Blockchain Terms¶
Permissioned | Permission-less | Private | Public | Consortium/Hybrid
Consensus Mechanisms| PoW | PoS | PoET | BFT
Centralized | Distributed | Decentralized
Hyperledger | Ethereum | Bitcoin | Hash | Merkel
Tree/Root | P2P | 51% Attack | Blockchain 1.0-2.0-3.0
Sidechains | Oracle | Smart contract
Data storage |nonce | Coinbase transaction
on-chain vs off-chain | Immutable | DeFi
CBDC | Scalability | Forking | Open vs. Closed
Blockchain as a Service – BaaS | + more
51% Attack
51% Attack Explained: The Attack on A Blockchain A 51% attack on a blockchain refers to a miner or a group of miners trying to control more than 50% of a network’s mining power, computing power or hash rate. People in control of such mining power can block new transactions from taking place or being confirmed.
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BFT
Byzantine Fault Tolerance
Byzantine Fault Tolerance is the characteristic which defines a system that tolerates the class of failures that belong to the Byzantine Generals’ Problem. Byzantine Failure is the most difficult class of failure modes. It implies no restrictions, and makes no assumptions about the kind of behavior a node can have (e.g. a node can generate any kind of arbitrary data while posing as an honest actor)
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Bitcoin
Bitcoin is an innovative payment network and a new kind of money.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
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Blockchain 1.0-2.0-3.0
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Blockchain as a Service – BaaS
Blockchain as a service
Blockchain-as-a-Service (BaaS) allows businesses to use cloud-based solutions to build, host and use their own blockchain apps, smart contracts and functions on the blockchain infrastructure developed by a vendor. Just like the growing trend of using Software-as-a-service (SaaS)[1] where access to the software is provided on a subscription basis, BaaS provides a business with access to a blockchain network of its desired configuration without the business having to develop their own Blockchain and build in-house expertise on the subject.
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CBDC
Central Bank Digital Currency (CBDC) is a digital form of central bank money that offers central banks unique advantages at the retail and wholesale levels, including increased financial access for individual customers and a more efficient infrastructure for interbank settlements.
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Centralized
- CENTRALIZED SYSTEMS:
We start with centralized systems because they are the most intuitive and easy to understand and define.
Centralized systems are systems that use client/server architecture where one or more client nodes are directly connected to a central server. This is the most commonly used type of system in many organisations where client sends a request to a company server and receives the response.
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Coinbase transaction
A coinbase transaction is the first transaction in a block. It is a unique type of bitcoin transaction that can be created by a miner. The miners use it to collect the block reward for their work and any other transaction fees collected by the miner are also sent in this transaction.
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Consensus Mechanisms
What Is a Consensus Mechanism?
A consensus mechanism is a fault-tolerant mechanism that is used in computer and blockchain systems to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems, such as with cryptocurrencies. It is useful in record-keeping, among other things.
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Consortium/Hybrid
- What is a Сonsortium Blockchain: Simple Overview
A consortium blockchain is a relatively new way of using Satoshi’s blockchain technology for enterprises. If public blockchain is accessible for everyone and the private one usually services one enterprise, consortium blockchain is a hybrid of the previous two versions but closer to the private type of a distributed ledger.
The main idea behind it is to meet the challenges of a particular industry by scaling the effect of cooperation. This creates an advantageous network, which includes not only business allies but competitors too. This is what the research of Deloitte proves, showing that 74% of organizations are participating in a blockchain consortium with competitors or would like to join one.
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Data storage
Blockchain storage is a way in which the data is stored in a decentralized network, which gains access to the user’s hard disk to look for space to store the data. This decentralized storage structure was introduced as an alternative to centralized cloud storage.
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Decentralized
- Decentralization
Decentralization is the process of distributing and dispersing power away from a central authority. Most financial and governmental systems, which are currently in existence, are centralized, meaning that there is a single highest authority in charge of managing them, such as a central bank or state apparatus. There are several crucial disadvantages to this approach, stemming from the fact that any central authority also plays the role of a single point of failure in the system: any malfunction at the top of the hierarchy, whether unintentional or deliberate, inevitably has a negative effect on the entire system. Bitcoin was designed as a decentralized alternative to government money and therefore doesn’t have any single point of failure, making it more resilient, efficient and democratic. Its underlying technology, the Blockchain, is what allows for this decentralization, as it offers every single user an opportunity to become one of the network’s many payment processors. Since Bitcoin’s appearance, many other cryptocurrencies, or altcoins, have appeared, and most of the times they also use the Blockchain in order to achieve some degree of decentralization.
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DeFi
DeFi is short for “decentralized finance,” an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries.
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Distributed
- What Are Distributed blockchain?
A distributed ledger is a database that is consensually shared and synchronized across multiple sites, institutions, or geographies, accessible by multiple people. … Underlying distributed ledgers is the same technology that is used by blockchain, which is the technology that is used by bitcoin
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Ethereum
Ethereum is open access to digital money and data-friendly services for everyone – no matter your background or location. It’s a community-built technology behind the cryptocurrency Ether (ETH) and thousands of applications you can use today.
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Forking
In blockchain, a fork is defined variously as: “what happens when a blockchain diverges into two potential paths forward” “a change in protocol” or. a situation that “occurs when two or more blocks have the same block height”
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Hash
Key Takeaways A hash, like a nonce or a solution, is the backbone of the blockchain network. Hashes are of a fixed length since it makes it nearly impossible to guess the length of the hash if someone was trying to crack the blockchain. A hash is developed based on the information present in the block header.Jun 30, 2020
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Hyperledger
- What is Hyperledger?
Hyperledger is an open source community focused on developing a suite of stable frameworks, tools and libraries for enterprise-grade blockchain deployments. It serves as a neutral home for various distributed ledger frameworks including Hyperledger Fabric, Sawtooth, Indy, as well as tools like Hyperledger Caliper and libraries like Hyperledger Ursa.
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Immutable
Blockchains are designed to be immutable. Once a block is written to a blockchain, realistically, it cannot change. … In short, spreadsheets and databases are mutable. A blockchain is designed to be immutable; once a piece of information goes in there, you can depend on it never changing
Important Links
https://dzone.com/articles/a-guide-to-blockchain-immutability-and-chief-chall
https://bitsonblocks.net/2016/02/29/a-gentle-introduction-to-immutability-of-blockchains/
https://www.quora.com/What-makes-a-blockchain-network-immutable
https://hackernoon.com/why-blockchain-immutability-matters-8ce86603914e
Merkel Tree/Root
WHAT IS MERKLE TREE & MERKLE ROOT IN BLOCKCHAIN? POSTED ONBY TOSHENDRA KUMAR SHARMA We all know that people who are familiar with cryptography and cryptocurrency will have heard of Merkle trees before. Every non-leaf node has a label with the hash of the names of child nodes. In plain English, this means Merkle trees provide for efficient and secure verification of large amounts of data. It is a very intriguing piece of technology that will be beneficial to cryptocurrency in the long run as well.
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nonce
A nonce is an abbreviation for “number only used once,” which is a number added to a hashed—or encrypted—block in a blockchain that, when rehashed, meets the difficulty level restrictions. The nonce is the number that blockchain miners are solving for.
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on-chain vs off-chain
An on-chain transaction, simply called a transaction, occurs and is considered valid when the blockchain is modified to reflect the transaction on the public ledger. … In contrast, an off-chain transaction takes the value outside of the block chain. It can be executed using multiple methods
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Open vs. Closed
Public blockchains are decentralised, no one has control over the network, and they are secure in that the data can’t be changed once validated on the blockchain. On the other hand, a Private Blockchain is a permissioned blockchain. … The open versus closed brings in to consideration who’s able to read that data.
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Oracle
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P2P
What is peer-to-peer (P2P)? In computer science, a peer-to-peer (P2P) network consists of a group of devices that collectively store and share files. Each participant (node) acts as an individual peer. Typically, all nodes have equal power and perform the same tasks.
In financial technology, the term peer-to-peer usually refers to the exchange of cryptocurrencies or digital assets via a distributed network. A P2P platform allows buyers and sellers to execute trades without the need for intermediaries. In some cases, websites may also provide a P2P environment that connects lenders and borrowers.
P2P architecture can be suitable for various use cases, but it became particularly popular in the 1990s when the first file-sharing programs were created. Today, P2P networks are at the core of most cryptocurrencies, making up a great portion of the blockchain industry. However, they are also leveraged in other distributed computing applications, including web search engines, streaming platforms, online marketplaces, and the InterPlanetary File System (IPFS) web protocol.
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Permission-less
What are Permissionless Blockchains?
Permissionless blockchains are blockchains that require no permission to join and interact with. They are also known as public blockchains. Most of the time, permissionless blockchain is ideal for running and managing digital currencies.
In a permissionless blockchain, a user can create a personal address and then interact with the network by either helping the network to validate transactions or simply send transactions to another user on the network.
Important Links
https://101blockchains.com/permissioned-vs-permissionless-blockchains/
https://blockonomi.com/permissioned-vs-permissionless-blockchains/
https://medium.com/@dustindreifuerst/permissioned-vs-permissionless-blockchains-acb8661ee095
https://akeo.tech/blog/blockchain-and-dlt/permissionless-permissioned-blockchain/
Permissioned
What are the Permissioned Blockchains?
Permissioned blockchains can be seen as an additional blockchain security system, as they maintain an access control layer to allow certain actions to be performed only by certain identifiable participants
KEY TAKEAWAYS
Permissioned blockchains provide an additional level of security over typical blockchain systems like Bitcoin, as they require an access control layer.
These blockchains are favored by individuals who require security, identity, and role definition within the blockchain.
Permissioned blockchains are not as common as other public blockchains like Bitcoin and other cryptocurrencies.
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PoET
Proof of Elapsed Time
Proof of Elapsed Time (PoET) is an efficient alternative to proof of work (PoW). In the case of PoW, an expensive computation is required to create a candidate block and propagate the message to other nodes in the network. It is expensive because it incurs a cost for the electricity utilized by the special mining hardware (designed specifically to calculate the hash-value) in order to mine the next block in the blockchain. The node that is able to find the hash-value first becomes the new leader and gets a reward in the form of Bitcoins.
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PoS
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PoW
What is Proof-of-Work?
Proof-of-Work, or PoW, is the original consensus algorithm in a Blockchain network.
In Blockchain, this algorithm is used to confirm transactions and produce new blocks to the chain. With PoW, miners compete against each other to complete transactions on the network and get rewarded
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Private
Private blockchains
Lets the middleman back in, to a certain extent.
Pros: allows for greater efficiency and transactions are completed faster.
Cons: does not offer the same decentralized security as its public counterpart. Missing the incentive layers inherent to blockchain technology with inflexible architecture.
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Public
Understanding public blockchain
A public blockchain has an open network. The information is available in a public domain. Due to its permissionless nature, any party can view, read, and write data on the blockchain and the data is accessible to all. No particular participant has control over the data in a public blockchain. Public blockchains are also decentralized and immutable
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Scalability
Blockchain scalability Note that the word “scalable” is a comparative term in blockchain. When a blockchain system is called scalable, it indicates that the system achieves a higher TPS than some existing systems through modifying its consensus mechanism and/or adjusting some system parameter(s).
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Sidechains
Sidechains are emerging mechanisms that allow tokens and other digital assets from one blockchain to be securely used in a separate blockchain and then be moved back to the original blockchain if needed. Sidechain functionality holds tremendous potential to enhance the capabilities of existing blockchains.
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Smart contract
A smart contract is a self-enforcing piece of so ware that is managed by a P2P network of computers. Smart contracts are e cient rights management tools that provide a coordination and enforcement fra- mework for agreements between network participants, without the need of traditional legal contracts. They can be used to formalize simple agreements between two parties, the bylaws of an organiza- tion, or to create tokens.
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