Blockchain
An immutable, digital ledger that facilitates the process of recording transactions and tracking assets in a network; it is updated and shared across many computers in a network.
Cryptocurrency
A currency that is digital & decentralized.
Crypto removes the need for a trusted authority or "middle-man" to certify the validity of a transaction.
Can be used to buy & sell goods or as a long-term store of value.
Nodes/Miners
The “boots on the ground” of blockchain networks. They are the physical computer hardware that runs their respective platform’s blockchain software. Nodes serve several critical functions:
- They vote on and validate blocks of transactions
- They communicate with other nodes to agree on the state of the blockchain
- They store the history (state) of the blockchain as a universal source of truth
- They are the endpoints of the network that enable users to access and interact with applications built on the network.
Validators
Validators are the miners of a proof-of-stake network. Like miners, the validators’ role is to collect transactions into blocks to add to the blockchain. For adding valid blocks, validators are rewarded in proportion to the amount of currency they post (“stake”) as collateral.
Block
A block is like a folder that contains “files”. The contents of this folder are the transactions that occur over a given time interval (hashed to a cryptographic digest). Each block contains a reference linking it to the previous block — hence the term “blockchain”.
Blocks are added by the miners or validators on a cryptonetwork according to a consensus protocol; they check:
- to ensure balances are not spent twice;
- that each digital signature matches the public key of the message; and
- that the included reference matches the hash of the previously-added block.
Because blocks are made up of cryptographic digests, they cannot be changed after the fact without detection. So blocks are effectively immutable once added to the blockchain.
Coin
A store of digital value that lives on a blockchain.
Tokens
At the simplest level, tokens are just code that lives on a blockchain. But unlike other forms of money, they’re digitally native, programmable, and secured by one’s crypto wallet and private key. Cryptocurrencies are just one type of token.
- Fungible
- Fungible tokens will be used to exchange goods, store value, and make collective decisions.
- Non-fungible (NFT’s)
- NFTs (Non-Fungible Tokens) are tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate.
- NFT’s can only have one official owner at a time and they're secured by a blockchain (Ethereum & Solana are the most popular) – no one can modify the record of ownership or copy/paste a new NFT into existence.
Wallets & Keys
- Owning cryptocurrency requires using a crypto wallet to store your funds. A crypto wallet can be hosted online, or it can be software downloaded on your phone or computer or a specialized piece of hardware, among other options.
- Regardless of the crypto wallet type, they all store public and private keys which control the associated crypto and allow you to send and receive cryptocurrency. Transactions are then completed on the blockchain using the keys held in your wallet.
- Custodial vs. Non-custodial
- Custodial: using a custodial wallet means the keys in your crypto wallet are controlled by someone else. These wallets are typically exchange or web-based wallets that you can access through your phone or desktop.
- Non-custodial: A non-custodial crypto wallet enables you to control your private keys yourself, rather than delegating the job of securing the keys to a third party, like an exchange. This is considered more secure but requires you to take more responsibility.
Digital Signatures
Just like fingerprints, digital signatures are unique to a single person or entity. These signatures are mathematically derived from a special pair of numbers called a public/private key pair. A signature on a public key can only be created by the holder of the corresponding private key. Just like a real signature, a digital signature should convince the recipient that message is authentic.
Distributed Ledger
A database that uses independent computers (referred to as nodes) to record, share, and synchronize transactions.
The data is spread across multiple entities, locations, or institutions.
Unlike in a centralized database, there is no central administrator.
Exchange
Coinbase, Binance, and Gemini are a few examples of centralized crypto exchanges.
Places where users can "exchange" one type of cryptocurrency for another.
Need to buy, sell, or trade your Crypto? An exchange is the place to be.
Smart Contracts
Programs (chunks of code) stored on a blockchain that automatically execute when predetermined conditions are met. Smart contracts are typically used to automate execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. Smart contract applications include everything from games to logistics tools to DeFi dapps.
Gas Fees
Gas fees are essentially the transaction fee people pay to submit a transaction to the block. Gas fees go towards incentivizing miners to spend the money required, in the form of hardware and electricity, to solve the puzzle and create the block.
dApps
Decentralized Applications are digital applications or programs that exist and run on a blockchain or P2P network of computers instead of a single computer, and are outside the purview and control of a single authority.