those revering what this early pioneering group thought and supported. Cypherpunks were to a large degree the premiere actors of the prehistory and early history of blockchain and cryptocurrency.
Cryptography
The practice of using ciphers to encrypt and decrypt messages and information dates to ancient times. In the digital age, it has become increasingly important to converting text or data into an unintelligible form so it can be communicated from one party to another intended and only be deciphered with a key allowing its decryption. Traditional cryptography required a centralized key authority (symmetric cryptography). The tremendously important invention and innovation of public key cryptography by Whitfield Diffie and Martin Hellman (1976), and fast on its heels, complementary development work of Ron Rivest, Adi Shamir, and Leonard Adleman’s RSA Algorithm, and RSA Data Security (a pioneering company started by the three growing out of this and restored to health from financial problems by skilled manager James Bidzos), revolutionized cryptography.
From the 1970s forward, cryptography became an increasingly important and growing specialty in computer science based on mathematical theory and computational practice. Modern cryptography is especially focused on both data confidentiality and data integrity and using mathematical models to ensure these goals.
Decentralized Autonomous Organizations (DAOs)
A DAO uses the decentralized and anonymity infrastructure of blockchain and public ledgers to create organizations with a goal, or an ideology and allows interactions and governance and allocation of capital with decentralized, non-hierarchical governance keeping members anonymous from outsiders and from each other. The first was in 2016 and took the name that came to define the class, Decentralized Autonomous Organization.
Decentralized Finance (DeFi)
Refers to a decentralized ledger and blockchain based finance that is not centered around or controlled by traditional hierarchical based financial institutions--such as banks, brokerages, asset managers, family offices, brokerages, and exchanges. It automates processes in finance through the use smart contract applications that reside on platforms such as Ethereum and Solana.
HODL
Hold, with implied long-term holder of a cryptocurrency. Arose from an early chat room misspelling of a trader returning drunken from a pub and realizing his market timing was not working well and wrote that from then on, he was going to "hodl." His experience with the ups and perhaps moe downs with active trading resonated as did the humorous mistake. It soon attained a new meaning from the community that stuck, Hold On for Dear Life, due to Bitcoin and other cryptocurrencies' extreme volatility with regard to fluctuating price.
Ether
The cryptocurrency token of Ethereum, it is used to pay "gas" or fees on transactions to use the Ethereum decentralized app platform and become part of the Ethereum ecosystem.
Ethereum
Conceptualized as a basic idea by Vitalik Buterin in late 2013 and launched as a project in 2014 and as a coin and smart contract platform in 2015. It was formed by a group of eight co-founders with Buterin the lead co-founder. It is a decentralized application, or DApps, platform that hosts other coins and projects smart contracts and NFTs. These users pay fees in the native token of Ethereum, which is Ether. Given "Ether," this token and fee payment structure is known as paying gas, fees or gas to use the system.
In 2016 a theft of roughly $50 million in Ether caused one of Ethereum's existential threats in its first half decade. The co-founders disagreed how to handle it. Buterin wanted to relaunch with a hard fork and make good on the loss. Charles Hoskins, alternatively, wanted to keep going with the existing chain. As such the original chain became Ethereum Classic led by Hoskins, who also joined another co-founder Gavin Wood to co-lead a new altcoin to launch as Proof-of-Stake, Cardano, one to compete directly with Ethereum in the decentralized application space. The hard forked 2016 new chain is what we know as Ethereum now. It is going through another hard fork to become Proof of Stake, transitioning from its original Proof of Work to become green and to better scale.
Cardano became one of the first "Ethereum Killers" in offering some advantages with scaling and with the environment (given Ethereum was created as and until 2021-2022 was Proof-of-Work). Ethereum however was building relationships with many coins and has an unparalleled ecosystem, so Carano or Salano are unlikely to kill it.
It is not necessary to solve the transactions on a Layer One blockchain platform like Ethereum or Cardano. Instead, a Layer Two of a partner can come in and offer greater transactional efficiency and communicate and transact back to the Layer One. That is exactly what did occur as the coin project Polygon and a few others are doing that at Layer Two for Ethereum. Many think Ethereum will outgrow Bitcoin to be the largest capitalized coin or token within the next decade, some even think it will happen in a year or several (myself included).
Fifty-One Percent Attack
An attack in which a group of miners collude to gain over half the hash rate or the processing power. Doing so gives authority over confirming transactions so it could allow the nefarious double or triple selling of the same cryptocurrency coins. This would immediately destroy confidence in the value of the successfully attacked cryptocurrency.
Layer One
With regard to blockchain and specified for cryptocurrency coins, tokens, and platforms, Layer One, or Layer 1, is the base protocol blockchain in which design is to improve scalability and functionality of the blockchain. The major decentralized applications platforms such Ethereum, Solano, Algorand, Cardano, and Avalanche are all Layer 1, there are a number of others, but these are some of the largest ecosystems. It contrasts with layer two, which aids Layer One.
Layer Two
Layer Two, or Layer 2 blockchain are blockchain protocols that lay upon Layer 1 and seek to aid its performance and provide solutions, often with regard scalability and functionality. An example would be Polygon providing Layer Two solutions to aid the transaction speed of Ethereum, a Layer One decentralized application blockchain platform and ecosystem.
Mining
A term that was appropriated to refer the creation or minting of new digital coins based on a consensus model such as Proof-of-Work or Proof-of-Stake
Non-Fungible Token (NFT)
Non-Fungible Tokens are digitally timestamped digital content that resides on decentralized applications blockchain platforms such as Ethereum and Solana. Most commonly they are digital artistic works of various types such as computer art, photographs, video, music, other audio, etc. In 2021 NFTs became extremely popular and were auctioned for incredible sums, including artist Beeple's digital collage "The First 5,000 Days," that went at Christie's auction for $69 million. Prior to NFT's he had never sold a print for more than $100. Online digital sneakers in the metaverse can go for far more than real world sneakers, as can many, many other digital forms. NFT's transform notions of authenticity, and is impacting intellectual property protection possibilities, and social, economic, cultural, and legal understandings.
Open Source
Arguably the origin of the this was the cooperative user organizations independent from but centered around the various mainframe and minicomputer manufactures of the mid-1950s, such as SHARE, Inc. (for IBM users), which was the first and set a general model imitated by others. Soon therewere also groups for Sperry Univac, USE, Inc.; Digital Equipment Corporation, DECUS; Control Data Corporation, COOP; and others. The multi-institutional UNIX (Bell Labs as central host, along with General Electric and MIT), open-source operating system, was an extremely important moment in advancing open-source software in the 1970s (it started as a project in the late 1960s) and was commonly used in academic settings, but also well beyond.
Computer scientist Richard Stallman lent further organizational and political momentum to open source in the 1980s with the Free Software Movement, free as in freedom that is (as Stallman and his much-read book emphasized). This movement shared the GNU operating system and associated routines and also facilitated the sharing of much other software.
By far the most important open-source project to follow UNIX, drew heavily from it. It was Finnish computer scientist Linus Torvalds' and his programming and sharing the LINUX operating system kernel. The LINUX community continues to thrive today. Open-source and the ideology behind it of community-based software development and sharing code was central to the code rebels or Cypherpunks that were at the heart of early work on timestamping, cryptography, blockchain, and cryptocurrency. The crypto and open-source movements are very much complementary in ideas, ideologies, groups, and individuals.
Public Ledger
Historically, a public ledger is record-keeping system where data is distributed to enable useful scrutiny, fairness, and accountability, such as a newspaper publishing commodity transactions or prices so many can operate with a rough notion of a going market price. Given overlapping general principles, the term was adopted in the blockchain and cryptocurrency community. In this sense, it refers to a record-keeping system of holdings and transactions that maintains the anonymity of participants with the network, and collectively the community ensures the accountability of the system and seeks to best address challenges of security and scalability through a consensus mechanism.
Proof-of-Stake (PoS)
Proof-of-Stake is a consensus mechanism or model in cryptocurrency in which owners of currency at a particular basic threshold agree to stake or put up their coins to the scrutiny of the community and when called upon review and attest or verify accuracy of sets or blocks of data on a public ledger. It uses the term stake in that if they do work correctly in attesting accuracy, they receive rewards, a return of percentage on the stake (perhaps 5 to 8% annually), if they do work incorrectly in verifying data, they lose their stake. Work is only done by the randomly selected individual taking part in the staking consensus and thus requires minimal hardware and processing power compared to Proof-of-Work. Thus, it is not energy intensive, and the energy used is generally less in decentralized apps in Proof-of-Stake crypto decentralized finance than it would be relative to traditional financial infrastructure such as physical banks, materials, heating and cooling, etc. Hence, it is green crypto.
Proof-of-Work (PoW)
A consensus mechanism or model in cryptocurrency in which miners prove to verifiers that a certain amount of work or processing/computational effort has been expended. In a different context, for defense against denial-of-service-attacks, Cynthia Dwork and Noni Naor developed the general concept in the 1990s. A 1999 paper by Markus Jakobsson and Ari Juels applied the Proof-of-Work term, which later gained widespread use as it was a section and key model in Satoshi Nakamoto's Bitcoin White Paper of 2008. Unlike Proof-of-Stake it is based on large-scale parallel work in competition, probability of minting new coins from verifying a block is based on work amount of expended, leading to ever higher energy levels per coin minted over time. Hence, it is incredibly hardware and energy intensive. It is quite secure but could be vulnerable to a highly unlikely 51 percent attack (highly unlikely, if decentralized and many nodes like Bitcoin, at least until quantum computing might lead to opportunity for stronger liklihood of one or several colluding operations to gain the majority hash rate).
Public-Key Cryptography
The tremendously important invention of public key cryptography by Whitfield Diffie and Martin Hellman (1976), and fast on its heels, complementary development work of Ron Rivest, Adi Shamir, and Leonard Adleman’s RSA Algorithm, and RSA Algorithm, cannot be overstated. It fundamentally changed the focus of cryptography. The non-central authority with public key and opportunity for privacy greatly influenced the cypherpunks. The system allows sharing one's public key that is cryptographically linked to one's private key that does not need to be shared with anyone. It allows for secret communication as long the NSA or other entity does not have a trapdoor, shortcut in the software to bypass security control. Timestamping, authentication, digital signatures, and cryptocurrency all grew out of public-key crypto.
Rug pull
A term inverting pulling rug out from under. In the cryptocurrency context it generally refers to a project that takes on investors with the guise of having a real cryptocurrency or token project that can achieve a goal, but it is all merely a false facade, and the perpetrators make off with the investors' money either without doing any work, or they abandon the work midway through to defraud.
Secure Hash Function-256
A highly influential cryptographic secure hash function that was developed by the US National Security Agency and published by the agency in 1991. It is used by Bitcoin and was from the very start of the project. It is also used with many other cryptocurrencies.
Smart Contract
Simply put, smart contracts are blockchain software applications that automate transactions if conditions of the contract are met. They are trustless, meaning they obviate the need for trust between contracting parties. They are likely to be the most important part of blockchain technology as they can potentially revolutionize many verticals by automating transactional processes in areas such as supply chain, insurance, governance, finance, and other realms. In fact, much of this is happening in its early stages already. Smart contacts reside on the ecosystems of decentralized app platform providers, with the leading ones being Ethereum (far and away more smart contracts than any other) and Solana. Ethereum already has about a million smart contracts operating on it, far more than Solana and others to date. Vending machines are often used as an example to illustrate the automation of a smart contract. Machinery validates the payment made and selection and provides the consumer the product they purchased without a human vendor. It also is indicative of smart or automated contracts can exist outside of blockchain as well.
TESCREAL
The TESCREAL acronym stands deonotes the TESCREAL bundle of ideologies: Transhumanism, Extropianism, Singularitarianism, Cosmism, Rationalism, Effective Altruism, and Longtermism. It was coined by AI scientist and ethicist Timnit Gebru, the Founder and Executive Director of the Distributed AI Research Institute (DAIR), and historian Émile Torres. In early 2023 these top scholars persuasively argued in social media (Twitter, LinkedIn, and Mastodon) and other venues that powerful founders and ideological leaders (including philosophers who are not AI scientists) like Nick Bostron, the "father of Longtermism," embrace many of the "isms" within this bundle, and their thought and writings (and overall the contained "ism") express and support eugenic and dysgenic notions. Both organizational leaders and thought leaders with the constituent parts of the bundle also are central powerbrokers in blockchain and cryptocurrency. For instance, both Ethereum's lead founder and current leader Vitalik Buterin and Sam Bankman-Fried, disgraced former leader of FTX, provided extensive funds supporting Effective Altruism. Buterin is also linked to transhumanism. Tesla founder and CEO Elon Musk is at the forefront of power in AI and also quite impactful with cryptocurrency (a large holder of Bitcoin and an influencer of meme coin Dogecoin) and is central in Cosmism, as well as rationalism, and associated libertarianism. In general, this insightful and vital term highlights linked and powerful and harmful ideologies, though the TESCREAL definition, like any ideological cluster, can at times lack the precision regarding individuals and groups and their relationships to the constituent parts of the bundle. Thus, TESCREAL is especially useful in spotlighting where to look for connections between these ideologies for deeper analysis.
Token
Like a digital coin, but possessing a special use purpose, such as the token Ether paying for gas or fees to transact with apps on the decentralized applications platform Ethereum. Like coins, value fluctuates tokens are traded on and off exchanges.