Blockchain Basics
Blockchain Terminologies
Beginner LevelBy Pratima Sharma
Understanding blockchain requires getting familiar with the vocabulary that defines its technology, processes, and applications. Below are some of the most important terms explained in simple yet technical language:
Term | Definition | Example / Use Case |
---|---|---|
Block | A data container that holds a set of verified transactions along with a timestamp and cryptographic hash. | Bitcoin stores ~1MB of transaction data in each block. |
Blockchain | A decentralized ledger where blocks are linked together in chronological order, ensuring immutability and transparency. | Bitcoin, Ethereum blockchains. |
Node | Any computer connected to the blockchain that maintains a copy of the ledger and participates in validation. | Bitcoin full node vs. light node. |
Transaction | A digital record of transferring assets or executing instructions on the blockchain. | Sending 1 ETH from Alice to Bob. |
Consensus Mechanism | The method by which nodes agree on the validity of transactions and the state of the blockchain. | Proof of Work (Bitcoin), Proof of Stake (Ethereum 2.0). |
Mining | Process of validating transactions and adding new blocks by solving computational puzzles (in PoW). | Bitcoin miners solving SHA-256 puzzles. |
Hash Function | A cryptographic algorithm that converts input data into a fixed-length unique output. | Bitcoin uses SHA-256 hashing. |
Smart Contract | Self-executing code on the blockchain that runs automatically when conditions are met. | Ethereum smart contracts for DeFi lending. |
Wallet | A digital tool to store, send, and receive blockchain assets using cryptographic keys. | MetaMask wallet, Ledger hardware wallet. |
Public Key / Private Key | Pair of cryptographic keys used for blockchain transactions: public for receiving, private for signing. | Public: account address, Private: transaction signing. |
Decentralization | Distribution of control and decision-making across multiple participants instead of one central authority. | Bitcoin has no central owner. |
Ledger | The record of all verified transactions stored across nodes in the blockchain. | Ethereum ledger showing token balances. |
Gas Fee | Transaction fee paid to validators/miners for processing blockchain operations. | Ethereum gas fees for deploying smart contracts. |
Fork | A protocol change that creates divergence in the blockchain. | Hard Fork: Bitcoin Cash; Soft Fork: SegWit in Bitcoin. |
dApps (Decentralized Apps) | Applications running on blockchain without centralized servers. | Uniswap (DEX), OpenSea (NFT marketplace). |
Token | A digital asset created on top of an existing blockchain. | USDT (ERC-20 token on Ethereum). |
NFT (Non-Fungible Token) | A unique digital asset representing ownership of digital or physical items. | Beeple’s NFT artwork sold for $69M. |
DAO (Decentralized Autonomous Organization) | Blockchain-based organization governed by smart contracts and token holder votes. | MakerDAO governing the DAI stablecoin. |
51% Attack | When an entity controls >50% of network power and can manipulate transactions. | Bitcoin Gold suffered a 51% attack in 2018. |
Interoperability | Ability of different blockchains to communicate and exchange data. | Polkadot, Cosmos enable cross-chain transactions. |
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