Glossary

The blockchain ecosystem has developed an extensive lexicon reflecting its technological complexity and financial innovation. At its foundation lies distributed ledger technology (DLT), the system of recording transactions across multiple computers that powers all cryptocurrencies. Cryptography secures these networks through advanced mathematical protocols, with public-key encryption enabling secure wallet addresses (public keys) and their corresponding private keys that must be guarded at all costs. Consensus mechanisms like Proof-of-Work (PoW) and Proof-of-Stake (PoS) validate transactions – PoW using competitive mining and PoS through validator stakes. Digital assets divide into coins (native blockchain currencies like Bitcoin) and tokens (assets built atop existing chains through standards like Ethereum’s ERC-20 for fungible tokens and ERC-721 for NFTs). The ecosystem thrives on decentralized applications (dApps) running on smart contract platforms, while oracles bridge blockchains with external data. Financial activities occur through centralized exchanges (CEXs) like Binance or decentralized exchanges (DEXs) like Uniswap, with automated market makers (AMMs) algorithmically setting prices in liquidity pools. Investors track total value locked (TVL) in DeFi protocols and monitor gas fees – transaction costs on networks like Ethereum. Security concerns range from sybil attacks (network takeovers) to rug pulls (exit scams), countered by measures like multi-signature wallets and cold storage. Emerging concepts include zero-knowledge proofs (ZKPs) enhancing privacy and layer 2 solutions improving scalability – all contributing to Web3’s vision of a decentralized internet where users control digital identities and assets through self-custody principles.