Glossary of Terms
A
Active Nodes
Nodes that fully participate in network operations, including processing transactions and storing data, crucial for maintaining operational integrity and executing consensus.
API (Application Programming Interface)
A set of rules that allows different software entities to communicate with each other. APIs let different parts of a software project interact seamlessly, enhancing functionality.
Automated Market Maker
An Automated Market Maker (AMM) is a decentralized exchange protocol that relies on a mathematical formula to price assets. Instead of using an order book like a traditional exchange, assets are priced according to a pricing algorithm.
Auto Scaling
Auto Scaling adjusts computational resources automatically based on demand, ensuring optimal performance and cost efficiency. It handles traffic spikes efficiently, providing a seamless user experience without manual intervention.
B
Blockchain
A digital ledger that records all transactions across a network of computers. It ensures security and transparency as each block (a set of transactions) is linked and secured using cryptography.
Block
A package of data that contains multiple transactions. Blocks are the fundamental elements of a blockchain, linked together to form a chain.
C
Cryptography
A method of protecting information by transforming it into a secure format that only those it is intended for can read and process.
Consensus
A rule or mechanism used by blockchain networks to agree on the validity of transactions. This prevents fraud and ensures all participants have a consistent view of the ledger.
Cycle Record
A record that includes the status of nodes, such as identifying lost nodes, used to inform network participants of the node’s status.
Censorship
A situation where a validator may prevent certain transactions from being processed.
D
Deterministic Random Selection
A deterministic algorithm used to select nodes from the standby list, assigning them IDs and determining their address space and neighbors.
Decentralization
The transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network.
Distributed Ledger Technology (DLT)
A consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.
Dynamic State Sharding
Dynamic state sharding is the most advanced and complex way to shard the state of a network because it shards the State, Network, and Transactions and that too dynamically, as opposed to, in a pre-determined way
DoS or DDoS Attack
Attacks that knock nodes offline, disrupting network activity.
E
Ethereum
A decentralized platform that allows developers to build and deploy smart contracts and decentralized applications without downtime, fraud, control, or interference from a third party.
EVM Compliance
Refers to the compatibility of a blockchain network with the Ethereum Virtual Machine (EVM), which allows it to execute smart contracts and transactions that are compatible with Ethereum's existing ecosystem.
F
Fork
When a blockchain's users make changes to its rules, creating two paths—one that follows the old rules, and one that branches off with the new rules.
Futures
Standardized financial contracts that obligate the buyer to purchase and the seller to sell an underlying asset at a predetermined price and time in the future.
Future Numbers
Numbers used in the deterministic selection process, generated later in the selection phase to prevent nodes from exploiting the system.
G
Gas (in Blockchain Context)
A unit that measures the amount of computational effort required to execute operations like transactions and smart contracts on the Ethereum network.
Governance Token
A cryptocurrency token used to control the operations and influence the direction of a coin, token, and/or project. Holding these tokens can be profitable, as their popularity and price appreciation often result in significant returns for investors.
H
Hash
A cryptographic function that converts an input (or 'message') into a fixed-length string of bytes. It is used in blockchain to secure and verify data.
Hedging
A risk management strategy used in finance to protect against potential losses by taking a counterbalancing position in a related investment or financial instrument.
High Fairness
High fairness ensures that all participants have equal opportunities to validate transactions and propose new blocks. It prevents any single entity from gaining disproportionate control over the network. Fairness is maintained through decentralized consensus mechanisms and transparent protocols.
High Capacity
High capacity refers to the network's ability to handle a large volume of transactions per second (TPS). This is crucial for scalability, enabling the network to support a growing number of users and applications without performance degradation. Enhancements like sharding and layer 2 solutions help increase blockchain capacity.
I
Impermanent Loss
A temporary loss of funds that occurs when liquidity providers deposit their assets into a liquidity pool and the price of the assets in the pool changes.
Immediate Finality
Immediate finality means that once a transaction is confirmed, it cannot be altered, reversed, or double-spent. This ensures that transactions are permanently recorded and trusted as soon as they are included in a block. Immediate finality is crucial for applications requiring quick and definite transaction settlements.
L
Ledger
A record-keeping system where all transactions are documented. In blockchain, this ledger is decentralized and maintained across multiple nodes.
Liquidity
The ease of changing an asset into cash.
Liquidation
Liquidation refers to the process of selling collateral to repay a debt. It occurs when all the collateral in a vault is sold to cover the costs of repaying a debt, typically by someone other than the owner of the collateral.
Liquidity Pool
A Liquidity Pool (LP) is a pool of deposited funds used to provide liquidity to a currency, network, or Smart Contract. Liquidity is vital to any currency, exchange, or financial network, and rewards or incentives are provided to those who provide liquidity to LPs.
Linear scalability
Linear scalability is a subset of the broader concept of scalability. Specifically, linear scalability refers to the fact that a system can increase its throughput as you provide it with more resources, and the relationship between throughput and resources is linear.
Liquidity Token
A Liquidity Token is a token issued via Smart Contracts to a depositor in exchange for their deposit(s), which can be used for other purposes such as yield farming. Liquidity tokens can be exchanged back into the deposited asset at any time.
Low Latency
Low latency refers to the minimal delay between the initiation of a transaction and its confirmation. It is essential for applications needing quick transaction processing and user responsiveness. Achieving low latency helps improve the user experience and the overall efficiency of the blockchain network.
Low Bandwidth
The network can operate efficiently with minimal data transmission requirements. This is important for reducing operational costs and enabling access in regions with limited internet infrastructure. Optimized data protocols and lightweight transactions help achieve low bandwidth usage.
Long Range Attacks
Attacks where a fork is created from the genesis block to build a competing chain.
Lost Node Detection System
A system that identifies and verifies unresponsive nodes through communication attempts, verification processes by other nodes, and consensus on the node's status.
Low Transaction Fees
The minimal costs associated with processing and confirming transactions on a blockchain network. These fees are paid by users to incentivize miners or validators to include their transactions in the next block of the blockchain.
M
Mining
The process by which transactions are verified and added to the public ledger, known as the blockchain, and also the means through which new coins are released.
N
Nodes
Computers connected to the blockchain network that validate and record transactions. Nodes are essential for the maintenance and security of the network.
Nothing at Stake
A scenario where validators might validate on multiple forks of a network without incurring costs, unlike in Proof of Work (PoW) networks.
Node Authentication and Authorization
The process of verifying the legitimacy and integrity of nodes before they join the network, ensuring only legitimate and verified nodes can participate.
O
Oracle
An Oracle is a data feed that provides high-confidence services to users and other services by supplying current market prices of an asset or assets. The data source must be timely, accurate, and untampered, and may come from singular or decentralized sources dispersed geographically. Accurate and timely information is essential for exchanges and markets to operate efficiently. One of the most well-known oracle protocols is Chainlink (LINK).
P
Partial Consensus
A consensus mechanism requiring only a simple majority (e.g., two out of four verifiers) to classify a node as lost.
Pool
A Pool is a Smart Contract containing shared amounts of assets provided by depositors. Pools are used in Automated Market Makers (AMMs).
Protocol
A set of rules that define interactions on a network, like blockchain. Protocols ensure reliable data transmission and are foundational to network operations.
Peer-to-Peer Network (P2P)
A network in which two or more computers connect and share resources directly without relying on a central server.
Proof of Quorum (PoQ)
A hybrid consensus mechanism requiring a quorum of nodes to collectively agree on transactions, preventing Sybil attacks and ensuring transaction validity.
Proof of Stake (PoS)
Proof of stake (PoS) is a consensus protocol in blockchains. It is a way to decide which user or users validate new blocks of transactions and earn a reward for doing so correctly.
S
Syncing Process
The process where newly selected nodes sync data from the network and other nodes before becoming active to prevent disruptions.
Sharding
A technique that breaks down the database of transactions into smaller, more manageable parts, allowing for faster processing and less load on any single computer in the network.
Smart Contracts
Self-executing contracts with the terms of the agreement directly written into code. They automatically execute transactions when predetermined conditions are met.
Standby Nodes
Nodes that are not yet holding or processing data, primarily enhancing network security by participating indirectly.
Slashing
A penalty mechanism for nodes that frequently fail to perform their duties or go offline, discouraging repeated failures and promoting network integrity.
Stealth Checks
Requests made by verifier nodes to an unresponsive node to determine its status, designed to be indistinguishable from regular requests to ensure fair responses.
Stablecoin
A stablecoin is a type of cryptocurrency designed to maintain a stable value. For example, if an individual holds $100 worth of a stablecoin, they can expect that the value of their holdings will remain relatively stable over time. This stability is typically achieved through various mechanisms such as over-collateralization, algorithmic stabilization, or a peg to a stable asset like the US Dollar.
Stablecoins are often used in cryptocurrency trading as a way to hedge against market volatility or as a means of exchange.
Stake
Staking refers to the act of holding cryptocurrency in a wallet or platform in order to support the network's operations and earn rewards. For example, a user may stake their coins to support the Proof of Stake consensus algorithm and earn a share of the block rewards.
Staking
Staking is the process of holding cryptocurrency to earn rewards. For example, a user may stake their coins in a liquidity pool to earn yield on their holdings or participate in a governance token staking program to influence the development of a project.
Sybil Attacks
Attacks where numerous fake identities are created to gain control of the network, disrupting its security.
Shard Takeover Attack
An attack where an adversary fills a shard with their own nodes to gain control and potentially forge transactions.
Solves Scalability Trilemma
Solving the scalability trilemma in blockchain involves achieving a balance between decentralization, security, and scalability. Typically, enhancing scalability can compromise either decentralization or security, but innovative solutions like sharding, layer 2 protocols, and consensus algorithm improvements aim to address all three aspects simultaneously.
Security
Security refers to the protection of data integrity, transaction authenticity, and network resilience against attacks. It ensures that transactions are tamper-proof and that the network is resistant to hacks, double-spending, and other malicious activities. Strong cryptographic protocols and consensus mechanisms are fundamental to maintaining high security in blockchain systems.
T
Token
A digital asset created on existing blockchain networks that can represent various assets or utilities.
Transaction
Actions carried out within a blockchain that result in the movement of data or assets between addresses.
Transaction Flooding
An attack where the network is flooded with valid transactions to slow it down.
W
Wallet
A digital wallet that allows users to store and manage their cryptocurrency addresses. Wallets can be software-based or hardware-based.