Glossary: what you need to know about blockchain and cryptocurrencies

Blockchain
Block-code units that perform the function of storing data about all actions. The formed block is checked by the network participants and, if everyone agrees, the block joins the chain. After that, it is impossible to change the information presented in the block. Each block can store a variety of information, from a list of transactions to a complex algorithm of actions. The block must contain a header.

Blockchain is an ever-growing chain of such blocks. With its help, you can not only control what is happening, but also transfer ownership of assets in digital form. Also, blockchain is a tool with which you can store transaction data. The main advantages of blockchain are transparency of transactions and equal access to information of process participants. The blockchain is decentralized, which means that it is impossible to completely destroy the data — each participant of the chain network will have a copy of the committed transactions.

Cryptography-encryption and decryption of information.

Smart contracts (smart contracts)-automatically executed electronic Protocol that provides the terms of execution of the transaction in the blockchain by both parties. The system allows you to completely get rid of the participation of intermediaries who usually control the execution of the transaction. The document is stored and duplicated in a decentralized registry, which does not allow one of the parties to independently change the terms of the contract. It is impossible to circumvent the agreement — the contract is considered executed only in case of fulfillment of the pre-specified conditions.

Attestation Ledgers-distributed Ledger, which takes into account agreements, obligations and statements. They can be used to prove that the agreements have been implemented.

Fork - when one blockchain is divided into parts to create a new project. This new blockchain is created on the basis of fully copied source code, with some changes. In cryptocurrencies, Litecoin is A striking example of a fork. This cryptocurrency was created by changing the Bitcoin code.

Hard Fork the code change when the old version of the blocks does not recognize the new. Formed obtained by two completely different unrelated chain.

Soft Fork-change the Protocol, transactions in which only previously allowed blocks were invalid. Older versions can recognize new blocks.

cryptocurrency
Cryptocurrency-digital (virtual) money. Cryptocurrencies do not have any physical embodiment. It is not affected by the price of oil or the dollar and the Euro. Coin (coin) is an encrypted information that cannot be copied. "Produced" cryptocurrency directly on the Internet. At the same time, it is impossible to fake it: at the heart of such coins, encrypted information that can not be copied. One of the main features is anonymity. To know the owners cryptocell impossible. The money is stored on the electronic wallet. Cryptocurrencies do not belong to any of the existing banking systems, so formally they are not controlled by anyone. Because of this, some countries have imposed restrictions on the use and penalties for violators.

Bitcoin (designation on the exchange — BTC) - payment system and cryptocurrency (considered the first and today the most popular). Bitcoin blockchain is a list of system transactions available for viewing. Every transaction wallets in the network is recorded in the blocks. Due to the fact that the system is decentralized, it is not possible to hack it, in the development originally envisaged the possibility of a variety of attacks. The bitcoin address contains 27 to 34 Latin characters and starts with 1 or 3 digits. The issue of bitcoin is decentralized and does not have any regulatory authority. New bitcoins are put into circulation as a reward for the formation of new blocks. At the same time, the size of the extracted bitcoins is halved every 210,000 blocks. The peculiarity is that the production of bitcoin is limited to 21 million, and its rate is highly volatile (volatile): it can both rise and fall.

Satoshi — one hundred millionth of a bitcoin (0.00000001). The smallest BTC unit that can be written to the block chain. The name was given on behalf of the Creator of bitcoin.

Satoshi Nakamoto-under this name hides a programmer or a group of individuals who created bitcoin and its own reference implementation. Nakamoto developed the first block database and was the first to address the problem of double spending.

Litecoin (Litecoin, symbol on the exchange — LTC) is a cryptocurrency launched in 2011. In 2016, it was recognized as the second most important cryptocurrency. As in bitcoin, transactions are conducted at a specific address. This address consists of 33 characters and begins with the letter L. it, like bitcoin, you can sell and buy on exchanges, pay litecoin services and goods, as well as output through exchange offices.

Transaction blocks are generated about four times faster than in the Bitcoin network. The complexity of the encryption is changed every three days and a half. The volume of litecoin on the market is limited to 84 million.

Altcoin (altcoin) — short for "alternative to bitcoin". So briefly called other cryptocurrencies. Their essence in changing at least one parameter of operation of bitcoin (the transaction rate, the hashing algorithm or method of distribution of the coins). Most of the new altcoins don't live long.

Ethereum is the second generation cryptocurrency, the second most popular in the world. Her coin-Ether (ETH) is ether. They can trade, pay for services within the network, change and display in Fiat. Ethereum appeared in 2014. Unlike Bitcoin, which is only a means of payment and the final product, Ethereum is used as a platform for creating decentralized applications. Use as a currency is secondary. Another difference from Bitcoin is the use of smart contracts.

Vitalik Buterin is a canadian-Russian programmer who created Ethereum in 2014. That same year, he won the World Technology Award, beating Mark Zuckerberg.

Token is the internal currency of the project. It is a digital asset that the user buys for money or receives for performing certain actions on the platform. Tokens can be changed to another cryptocurrency or they can pay for services within the project. The main feature: the token works on someone else's blockchain platform, for example, on the Ethereum platform.

Coin is another coin that the company may issue to the ICO. They differ from the token in that they work on their own blockchain.

Ripple (XRP) — the internal currency of the Ripple system, the largest market capitalization is the third after Bitcoin and Ethereum. Ripple can be used as an intermediate currency and anti-spam protection. In accordance with the Protocol rules, 100 billion XRP were created. No further emissions are envisaged. The features include high transaction speed, zero Commission. You also do not need to confirm the operation. And transactions, if desired, can be canceled. You cannot buy anything on XRP. Basically, the system works only with banks. It is an economical and efficient way to transfer money anywhere in the world in seconds. To send currency within the system, first you need to exchange Fiat money for XRP and make a transaction. The recipient can exchange XRP for any currency convenient for him.

Fiat currency (Fiat currency) — any money that governments approve for payment transactions (ruble, dollar, Euro, etc.).

"Extraction" of money
Mining is a mathematical calculation process that checks transactions and adds them to the block chain.

Hashcash is a proof-of-work algorithm that requires a sample volume of data for computation and subsequent validation. The technology was invented in 1997 to reduce the number of spam and DDOS attacks. The cryptocurrency is used as one of the methods of data analysis.

Mempool / memory pool — list of transactions awaiting confirmation from a specific node. Before the transaction goes to the miners, it is distributed over the network nodes. When analyzing a pool, the node decides whether to forward the transaction further over the network or not. The network contains the same number of nodes and pools, but the state of each pool is unique because of the different hardware on which the nodes are located.

Hash (hash) is the basis of blockchain security. This is the result of the hash function (encoder). As a result of the function operation, one hash is obtained from the given data set. Herewith:

even if you have an encryption key, you will not be able to find out similar data for the function;
another set of data that creates the same hash is almost impossible to find.
Examples of algorithms: SHA 256 is a hash function developed by the US national security Agency. The calculation is on the processes between CPU and GPU. The more powerful the equipment, the more likely mined the crypt. Scrypt is another algorithm, an alternative proof of work system to SHA-256.

Consensus is the process of obtaining a General result by a group of participants. The objective of the consensus is used when approval of a transaction in decentralized systems.

Proof of Work (proof of work) — algorithm to protect decentralized systems from abuse. The purpose of proof of work is to verify that calculations are performed when a new block is created. Simply put, in order to get a block, the system needs to perform a long computational work with a small probability of success and a large number of errors.

Proof of Stake is an alternative method of protection, in which the probability of a participant forming a new block is directly proportional to the share of ownership of a certain cryptocurrency from its total. The more cryptocurrencies will be the user, the greater the likelihood of generating new blocks.

Transaction fees-fees that are charged for priority transactions. Transactions can take place without a fee, but priority transactions are calculated in blocks in the first place. The Commission is mandatory in most cryptocurrency systems, and in the bitcoin system, users can set its size.

Protocols — formal rules for the transfer and exchange of data.

Peer — to-peer (P2P) - direct interaction between the two parties without intermediaries in the peer-to-peer network.

ASIC mining (abbreviation "Specific integrated circuit application") - mining for industrial purposes, which became possible with the creation of specialized chips designed exclusively for the extraction of coins. Unlike Amateur mining, where the same functions are performed by a graphics card, ASIC-mining is more profitable due to higher hash calculation speed and lower energy consumption.

Double spend is an attack in which the same money can be used in transactions twice.
Type of attack:

Race-two transactions are created for the same money and sent to two different stores. The money will get the one whose transaction will be the first to fall into the chain.
Finney-to include repeated transactions in a block, the miner's participation is required. And good luck.
Vector76 is a combination of two previous attacks that allows you to spend money from a single confirmation transaction.
Brute force-an attacker sends a transaction to pay for goods / services, but at the same time continues to mine the branch of the chain of blocks (blockchain force). After N-confirmations the store sends him the goods. If by this point the attacker has received more than N blocks, he breaks the chain branch and receives the funds back. If he fails, the attack fails and the money goes to the store.
51% attack — the situation described in his article Satoshi Nakamoto. In this case, the attacker needs to control 51% of the generating capacity to take control of the network. In this case, the user will be able to cancel the old transactions and prohibit the inclusion of individual blocks in the system, but will not be able to redirect or intercept new transactions between users.
Address (addresses) — a string of dozens of Latin letters or symbols, sometimes a QR-code; it is used to accept and send transactions. If the user is able to protect your transactions under each need to create a new address.

Wallet — a system for storing transaction records in the network. The main task of the wallet is to store the access key to the user's address. The wallet can be computer, hardware, online or even paper.

Private key (security key) — in fact, this is the password that opens access to your crypto-wallet. The key is know only by its owner.

Fee-the fee that miners receive for their transactions. The more transactions, the higher the fee.

A business based on the blockchain
ICO / Crowdsale — the process of attracting capital to a new project. The system is similar to the issue of shares by the company during the IPO, only tokens or coins are issued instead of shares on the blockchain platform. Users can buy them, and then spend to pay for services/operations within the project or to exchange for another cryptocurrency. All the money raised at the ICO goes to the development of the project: product development, advertising, advertising and PR, etc.

preICO-a similar process of attracting money, but it can be called a test. Investors are attracted by bonuses, and the money raised goes to the future of ICO. As with the ICO, the circle of those who have the opportunity to buy tokens/coins is limited, and they can only buy a certain number of coins.

White list — "white list", where the startup includes verified project participants. They get the opportunity to buy tokens before other potential investors, during preICO.

Bounty - distribution of tokens for performing certain actions or for registering. It is not necessary to invest money. It was run projects during the ICO. This system helps to save money when you go to the ICO and increases the recognition of the project. Initially, bounty helped developers to attract a product tester to look for problems in the system. Bounty was a reward for the job. Now they charge, for example, for sharing links to the startup site.

White paper-the official document of the company with the full description of the product. Its task is to help the potential buyer to get acquainted with the project and motivate him to spend money on the project.

Roadshow is an advertising campaign launched by a startup. It can be carried out both for attracting investors and transactions (deal roadshow), and for PR to a wide audience, without the purpose to conclude an agreement (nondeal-readshow).