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Blockchain glossary

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10 terms

Fundamentals

Blockchain: An append-only ledger of transactions grouped into blocks, each cryptographically linked to the one before it and replicated across many independent computers.
Block: A batch of transactions bundled together with a timestamp and a reference (hash) to the previous block.
Hash: A fixed-length fingerprint produced by a one-way function. The same input always yields the same hash; the smallest change produces a completely different one.
Node: A computer running the blockchain's software that stores a copy of the ledger and helps validate and relay transactions.
Consensus: The process by which distributed nodes agree on which transactions are valid and what the current state of the ledger is.
Proof of Work: A consensus mechanism where miners spend computing power to find a valid hash, securing the chain by making attacks expensive.
Proof of Stake: A consensus mechanism where validators lock up (stake) tokens for the right to propose and attest blocks, and can lose the stake for misbehaving.
Immutable: Designed to resist changes after confirmation. How final a record is depends on the network, its consensus rules, and how much confirmation has accumulated.
Decentralized: Operated by many independent participants rather than a single authority, so no one party can unilaterally control it.
51% attack: An attack where a single party controls a majority of the network's mining or staking power and can rewrite recent history.

17 terms

Layer 1, Layer 2 & Rollups

Layer 1: The base blockchain itself - like Bitcoin or Ethereum - that provides its own consensus, security, and data availability. Every other layer ultimately settles back to it.
Layer 2: A protocol built on top of a Layer 1 that processes transactions elsewhere and periodically commits a compressed summary back to the L1, inheriting its security.
Rollup: A Layer 2 that executes transactions off-chain, then posts the resulting data and a proof back to Layer 1, so anyone can verify its history without trusting the operator.
Optimistic rollup: A rollup that assumes transactions are valid by default and only checks them if someone submits a fraud proof during a challenge window.
ZK-rollup: A rollup that submits a cryptographic validity proof with every batch, mathematically guaranteeing correctness with no waiting period.
Fraud proof: Evidence submitted during an optimistic rollup's challenge window showing a posted batch was invalid, which reverts it and penalizes the poster.
Validity proof: A cryptographic proof (e.g. a zk-SNARK) that mathematically demonstrates a batch of transactions was executed correctly, without re-running them.
Sequencer: The party - often centralized, at least initially - that orders and batches transactions on a Layer 2 before posting them to Layer 1.
Data availability: The guarantee that the underlying transaction data behind a block or batch is actually published, so anyone can verify or reconstruct the chain's state.
Finality: The point at which a transaction is considered irreversible. L2 transactions often have quick 'soft' finality but only reach 'hard' finality once settled on L1.
Blockchain trilemma: The observation that decentralization, security, and scalability are hard to maximize simultaneously - improving one tends to pressure the others.
Sidechain: An independent blockchain connected to a main chain via a bridge, with its own consensus and security - meaning it does not inherit the main chain's security.
Bridge: A protocol that moves assets or data between two blockchains, typically by locking tokens on one chain and minting a representative version on the other.
State channel: A scaling technique where participants transact off-chain directly with each other and only settle the final outcome on-chain.
Sharding: Splitting a blockchain's data and transaction processing across multiple parallel chains ('shards') so the network can handle more throughput.
TPS: Transactions per second - a common (if imperfect) measure of a blockchain's throughput capacity.
Calldata: The transaction data field where rollups post compressed L2 transaction data to Ethereum, making it a main cost driver for many rollups.

5 terms

Wallets & Keys

Wallet: Software (or hardware) that stores your private keys and lets you sign transactions. The wallet holds keys, not coins - the coins live on-chain.
Private key: A secret number that controls an account. Anyone with it can move the funds, so it must never be shared.
Public key: A value derived from the private key that others use to verify your signatures. Your address is usually derived from it.
Seed phrase: A human-readable list of 12–24 words that can regenerate all the private keys in a wallet. Whoever holds it controls the wallet.
Cold storage: Keeping private keys fully offline (e.g. on a hardware wallet or paper) so they can't be reached by online attackers.

10 terms

DeFi & Tokens

Gas: The fee paid to have the network process a transaction or run a smart contract. Priced in the chain's native token.
Smart contract: A program deployed on-chain that runs exactly as written when called, without a middleman. The basis of DeFi, NFTs, and most dApps.
DeFi: Decentralized Finance - financial services (lending, trading, saving) built from smart contracts instead of banks or brokers.
DEX: A decentralized exchange that lets users swap tokens peer-to-contract, often using an automated market maker instead of an order book.
AMM: Automated Market Maker - a smart contract that prices swaps from a pool of two assets using a formula rather than matching buyers and sellers.
Liquidity: Assets deposited into a pool or market so that others can trade against them. Providers earn a share of the fees.
Stablecoin: A token designed to hold a steady value, usually pegged to a currency like the US dollar, via reserves or algorithms.
Token: A unit of value issued on top of a blockchain via a smart contract, following a standard like ERC-20 (fungible) or ERC-721 (non-fungible).
Mint: To create a new token or NFT on-chain, recording its existence and initial owner.
Gas fee: The total cost of a transaction: gas used multiplied by the price per unit of gas.

1 terms

NFTs & Ownership

NFT: Non-Fungible Token - a unique on-chain token used to represent ownership of a specific item such as art, collectibles, or access passes.

1 terms

Security & Safety

Rug pull: A scam where a project's creators drain the liquidity or funds and disappear, leaving holders with worthless tokens.