A 51% attack is when a single entity or group gains control of over 50% of a blockchain network's mining or computational power, enabling it to manipulate transactions, double-spend coins, or disrupt the network's operations.
A feature in blockchain that allows user accounts to operate with customizable rules and logic for transaction processing, enabling better functionalities like multi-signature approvals, social recovery, and more. Ultimately, account abstraction transforms Web3 wallet accounts to improve the user experience.
A distribution of free tokens or cryptocurrencies to a large number of wallet addresses often used as a marketing strategy to promote a new project, reward loyal users, or incentivize adoption.
A peer-to-peer exchange of crypto assets from different incompatible blockchains that occurs directly between users without the need for an intermediary, ensuring the trade either fully completes or is entirely canceled, eliminating the risk of one party defaulting.
Simplified, algorithmic systems designed to facilitate the exchange of digital assets without the need for traditional order books and intermediaries. AMMs are commonly used in decentralized exchanges to help execute swaps.
BRC-20 is an experimental token standard that enables the minting and transferring of fungible tokens via the Ordinals protocol on the Bitcoin blockchain.
In a blockchain network, a block reward incentivizes miners or validators to successfully add a new block to the blockchain.
A decentralized, public ledger that records transactions verified by a peer-to-peer network of computers in a secure, transparent, and immutable way.
A web tool to explore a particular network’s transaction and data history. It offers transparency by viewing wallet history, transaction balances, and more.
A belief that blockchains can only provide two of three benefits with respect to decentralization, security, and scalability.
A bridge allows market participants to transfer assets between two blockchains like from Ethereum to Solana. Today, most bridges typically achieve this by locking up an asset on one blockchain and minting the equivalent on the other blockchain. A burn function is activated to release the locked asset subsequently.
Cross-chain bridges can be broadly categorized by their underlying security mechanism and fall into these categories:
· Light-clients with block relays-based bridges. Unlike a Merkle tree commitment, a light client does not verify all the transactions in the entire chain and relies on the assumption that the chain with the most PoW contains only valid transactions, removing the need for heavy computation.
· Oracle-based bridges. Wormhole is an example of an Oracle-based bridge where the trust lies in the oracle network rather than the blockchain and is powered by its own consensus mechanism.
· Cross-Chain Liquidity bridges are supported by the protocol’s security model and are driven by their method of data availability, withdrawal integrity, and liveness.
A digital form of a country's official currency issued and regulated by its central bank. Unlike crypto assets like Bitcoin and Ethereum, CBDCs are typically centralized and represent a digitized version of the national currency. CBDCs aim to provide a secure and efficient means of digital payments while remaining under the control and oversight of the central monetary authority.
The primary fiat onramps to buy and sell cryptoassets. They operate similarly to stock exchange platforms, relying on order book systems while offering intuitive user interfaces.
A physical device used to securely store cryptocurrencies offline, protecting them from online threats such as hacking. Cold, or hardware wallets typically store private keys and allow users to access their funds without exposing sensitive information to the internet.
A situation where the network becomes overloaded with transactions, leading to delays in processing and higher fees. It often occurs when there is a surge in transaction volume which exceeds the network’s processing capacity.
A mechanism used by blockchains to agree on the validity of transactions and maintain the integrity of the ledger, ensuring that all participants in the network reach a common agreement on the state of the blockchain.
For the blockchain to work, every node (user) needs access to the same, continually updating database. When new data is added to the network, the majority of nodes must verify and confirm the legitimacy of the new data based on permissions or economic incentives; these are also called consensus mechanisms. A new block is created and attached to the chain when a consensus is reached.
A digital currency that uses cryptography for security, operates on a decentralized network (typically a blockchain) and enables peer-to-peer transactions without the need for intermediaries like banks.
The use of mathematical algorithms to secure data and transactions on the network. It ensures confidentiality, integrity, and authenticity by encrypting data, verifying signatures, and generating a cryptographic key.
The distribution of control, authority, and decision-making across a network of participants instead of being concentrated in a single entity.
A software program built on blockchain technology that operates without a central authority, using smart contracts and distributed networks to execute functions securely, transparently, and autonomously.
A blockchain-based organization governed by smart contracts and community members through decentralized voting, where decisions are made collectively without centralized leadership.
Identities residing on public networks such as Ethereum and Polygon empower users to manage their personal information without relying on centralized authorities. Decentralized Identifiers (DIDs) not only bolster privacy by reducing reliance on centralized databases but also enable users to selectively share only essential information pertinent to their ongoing activities. This approach ensures an immutable and tamper-resistant record of the data, enhancing both security and user control over personal information.
An exchange built on a blockchain that facilitates the buying and selling of tokens in a non-custodial fashion. Their underlying pricing technology is dubbed an Automated Market Maker (AMM).
A financial ecosystem built on blockchain technology that provides traditional financial services like lending, borrowing, trading, and investing without intermediaries such as banks, using smart contracts and decentralized applications (dApps) to automate and execute transactions transparently and securely.
An emerging sector in the crypto space designed to leverage tokens and incentives to build better physical infrastructure in the real world. Examples include wireless networks like Helium, data storage solutions like Filecoin and Arweave, and energy distribution networks like Energy Web. The guiding principle behind this movement is to reduce reliance on large entities and usher in a new sharing economy based on a decentralized model.
Data storage solutions that distribute files across a network of nodes or computers, rather than relying on a central server, enhancing security, privacy, and resilience by eliminating single points of failure.
The fraudulent attempt to spend the same digital currency twice. Blockchain technology mitigates this risk by creating a shared, public ledger that transparently records all transactions, making it impossible to alter or erase spending history.
A formal document outlining a proposed change or addition to the Ethereum protocol. EIPs serve as a mechanism for the Ethereum community to collaboratively propose, discuss, and implement improvements to the network.
The Ethereum Virtual Machine (EVM) is like the “brain” of Ethereum, similar to how the Mac operating system (macOS) is the brain behind a Mac computer. It contains an engine that reads, understands, and executes smart contracts. It also maintains the Ethereum blockchain state by tracking data points like account balances, token ownership, and history of all transactions. The EVM operating system has become a cornerstone of the blockchain economy stack, so many alternative blockchains are now trying to build EVM-compatible systems.
A type of loan that doesn’t require collateral and must be borrowed and repaid within the same blockchain transaction. If the loan isn’t repaid during the transaction, the entire operation is canceled, minimizing risk to the lender.
Fees paid in tiny fractions of the native currency to compensate validators for processing transactions. These fees also help control network congestion by incentivizing users to conduct only essential and not spam transactions.
A condition set in Bitcoin's protocol that reduces the block reward by half every 210,000 blocks (approximately every four years). This event controls the supply of new bitcoins, reducing inflation and capping the total supply at 21 million coins.
A significant update to a blockchain's protocol that is not backward-compatible, resulting in a permanent split from the original chain. It creates two separate blockchains: one that follows the old rules and one that follows the new rules. Hard Forks occur when the users and nodes supporting the network disagree about the direction the protocol is embarking on. Hence, they split the network in two directions to accommodate the variety of opinions. Examples include Bitcoin Cash splitting from Bitcoin.
A software wallet connected to the Internet that stores private keys. allowing for quick and easy access to funds but making it more vulnerable to hacking or cyberattacks compared to offline (cold) storage.
Initial Coin Offering is a fundraising method used by blockchain projects, where they issue and sell their own cryptocurrency tokens to investors. Investors buy these tokens with the expectation of future returns or access to the project's products or services.
Metadata attached directly to individual units of cryptocurrencies, for example, on Satoshis in the Bitcoin network. This metadata encompasses various data types like text, images, videos, or code, allowing for NFT-like features on the Bitcoin network.
The ability of different blockchains to communicate with each other. In essence, it allows for the transfer of information and value across originally incompatible blockchains, creating a more cohesive ecosystem that overcomes the siloes of traditional blockchains.
Layer 0 is like the foundation beneath the foundation layer (Layer 1). While Layer 1 is the blockchain itself (like Bitcoin or Ethereum), Layer 0 is the underlying infrastructure that allows multiple blockchains to be created and interact with each other. Otherwise, Layer 1s built with a monolithic architecture would work in silos. If Layer 1 blockchains is a neighborhood of houses, Layer 0 would be the groundwork, like the roads, power lines, and plumbing, that connect these houses. Without the groundwork, the houses would be isolated and they wouldn’t be able to share resources or interact with one another. This vertical includes networks such as Cosmos, Polkadot, LayerZero.
Acting as the base layer, Layer 1 networks provide the foundational security and structure for other protocols or applications. Examples include Bitcoin, Ethereum, and other major blockchains. These blockchains handle transactions, security, and smart contracts but can get slow or expensive when too many people use them simultaneously. Think of it like a busy highway—when too many cars (transactions) are on it, traffic builds up, and everything slows down.
Acting as the helper, Layer 2 is built on top of Layer 1 to help alleviate the congestion problems many Layer 1 blockchains face. It’s like creating extra lanes or side roads that take some of the traffic off the main highway, similar to how ADSL solved the problem of the dial-up internet connection.
Layer 2 solutions process transactions off the main blockchain and then send the final results back to Layer 1 so the main blockchain doesn’t get too crowded. This makes things faster and cheaper without compromising security since Layer 2 solutions like Arbitrum and Optimism typically inherit the security mechanisms of the Layer 1 they’re built on.
A scaling solution built on Bitcoin that enables faster, cheaper transactions through a network of payment channels. These channels operate off-chain, allowing for quicker settlements and lower fees compared to traditional Bitcoin transactions.
Much like Liquid Staking tokens (LST), Liquid Restaking Tokens can also be considered an IOU representing users' deposit into staking protocols built on top of restaking protocols like EigenLayer. This allows users to accrue yield from re-staking activities while using receipt-like tokens to participate in DeFi activities like lending, borrowing, and accessing leverage.
The introduction of the Liquid Staking concept attempts to solve the participation hurdles associated with initial ETH staking – illiquidity, immovability, and inaccessibility – by turning the locked capital into liquid capital.
This concept enables the staked position to be ”liquified;” a receipt token is issued to the user upon depositing ETH into staking. In other words, an IOU. By letting the user immediately exit a staked position (through the sale of the receipt token), they receive access to additional liquidity, creating a (secondary) market.
The maximum amount of value miners or validators can extract by reordering, including, or excluding transactions in a blockchain block to maximize their gain, often at the expense of regular users. This can lead to higher fees, delayed transactions, and front-running opportunities.
A cryptocurrency inspired by internet memes, jokes, or cultural references, typically created as a humorous or satirical project rather than for utility-based purposes. Meme coins often gain popularity through social media, community-driven hype, and influencers, rather than intrinsic technical value.
Examples: Dogecoin (DOGE), Shiba Inu (SHIB)
A waiting area for crypto transactions where they essentially queue before getting confirmed and added to the blockchain by miners or validators. It's a crucial part of the transaction process in blockchain networks.
The process by which new blocks are created on the Bitcoin blockchain, where individuals known as miners use specialized hardware to solve complex mathematical problems to be rewarded with new units of BTC upon the successful completion of their operations. In a simpler breakdown, Mining is used to validate transactions on top of the Bitcoin network in order to keep it secured
A blockchain architecture that separates the different components of a blockchain, such as execution, consensus, and data availability, into separate modules that can be customized and replaced. This allows for greater flexibility and scalability, as well as easier upgrades and maintenance.
A secure way for multiple parties to jointly analyze and compute results on sensitive data without revealing the actual data to each other.
Imagine a situation where different people want to perform a calculation together, like finding the average of their salaries, but they don't want to disclose their individual salaries. MPC enables them to collectively compute the average without anyone knowing the specific salary of any other participant.
Individual computers in a blockchain network that work together to validate transactions, maintain a distributed ledger (the blockchain), and secure the network by ensuring its decentralization.
Digital assets representing ownership over a unique item. Unlike tokens, NFTs are nonfungible, meaning that each token is unique and can’t be exchanged one-to-one, much like any traditional crypto tokens or currencies in the existing world. NFTs can also be used as the underlying instrument to tokenize real-world assets like legal documents, contracts or even credentials like identities and certificates.
The token interoperability standard (OFT) put forward by LayerZero allows for tokens to be represented on multiple chains without relying on bridges or pegged versions of the tokens. In other words, the standard allows the token to exist natively on multiple chains through a burn and mint mechanism, analogous to ETF creations and redemptions, while allowing liquidity and supply to be unified, preventing fragmentation. Finally, OFT standard is EVM compatible which makes the solution composable and ideal for integration with existing platforms.
On-chain refers to actions or transactions that occur on a blockchain network. These transactions are permanently recorded on the blockchain ledger, visible to all participants, and secured by the decentralized nature of the blockchain.
On the other hand, off-chain refers to transactions that occur away from the blockchain, which could include agreements or interactions that are not recorded directly on the blockchain.
A Layer 2 scaling solution that processes transactions off-chain to improve speed and reduce costs while inheriting Ethereum’s security. They assume transactions are valid by default (“optimistically”) but allow fraud challenges within a dispute window. If fraud is detected, the rollup reverts the transaction using Ethereum’s base layer. Examples include Arbitrum and Optimism.
A crypto oracle serves as a source of external data for smart contracts. It retrieves real-world information, such as stock prices, weather conditions, or sports scores, and provides this information to smart contracts so they can make decisions based on real-world data.
Think of it as a messenger that brings real-world data into the blockchain world, allowing smart contracts to react to and execute based on information beyond the blockchain itself. This connection to external data helps make blockchain applications more versatile and applicable to a wider range of use cases.
Bitcoin Ordinals were introduced in January 2023 as a method of generating Bitcoin NFTs by attaching information to individual satoshis. This is achieved through a process called “inscribing,” which is analogous to drawing or writing notes on a dollar bill.
The Price-to-Fees (P/F) ratio in cryptoassets measures the relationship between a coin's market price and the transaction fees generated by its network. It helps assess the profitability and usage efficiency of a blockchain. A lower P/F ratio suggests that the network is generating higher fees relative to its price, indicating strong demand or utility, while a higher ratio may suggest overvaluation or low network activity. This metric is often used to evaluate the sustainability and health of decentralized ecosystems.
An extra fee that users can pay to have their transactions processed faster on a blockchain. When the network is busy, validators (the operators who confirm transactions) prioritize transactions that include higher fees. This means that if you want your transaction to go through quickly, you can add a priority fee as an incentive for validators to process it before others.
Every public key is paired with a private key, serving as a password to unlock funds from a wallet.
A mechanism that selects block creators based on a participant's stake, such as the number of tokens they hold or how long they have participated in the network.
A piece of data to add new transactions on a blockchain. PoW is difficult to produce but easy for others to verify. It is used in the consensus mechanisms of some cryptoasset networks like Bitcoin.
The public key is a cryptographic code for receiving cryptoassets. It is analogous to account numbers for value transfers over a blockchain.
An adjustment mechanism where the total supply of a token is automatically altered periodically to maintain a target price. Unlike a traditional split, this change in supply does not affect the proportional ownership of holders. If the token price is above the target, the supply increases (positive rebase), lowering the price. Conversely, if the price is below the target, the supply decreases (negative rebase), raising the price. This mechanism aims to stabilize the token’s value while maintaining its market capitalization.
A secret recovery phrase is the backup of all private keys. It allows the recovery of funds, even without the original wallet or device.
RPC is commonly used to communicate between different components of a blockchain network. It allows applications or scripts to make requests to a blockchain node, enabling them to access blockchain data or execute functions without having to run a full node themselves. RPC acts as a communication bridge, allowing different parts of the cryptocurrency ecosystem to work together efficiently.
Restaking allows users to stake the same ETH on both Ethereum and other protocols, securing all of these networks simultaneously. Hence, restaking allows for leveraging existing trust networks. To put it differently, it allows users to rehypothecate existing staked ETH for securing external networks beyond ETH.
However, when users opt-in to restake their ETH, they are exposed to increased slashing risk. As a result, restakers are compensated with higher staking rewards for undertaking more risk.
A rollup is an off-chain aggregation of transactions to be processed off-chain before on-chain settlement and is often considered a throughput solution.
Rollups are an example of a modular blockchain. A rollup chain processes transactions but outsources consensus, data availability, and settlement to the parent chain.
The act of implementing techniques to improve a blockchain’s ability to process transactions efficiently as the network grows. Challenges like limited transaction throughput and high fees necessitate scaling solutions. These solutions can involve increasing block size, sharding, or employing layer 2 protocols that handle transactions off-chain while relying on the main chain for security.
Sequencers are equivalent to validators, particularly in Layer 2 solutions, that aggregate and order transactions before submitting them to the main chain, improving efficiency and scalability.
Sharding is a technique used to enhance the scalability of blockchain networks by dividing the network into smaller partitions called "shards." Each shard is responsible for maintaining its own portion of the blockchain data, and they communicate with each other to ensure that the entire network remains consistent. They also process transactions independently, significantly increasing the network's overall throughput.
A scaling solution in the form of an independent chain that runs in parallel with a main network yet is interoperable with it, allowing assets to be transferred between both blockchains via a two-way bridge. Such networks include Polygon 1.0 and Axie Infiity’s side network, Ronin chain.
A penalty mechanism in Proof of Stake (PoS) blockchains where a portion of a validator's staked assets are forfeited for malicious behavior, such as double-signing or being offline, to maintain the network's security and integrity. This discourages validators from taking actions that could harm the network’s security.
A self-executing contract with the terms directly written into code, running on a blockchain. It automatically enforces and executes agreements when predefined conditions are met without the need for intermediaries.
Digital currencies pegged to the value of fiat currencies like the US dollar to maintain a stable value.
The process of locking up tokens to be eligible to verify transactions on the blockchain and earn rewards.
The upgrade was triggered in September 2022 and marked a major milestone for Ethereum as it transitioned from Proof-of-Work to Proof-of-Stake. The Merge refers to the original Ethereum Mainnet merging with a separate Proof-of-Stake blockchain called the Beacon Chain, which now exists as one chain.
A set of rules and technical specifications that govern how tokens are created, issued, and interact on a blockchain. These standards ensure compatibility and consistency, allowing developers to create tokens with predictable behavior and enabling wallets and applications to interact with them seamlessly. Examples include ERC-20 for fungible tokens and ERC-721 for non-fungible tokens (NFTs) on Ethereum.
The process of creating a digital representation of any real-world asset like equities, real estate properties, or bonds on a blockchain via issuing a tokenized share of the underlying asset, which could further unlock things like fractionalization of an asset, opening its market and deepening its liquidity.
The economic principles, standards, and models for token distribution within the crypto economy. In other words, it looks into what roles a token plays within a blockchain and how its economic features impact the overall functioning of the network. Thus, tokenomics design is a crucial aspect of any public blockchain as it influences the behavior of participants within its network, aligns their incentives, and contributes to the overall growth of the ecosystem.
A metric native to decentralized finance (DeFi) that measures the cryptoassets locked in DeFi protocols through smart contracts, akin to assets under management (AUM) in traditional finance.
Refers to the aggregate TVL within all smart contracts that depend on the proper operations of a given decentralized oracle network (DON).
TVS is a metric that can be used to trace an oracle network's growth over time. As an oracle network's TVS increases, the economic value associated with its proper performance increases.
A unit of cryptocurrency that remains after a transaction is completed and can be used as input in a future transaction. UTXOs represent the remaining balance a user has available for spending on a blockchain like Bitcoin.
Network participants responsible for validating transactions on top of a Proof of Stake blockchain and securing the network in the process. Validators play a role in reaching consensus on the most updated state of the blockchain. Validators usually lock their tokens as a deposit insurance (stake) in the blockchain as a way of winning the right to validate transactions on top of the network
A software that secures and conceals your private keys.
Refers to the return on investment generated from various crypto-related activities. Several different mechanisms enable users to earn additional crypto or tokens such as staking, lending, liquidity provision, and mining.
A cryptographic method that enables an individual to prove to a verifier that a particular asset or information exists without revealing details about the asset or information itself.
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