Blockchain Explained

As with any new industry or technology, there is an abundance of terms and acronyms being adopted to describe many of the innovations associated with blockchain. The intent of this glossary is to provide a list of many of the common ones you are likely to encounter: 

Bitcoin The first decentralised digital currency.

Blockchain A decentralised ledger where transactions are grouped together into blocks which are linked together in a cryptographically secure manner. These blocks are shared with all participants on the network.

BTC The symbol for the bitcoin cryptocurrency.

Decentralised Finance (DeFi) The ecosystem of decentralised applications being built on public blockchain networks such as Ethereum that governs innovations such as stable coins and decentralised lending, insurance and exchanges.

Distributed Ledger Technology (DLT) A system of record that is distributed across multiple nodes on a network, where transactions are shared among participants on the network.

Consensus algorithm The mechanism by which a network reaches agreement among participant nodes on the network.

DApp A decentralised application running on a blockchain or DLT. Typically defined as a smart contract.

Decentralised identifier (DID) A verifiable decentralised identifier that is decoupled from a centralised provider.

Decentralised exchange (DEX) An exchange that allows users to exchange tokens without an intermediary.

Decentralised Finance (DeFi) Decentralised applications providing services for cryptocurrencies and tokens such as lending, borrowing and exchanging.

Digital twin A digital representation of a real world asset.

EIP An Ethereum improvement proposal.

Elliptic curve A type of mathematical curve that underpins public key cryptography.

ERC Ethereum request for comments, an Ethereum standard.

ETH The symbol for the Ether cryptocurrency.

Ethereum A blockchain platform for running smart contracts and decentralised applications.

ERC20 The Ethereum fungible token standard.

ERC721 The Ethereum non-fungible token standard.

Fungible token A token that is interchangeable with another token.

Gas The fee associated with a blockchain transaction on the Ethereum blockchain.

Hard fork A breaking change to a blockchain protocol.

Initial Coin Offering (ICO) A public token sale for a blockchain protocol or project where the funds are raised by investors investing cryptocurrencies into a smart contract that gives them tokens in return that can be used with the new project or protocol once built.

Initial DEX Offering (IDO) A project token sale that takes place on a decentralised exchange.

Initial Exchange Offering (IEO) A project token sale that takes place on a centralised exchange.

IPFS The Interplanetary Filesystem, a decentralised file storage network.

Launchpad A platform facilitating an IDOs with investment pools.

Layer 1 protocols Base blockchain network protocols.

Layer 2 protocols Overlay networks that sit on top of the base protocol which are typically used for scaling or privacy purposes.

Non-fungible token (NFT) A token that is not interchangeable with another token. They represent the unique attributes of something digital or physical that cannot be duplicated.

On-chain governance A decision making process for a blockchain protocol that takes place with voting via smart contracts that reside on the associated blockchain.

Off-chain governance A decision making process that takes on more conventional channels, not on the blockchain.

Public key cryptography A type of cryptography that uses public and private keys that enable someone to encrypt or sign a message with a private key, that can only be decrypted or verified using the associated public key.

Security token A token that represents financial value in the project it is associated with.

Security Token Offering (STO) A usually private token sale where security tokens are issued to investors.

Smart contract The application code used to write decentralised applications that run on a blockchain.

Soft fork A backward compatible change to a blockchain protocol.

Utility token A token that is native to a blockchain network or project that provides some utility for users.

Verified credential A credential that has been verified by a third-party.

Yield farming The process of lending crypto assets for yield on DeFi platforms.

Zero-knowledge proof A type of cryptographic proof that enables one party to prove to another party that they know the value of a thing without having to share any information apart from the fact they know the value.