Glossary

There are many glossaries out there which explain Bitcoin and blockchain technologies for the common user, but some of the governance aspects and more politicised elements of the systems are not often included as these are not strictly necessary to understand in order to use the system. This glossary seeks to fill that gap and will be expanded upon throughout my research. Please do contribute or correct!

Occasionally, when someone else’s entry is comprehensive, I might include it in full – these are individually referenced. I have drawn from, amongst others Antonopoulos, Mastering Bitcoin, 2015, the Bitcoin.org vocabulary and Ethereum whitepaper.

 

Address

A Bitcoin address is similar to a physical address or an email. It is the only information you need to provide for someone to pay you with Bitcoin. You can use a different address for each transaction if you want. (bitcoin.org)

BIP

Bitcoin Improvement Proposal, a set of proposals that members of the bicoin community have submitted to improve bitcoin. (what is the selection process??)

Bit

Bit is a common unit used to designate a sub-unit of a bitcoin – 1,000,000 bits is equal to 1 bitcoin (BTC). With a current (date) value of one bitcoin at , and with a cap on the total number of bitoins in circulation, sub-units will be increasingly used in transactions. (bitcoin.org)

Bitcoin

Bitcoin – with capitalization, is used when describing the concept of Bitcoin, or the entire network itself
bitcoin – without capitalization, is used to describe bitcoins as a unit of account. e.g. “I sent ten bitcoins today.”; it is also often abbreviated BTC or XBT. (bitcoin.org)

Block

A block is a record in the blockchain that contains and confirms data. In the case of Bitcoin the block is marked with a timestamp and signature of the previous transaction and the block header is hashed to produce a proof of work, thereby confirming transactions.

Blockchain (blockchain and cipher block chaining, cbc)

The blockchain is a technology for validating and storing digital data in a distributed manner that aims to be independent of any intermediary or central authority. When referring to the Bitcoin Blockchain, this will be spelled with a capital B, lower case will be used when referring to blockchains in general, and block chain or cbc describes the method of cryptographic block chaining for various other purposes.

Confirmation

Confirmation means that a transaction has been processed by the network and is highly unlikely to be reversed. Transactions receive a confirmation when they are included in a block and for each subsequent block. Six or more confirmations is considered sufficient proof that a transaction cannot be reversed. (bitcoin.org/ Antonopoulos)

Contract account (Ethereum)

An account that is controlled by a contract code and that can send messages to other contract accounts

Cryptography

Cryptography is the branch of mathematics that lets us create mathematical proofs that provide high levels of security. Online commerce and banking already uses cryptography. In the case of Bitcoin, cryptography is used to make it impossible for anybody to spend funds from another user’s wallet or to corrupt the blockchain. It can also be used to encrypt a wallet, so that it cannot be used without a password. (bitcoin.org)

Consensus rules

The basic rule set that the network has agreed to, including such things as the 21million total limit on bitcoin, the difficulty target for
mining, the size limit on each block and so on.

Cryptographic keypair

Cryptographic keys consists of a keypair taking advantage of the one-way mathematics of cryptography, so that only the holder of the private key is able to decrypt messages that have been encrypted with the public key. Furthermore, only the holder of the private key can generate a public signature that can be verified using the public key. This means you can share your public key widely, allowing people to encrypt their communication with you, while your private key ensures that only you can decrypt the messages.

Difficulty target

A difficulty at which all the computation in the mining network will find blocks approximately every 10 minutes. (Antonopoulos)

Distributed Autonomous Organisation

A DAO is a bundle of smart contracts that run and execute functions independently of human involvement.

Double Spend

If a malicious user tries to spend their bitcoins to two different recipients at the same time, this is double spending. Bitcoin mining and the blockchain are there to create a consensus on the network about which of the two transactions will confirm and be considered valid. (bitcoin.org)

Ether (Ethereum)
Ether is the internal currency for the Ethereum system.

Externally owned account (Ethereum)

An account that is controlled by a keypair, similar to a bitcoin account

Fees

The sender of a transactions often includes a fee to the network for processing the requested transaction. Most transactions require a minimum fee of 0.5mBTC (Antonopoulos)

Fork

When a piece of code is modified and is not included in the main body of code. A fork can be incorporated back into the main code down the line, whereas a hard fork is not backwards compatible.

Full node

A full node checks transactions and blocks to see whether they comply with the consensus rules that have been installed before forwarding to other full nodes and miners to include in the blockchain.

Gas (Ethereum)

When Ether is used to pay for transactions. While in Bitcoin each transaction costs more or less the same, in Ethereum, the transaction fee is dependent on the amount of computing needed for the full transaction. Each transaction or message therefore has an amount of “startgas” included in order to pay for the execution of a function and as transaction fee that goes to the miner. The function will stop, or return an error when it has run out of gas.

Genesis block

The first block on a blockchain.

Hard fork

When a modification to a piece of code is no longer backwards compatible with its source, thus creating a split between users of the old code and those of the new.

Hashing

A hash function is a mathematical procedure that takes any type of data (also called a “message”) and produces an output, say a string of numbers and characters, of a given size. Importantly, the source data cannot be deduced from the output, while the same input will always reproduce that same output. These characteristics are common for all types of hashing functions. Bitcoin currently uses SHA-256 (which produces a 256bit output), however, cryptography requires constant innovation and updates in order to remain secure in the long-term (cf. Gupta, 2016; Silva, 2003)

Hash Rate

The hash rate is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second. (bitcoin.org)

Message (Ethereum)

Apart from transactions, accounts can also send messages that can for example consist of a request to run a given piece of code. Contract accounts can thus send each other messages to run their contract code.

Mining/ miner

A miner confirms transactions and increases the security of the network by spending computing power to hash a valid proof-of-work for a block that can then be included in the blockchain. As reward, the miner receives a number of newly created bitcoins as well as transaction fees.

Proof-of-stake

In Bitcoin validation of transactions take place through “proof-of-work” which is the task that miners do, in which your contribution of computing power to the network determines your level of say in the consensus process, in Ethereum, this instead takes place through proof-of-stake, and is dependent on your stake in the network, i.e. how much currency, or ether, you hold.

Private Key

A private key is a secret piece of data that proves your right to spend bitcoins from a specific wallet through a cryptographic signature. Your private key(s) are stored in your computer if you use a software wallet; they are stored on some remote servers if you use a web wallet. Private keys must never be revealed as they allow you to spend bitcoins for their respective Bitcoin wallet. (bitcoin.org)

Proof-of-work

Proof-of-work is a piece of data that on the one hand proves the expenditure of a certain amount of computational power through the mining process, as well as an underlying condition of participation so that your influence in the network is proportional to your computational expenditure. (Antonopoulos: A piece of data that requires significant computation to find. In bitcoin, miners must find a “nonce”, in other words, a number that when hashed using SHA256 and the transactions has the result that meets the network-wide difficulty target that is adjusted every once in a while so that a proof-of-work is on average found every 10 minutes.)

Reward

An amount included in each block as a reward to the miner for finding the proof-of-work, thus validating and securing the network. The reward is halved every once in a while to eventually reach 0 when the limit of 21million bitcoins are in circulation.

Signature

A cryptographic signature is a mathematical mechanism that allows someone to prove ownership.

State

The status of all accounts at a given point in time. The blockchain is the mechanism that allows for decentralised consensus on the state, in the case of Bitcoin for example of all transactions in the network.

State transition

A change from one state to another, as when a transaction takes place, requiring a new consensus process to take place across the network to agree on the new state

Transaction

A transfer of bitcoins from one address to another. However, addresses do not as such “hold” any bitcoin, rather, as put by Antonopoulos: a transaction is a signed data structure expressing a transfer of value. Transactions are transmitted over the bitcoin network, collected by miners, and included into blocks, made permanent on the blockchain.

Wallet

Software that holds your cryptocurrency addresses and secret keys. Use it to send, receive and store your cryptocurrencies.