A glossary of blockchain jargon

Address


  • It consists of a string of letters & numbers.
  • It’s really an encoded base58check version of a public key 160-bit hash.

Bitcoin Improvement Proposals (Bip)


  • A set of proposals that members of the bitcoin community have submitted to improve bitcoin.

Block


  • A grouping of transactions, marked with a timestamp & a fingerprint of the previous block.
  • The block header is hashed to produce a proof of work, thereby validating the transactions.
  • Valid blocks are added to the main blockchain by network consensus.

Byzantine Generals Problem


  • A reliable computer system must be able to cope with the failure of one or more of its components.
  • A failed component may exhibit a type of behavior that is often overlooked—namely, sending conflicting information to different parts of the system.

Coinbase


  • A special field used as the sole input for coinbase transactions.
  • The coinbase allows claiming the block reward and provides up to 100 bytes for arbitrary data.

Coinbase Transaction


  • The 1st transaction in a block.
  • Always created by a miner, it includes a single coinbase.

Cold Storage


  • Refers to keeping a reserve of bitcoin offline.
  • Cold storage is achieved when private keys are created & stored in a secure offline environment.

Colored Coins


  • An open source Bitcoin 2.0 protocol that enables developers to create digital assets on top of bitcoin blockchain utilizing its functionalities beyond currency.

Confirmations


  • Once a transaction is included in a block, it has one confirmation.
  • As soon as another block is mined on the same blockchain, the transaction has two confirmations, and so on.
  • Six or more confirmations is considered sufficient proof that a transaction cannot be reversed.

Consensus


  • When several nodes, usually most nodes on the network, all have the same blocks in their locally-validated best block chain.

Consensus Rules


  • The block validation rules that full nodes follow to stay in consensus with other nodes.

Difficulty


  • A network-wide setting that controls how much computation is required to produce a proof of work.

Difficulty Retargeting


  • A network-wide recalculation of the difficulty that occurs once every 2,016 blocks & considers the hashing power of the previous 2,016 blocks.

Difficulty Target


  • A difficulty at which all the computation in the network will find blocks approximately every 10 minutes.

Double Spending


  • Is the result of successfully spending some money more than once.

Elliptic Curve Digital Signature Algorithm (ECDSA)


  • Is a cryptographic algorithm used by Bitcoin to ensure that funds can only be spent by their rightful owners.

Extra Nonce


  • As difficulty increased, miners often cycled through all 4 billion values of the nonce without finding a block.
  • Because the coinbase script can store between 2 and 100 bytes of data, miners started using that space as extra nonce space, allowing them to explore a much larger range of block header values to find valid blocks.

Fees


  • The sender of a transaction often includes a fee to the network for processing the requested transaction.

Fork


  • Fork, also known as accidental fork, occurs when two or more blocks have the same block height, forking the block chain.
  • Typically occurs when two or more miners find blocks at nearly the same time.
  • Can also happen as part of an attack.

Genesis Block


  • The first block in the blockchain, used to initialize the cryptocurrency.

Hardware Wallet


  • A hardware wallet is a special type of bitcoin wallet which stores the user’s private keys in a secure hardware device.

Hash


  • A digital fingerprint of some binary input.

Hashlock


  • A hashlock is a type of encumbrance that restricts the spending of an output until a specified piece of data is publicly revealed.
  • Hashlocks have the useful property that once any hashlock is opened publicly, any other hashlock secured using the same key can also be opened.
  • This makes it possible to create multiple outputs that are all encumbered by the same hashlock and which all become spendable at the same time.

Hierarchical Deterministic (HD)


  • The Hierarchical Deterministic (HD) key creation and transfer protocol (BIP32), which allows creating child keys from parent keys in a hierarchy.

Hierarchical Deterministic (Protocol)


  • The Hierarchical Deterministic (HD) key creation and transfer protocol (BIP32), which allows creating child keys from parent keys in a hierarchy.

Hierarchical Deterministic (HD)


  • Wallets using the Hierarchical Deterministic (HD Protocol) key creation and transfer protocol (BIP32).

HD Wallet Seed


  • HD wallet seed or root seed is a potentially-short value used as a seed to generate the master private key and master chain code for an HD wallet.

Hashed TimeLock Contract


  • HTLC is a class of payments that use Hashlocks and timelocks to require that the receiver of a payment either acknowledge receiving the payment prior to a deadline by generating cryptographic proof of payment or forfeit the ability to claim the payment, returning it to the payer.

Know Your Customer


  • Is the process of a business, identifying and verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities.

LevelDB


  • Is an open source on-disk key-value store.
  • Is a light-weight, single-purpose library for persistence with bindings to many platforms.

Lightning Networks


  • Is a proposed implementation of Hashed Timelock Contracts (HTLCs) with bi-directional payment channels which allows payments to be securely routed across multiple peer-to-peer payment channels.
  • This allows the formation of a network where any peer on the network can pay any other peer even if they don’t directly have a channel open between each other.

Locktime


  • Locktime, or more technically nLocktime, is the part of a transaction which indicates the earliest time or earliest block when that transaction may be added to the block chain.

Mempool


  • Is a collection of all transaction data in a block that have been verified by bitcoin nodes, but are not yet confirmed.

Merkle Root


  • The root node of a merkle tree, a descendant of all the hashed pairs in the tree.
  • Block headers must include a valid merkle root descended from all transactions in that block.

Merkle Tree


  • A tree constructed by hashing paired data (the leaves), then pairing and hashing the results until a single hash remains, the merkle root.
  • In Bitcoin, the leaves are almost always transactions from a single block.

Miner


  • A network node that finds valid proof of work for new blocks, by repeated hashing.

Network


  • A peer-to-peer network that propagates transactions and blocks to every bitcoin node on the network.

Nonce


  • Is a 32-bit (4-byte) field whose value is set so that the hash of the block will contain a run of leading zeros.
  • The rest of the fields may not be changed, as they have a defined meaning.

Off-chain Transactions


  • Is the movement of value outside of the block chain.
  • While an on-chain transaction—usually referred to as simply a transaction— modifies the blockchain and depends on the blockchain to determine its validity an off-chain transaction relies on other methods to record and validate the transaction.

Opcode


  • Operation codes from the Bitcoin Script language which push data or perform functions within a pubkey script or signature script.

Open Assets Protocol


  • The Open Assets Protocol is a simple and powerful protocol built on top of the bitcoin blockchain.
  • It allows issuance and transfer of user-created assets.
  • Is an evolution of the concept of colored coins.

OP_RETURN


  • An opcode used in one of the outputs in an OP_RETURN transaction.

OP_RETURN Transaction


  • A transaction type relayed and mined by default in Bitcoin Core 0.9.0 and later that adds arbitrary data to a provably unspendable pubkey script that full nodes don’t have to store in their UTXO database.

Orphan Block


  • Blocks whose parent block has not been processed by the local node, so they can’t be fully validated yet.

Output


  • Output, transaction output, or TxOut is an output in a transaction which contains two fields: a value field for transferring zero or more satoshis and a pubkey script for indicating what conditions must be fulfilled for those satoshis to be further spent.

P2PKH


  • Transactions that pay a bitcoin address containing P2PKH or Pay To Pubkey Hash scripts.
  • An output locked by a P2PKH script can be unlocked (spent) by presenting a public key and a digital signature created by the corresponding private key.

Payment Channels


  • Is class of techniques designed to allow users to make multiple bitcoin transactions without committing all of the transactions to the bitcoin blockchain.
  • In a typical payment channel, only two transactions are added to the block chain but an unlimited or nearly unlimited number of payments can be made between the participants.

Pooled Mining


  • Is a mining approach where multiple generating clients contribute to the generation of a block, and then split the block reward according the contributed processing power.

Reward


  • An amount included in each new block as a reward by the network to the miner who found the Proof-of-Work solution.
  • It is currently 12.5 BTC per block.

Satoshi


  • A satoshi is the smallest denomination of bitcoin that can be recorded on the blockchain.
  • It is the equivalent of 0.00000001 bitcoin and is named after the creator of Bitcoin, Satoshi Nakamoto.

Pay-to-Script-Hash


  • Is a powerful new type of transaction that greatly simplifies the use of complex transaction scripts.
  • With P2SH the complex script that details the conditions for spending the output (redeem script) is not presented in the locking script.
  • Instead, only a hash of it is in the locking script.

P2SH Address


  • Are Base58Check encodings of the 20-byte hash of a script, P2SH addresses use the version prefix “5”, which results in Base58Check-encoded addresses that start with a “3”.
  • P2SH addresses hide all of the complexity, so that the person making a payment does not see the script.

Pay-to-Witness-Public-Key-Hash


  • The signature of a P2WPKH contains the same information as a P2PKH spending, but is located in the witness field instead of the scriptSig field.
  • The scriptPubKey is also modified.

Pay-to-Witness-Public-Key-Hash


  • The signature of a P2WPKH contains the same information as a P2PKH spending, but is located in the witness field instead of the scriptSig field.
  • The scriptPubKey is also modified.

Satoshi


  • A satoshi is the smallest denomination of bitcoin that can be recorded on the blockchain.
  • It is the equivalent of 0.00000001 bitcoin and is named after the creator of Bitcoin, Satoshi Nakamoto.

Script


  • Bitcoin uses a scripting system for transactions.
  • Forth-like, Script is simple, stack-based, and processed from left to right.
  • It is purposefully not Turing complete, with no loops.

ScriptPubKey


  • Is a script included in outputs which sets the conditions that must be fulfilled for those satoshis to be spent.
  • Data for fulfilling the conditions can be provided in a signature script.

ScriptSig


  • Is the data generated by a spender which is almost always used as variables to satisfy a pubkey script.

Secret Key


  • The secret number that unlocks bitcoin sent to the corresponding address.

Secure Hash Algorithm


  • Is a family of cryptographic hash functions published by the National Institute of Standards and Technology (NIST).

Stale Block


  • Block which was successfully mined but which isn’t included on the current best block chain, likely because some other block at the same height had its chain extended first.

Wallet


  • Software that holds all your bitcoin addresses and secret keys.
  • Use it to send, receive, and store your bitcoin.
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