Simple Blockchain Terms – RealUseCase – Medium

This is my attempt to explain the basic meaning of common blockchain concepts using minimum jargon. My hope is that by understanding these terms, people will have the basic building blocks to begin understanding the significance of this disruptive technology.

Cryptography

• Mathematics used to send, receive, or reveal secret information
• Cryptography was used to communicate concealed messages between allies during World War II

Cryptocurrency

• A system of digital money that uses cryptography to set up its basic rules
• bitcoin is a cryptocurrency that was designed to have a fixed limited supply and no central authority

Blockchain

• A way to organize, create, and verify a shared record without a central authority. Each new block of information is verified by the participants then linked sequentially to the common record
• It is nearly impossible to change a single past transaction in a blockchain without obviously altering every block in the chain since that change

Token (Coin)

• Representation of value on the blockchain
• A token, also referred to as a coin, can be used for payments, to represent an asset like a house or gold, or shares in a network

Utility Token

• A token that is needed in order to access services on a system

Non-Fungible Token (NFT)

• A token that is unique and can not be broken up into smaller parts

Distributed Ledger Technology (DLT)

• An alternative term for blockchain that refers to a common ledger or database shared by a network of computers
• Distributed Ledger Technology is useful for supply chains in which different, sometimes competing, participants need to share and track the same information

Peer-to-Peer (P2P) Network

• A system of computers in which all the computers have equal access and rights, and directly communicate with each other
• Most blockchain and cryptocurrencies operate as peer-to-peer networks

Node

• A single computer in a peer-to-peer network
• The more nodes there are in the network, the more decentralized it is

Consensus

• Agreement of what is true by a minimum amount of nodes
• Without a central authority dictating what is true, participants must all use the same consensus rule set to determine what the state of the system is

Smart Contract

• Terms of an agreement that are written into a computer program and executed automatically when the conditions are met
• A vending machine can be controlled by a smart contract that automatically sends payments to suppliers and profits to the machine’s owners as soon as it sells a certain amount of goods

Economics

• The study of how limited resources are used

Game Theory

• The study of how incentives and punishments can influence behavior and choices

Cryptoeconomics

• The study of how economics and game theory can be applied within a blockchain network