An object containing an address, balance, nonce, and optional storage and code. An account can be a contract account or an externally owned account (EOA).
A bitcoin address looks like 1DSrfJdB2AnWaFNgSbv3MZC2m74996JafV. It consists of a string of letters and numbers. It’s really an encoded base58check version of a public key 160-bit hash. Just as you ask others to send an email to your email address, you would ask others to send you bitcoin to one of your bitcoin addresses.
Most generally, this represents an EOA or contract that can receive (destination address) or send (source address) transactions on the blockchain. More specifically, it is the rightmost 160 bits of a Keccak hash of an ECDSA public key.
Atomic Multipath Payments was an early suggestion for a multipart payment protocol which did not get implemented but introduced the idea of splitting a single payment into multiple parts and send them along potentially different paths.
In Solidity, +assert(false)+ compiles to 0xfe, an invalid opcode, which uses up all remaining gas and reverts all changes. When an +assert()+ statement fails, something very wrong and unexpected is happening, and you will need to fix your code. You should use +assert()+ to avoid conditions that should never, ever occur.
A positional number representation where the most significant digit is first. The opposite of little-endian, where the least significant digit is first.
Bitcoin Improvement Proposals. A set of proposals that members of the bitcoin community have submitted to improve bitcoin. For example, BIP-21 is a proposal to improve the bitcoin uniform resource identifier (URI) scheme.
Bitcoin Improvement Proposals. A set of proposals that members of the Bitcoin community have submitted to improve Bitcoin. For example, BIP-21 is a proposal to improve the Bitcoin uniform resource identifier (URI) scheme.
The name of the currency unit (the coin), the network, and the software.
A grouping of transactions, marked with a timestamp, and a fingerprint of the previous block. The block header is hashed to produce a proof of work, thereby validating the transactions. Valid blocks are added to the main blockchain by network consensus.
A collection of required information (a block header) about the comprised transactions, and a set of other block headers known as ommers. Blocks are added to the Ethereum network by miners.
An amount included in each new block as a reward by the network to the miner who found the Proof-of-Work solution. Approximately every four years, or more accurately every 210,000 blocks, the block reward is halved. It is currently 6.25 BTC per block.
A list of validated blocks, each linking to its predecessor all the way to the genesis block.
In Ethereum, a sequence of blocks validated by the proof-of-work system, each linking to its predecessor all the way to the genesis block. This varies from the Bitcoin protocol in that it does not have a block size limit; it instead uses varying gas limits.
BOLT, or Basis Of Lightning Technology, is the formal specification of the Lightning Network protocol. Unlike Bitcoin, which has a reference implementation that also serves as the protocol’s specification the various Lightning Network implementations follow BOLT so they can work with one another to form the same network. It is available at https://github.com/lightningnetwork/lightning-rfc.
An abstract instruction set designed for efficient execution by a software interpreter or a virtual machine. Unlike human-readable source code, bytecode is expressed in numeric format.
A reliable computer system must be able to cope with the failure of one or more of its components. A failed component may exhibit a type of behavior that is often overlooked–namely, sending conflicting information to different parts of the system. The problem of coping with this type of failure is expressed abstractly as the Byzantine Generals Problem.
The first of two hard forks for the Metropolis development stage. It included EIP-649: Metropolis Difficulty Bomb Delay and Block Reward Reduction, where the Ice Age (see below) was delayed by 1 year and the block reward was reduced from 5 to 3 ether.
Implementation of the Lightning Network Protocol by the Victoria based company https://blockstream.com[Blockstream]. It is written in C. Source code is at https://github.com/ElementsProject/lightning.
A block that a miner is still trying to mine. It is not yet a valid block, because it does not contain a valid Proof-of-Work.
Refers to keeping a reserve of bitcoin offline. Cold storage is achieved when Bitcoin private keys are created and stored in a secure offline environment. Cold storage is important for anyone with bitcoin holdings. Online computers are vulnerable to hackers and should not be used to store a significant amount of bitcoin.
Converting code written in a high-level programming language (e.g., Solidity) into a lower-level language (e.g., EVM bytecode).
A problem is considered to be computationally easy if there exists an algorithm that is able to compute the solution to the problem rather quickly.
A problem is considered to be computationally hard if no algorithm exists or is known that is able to compute the solution to the problem rather quickly.
Once a transaction is included in a block, it has one confirmation. As soon as another block is mined on the same blockchain, the transaction has two confirmations, and so on. Six or more confirmations is considered sufficient proof that a transaction cannot be reversed.
When numerous nodes—usually most nodes on the network—all have the same blocks in their locally validated best blockchain. Not to be confused with consensus rules.
The block validation rules that full nodes follow to stay in consensus with other nodes. Not to be confused with consensus.
The second part of the Metropolis stage, originally planned for mid-2018. Expected to include a switch to a hybrid proof-of-work/proof-of-stake consensus algorithm, among other changes.
An account containing code that executes whenever it receives a transaction from another account (EOA or contract).
A special transaction, with the “zero address” as the recipient, that is used to register a contract and record it on the Ethereum blockchain (see “zero address”).
Decentralized Autonomous Organization. A company or other organization that operates without hierarchical management. Also may refer to a contract named “The DAO” launched on April 30, 2016, which was then hacked in June 2016; this ultimately motivated a hard fork (codenamed DAO) at block #1,192,000, which reversed the hacked DAO contract and caused Ethereum and Ethereum Classic to split into two competing systems.
Decentralized application. At a minimum, it is a smart contract and a web user interface. More broadly, a DApp is a web application that is built on top of open, decentralized, peer-to-peer infrastructure services. In addition, many DApps include decentralized storage and/or a message protocol and platform.
Non-fungible token (NFT) standard introduced by the ERC721 proposal. Unlike ERC20 tokens, deeds prove ownership and are not interchangeable, though they are not recognized as legal documents in any jurisdiction—at least not currently (see also “NFT”).
A network-wide setting that controls how much computation is required to produce a proof of work.
A network-wide setting that controls how much computation is required to produce a proof of work.
A network-wide recalculation of the difficulty that occurs once every 2,016 blocks and considers the hashing power of the previous 2,016 blocks.
A difficulty at which all the computation in the network will find blocks approximately every 10 minutes.
A short string of data a user produces for a document using a private key such that anyone with the corresponding public key, the signature, and the document can verify that (1) the document was “signed” by the owner of that particular private key, and (2) the document was not changed after it was signed.
Double spending is the result of successfully spending some money more than once. Bitcoin protects against double-spending by verifying each transaction added to the block chain to ensure that the inputs for the transaction had not previously already been spent.
Elliptic Curve Digital Signature Algorithm or ECDSA is a cryptographic algorithm used by Bitcoin to ensure that funds can only be spent by their rightful owners.
Implementation of the Lightning Network Protocol by the Paris based company https://acinq.co[ACINQ]. It is written in Scala. Source code is at https://github.com/ACINQ/eclair.
Ethereum Improvement Proposal. A design document providing information to the Ethereum community, describing a proposed new feature or its processes or environment. For more information, see https://github.com/ethereum/EIPs (see also “ERC”).
An Electrum server is a bitcoin node with an additional interface (API) is often required by bitcoin wallets that do not run a full node. For example, these wallets check the status of specific transactions or broadcasts transactions to the mempool using Electrum server APIs. Some Lightning wallets also use Electrum servers, so even if they are non-custodial, they may compromise user sovereignty in that users trust the Electrum server to provide accurate information and privacy in that calls made to the Electrum server may reveal private information.
Ethereum Name Service. For more information, see https://github.com/ethereum/ens/.
In the context of cryptography, lack of predictability or level of randomness. When generating secret information, such as private keys, algorithms usually rely on a source of high entropy to ensure the output is unpredictable.
Externally Owned Account. An account created by or for human users of the Ethereum network.
Ethereum Request for Comments. A label given to some EIPs that attempt to define a specific standard of Ethereum usage.
A proof-of-work algorithm for Ethereum 1.0. For more information, see https://github.com/ethereum/wiki/wiki/Ethash.
The native cryptocurrency used by the Ethereum ecosystem, which covers gas costs when executing smart contracts. Its symbol is Ξ, the Greek uppercase Xi character.
Ethereum Virtual Machine. A stack-based virtual machine that executes bytecode. In Ethereum, the execution model specifies how the system state is altered given a series of bytecode instructions and a small tuple of environmental data. This is specified through a formal model of a virtual state machine.
A human-readable form of EVM bytecode.
As difficulty increased, miners often cycled through all 4 billion values of the nonce without finding a block. Because the coinbase script can store between 2 and 100 bytes of data, miners started using that space as extra nonce space, allowing them to explore a much larger range of block header values to find valid blocks.
A default function called in the absence of data or a declared function name.
A service that dispenses funds in the form of free test ether that can be used on a testnet.
The sender of a transaction often includes a fee to the network for processing the requested transaction. Most transactions require a minimum fee of 0.5 mBTC.
A denomination of ether. 1 finney = 10^15^ wei, 10^3^ finney = 1 ether.
Fork, also known as accidental fork, occurs when two or more blocks have the same block height, forking the block chain. Typically occurs when two or more miners find blocks at nearly the same time. Can also happen as part of an attack.
A change in protocol causing the creation of an alternative chain, or a temporal divergence in two potential block paths during mining.
The initial test development stage of Ethereum, which lasted from July 2015 to March 2016.
A personal Ethereum blockchain that you can use to run tests, execute commands, and inspect state while controlling how the chain operates.
A virtual fuel used in Ethereum to execute smart contracts. The EVM uses an accounting mechanism to measure the consumption of gas and limit the consumption of computing resources (see “Turing complete”).
The maximum amount of gas a transaction or block may consume.
A British programmer who is the cofounder and former CTO of Ethereum. In August 2014 he proposed Solidity, a contract-oriented programming language for writing smart contracts.
The first block in the blockchain, used to initialize the cryptocurrency.
The first block in a blockchain, used to initialize a particular network and its cryptocurrency.
Go Ethereum. One of the most prominent implementations of the Ethereum protocol, written in Go.
A halving event occurs when the block reward is cut in half, which happens approximately every four years (or precisely every 210,000 blocks). Bitcoin already had three halving events: in 2012 (from 50 to 25 BTC), in 2016 (from 25 to 12.5 BTC), and in 2020 (from 12.5 to 6.25 BTC).
A permanent divergence in the blockchain; also known as a hard-forking change. One commonly occurs when nonupgraded nodes can’t validate blocks created by upgraded nodes that follow newer consensus rules. Not to be confused with a fork, soft fork, software fork, or Git fork.
A hardware wallet is a special type of bitcoin wallet which stores the user’s private keys in a secure hardware device.
A digital fingerprint of some binary input.
A fixed-length fingerprint of variable-size input, produced by a hash function.
A hashlock is a type of encumbrance that restricts the spending of an output until a specified piece of data is publicly revealed. Hashlocks have the useful property that once any hashlock is opened publicly, any other hashlock secured using the same key can also be opened. This makes it possible to create multiple outputs that are all encumbered by the same hashlock and which all become spendable at the same time.
The Hierarchical Deterministic (HD) key creation and transfer protocol (BIP-32), which allows creating child keys from parent keys in a hierarchy.
Wallets using the Hierarchical Deterministic (HD Protocol) key creation and transfer protocol (BIP-32).
HD wallet seed or root seed is a potentially-short value used as a seed to generate the master private key and master chain code for an HD wallet.
The second development stage of Ethereum, launched in March 2016 at block #1,150,000.
A Hashed TimeLock Contract or HTLC is a class of payments that use hashlocks and timelocks to require that the receiver of a payment either acknowledge receiving the payment prior to a deadline by generating cryptographic proof of payment or forfeit the ability to claim the payment, returning it to the payer.
Inter-exchange Client Address Protocol. An Ethereum address encoding that is partly compatible with the International Bank Account Number (IBAN) encoding, offering a versatile, checksummed, and interoperable encoding for Ethereum addresses. ICAP addresses use a new IBAN pseudo-country code: XE, standing for “eXtended Ethereum,” as used in nonjurisdictional currencies (e.g., XBT, XRP, XCP).
A hard fork of Ethereum at block #200,000 to introduce an exponential difficulty increase (aka Difficulty Bomb), motivating a transition to proof of stake.
Integrated Development Environment. A user interface that typically combines a code editor, compiler, runtime, and debugger.
Once a contract’s (or library’s) code is deployed, it becomes immutable. Standard software development practices rely on being able to fix possible bugs and add new features, so this represents a challenge for smart contract development.
InterPlanetary File System. A protocol, network, and open source project designed to create a content-addressable, peer-to-peer method of storing and sharing hypermedia in a distributed filesystem.
Key Derivation Function. Also known as a “password stretching algorithm,” it is used by keystore formats to protect against brute-force, dictionary, and rainbow table attacks on passphrase encryption, by repeatedly hashing the passphrase.
A JSON-encoded file that contains a single (randomly generated) private key, encrypted by a passphrase for extra security.
Know your customer (KYC) is the process of a business, identifying and verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities.
LevelDB is an open source on-disk key-value store. LevelDB is a light-weight, single-purpose library for persistence with bindings to many platforms.
A special type of contract that has no payable functions, no fallback function, and no data storage. Therefore, it cannot receive or hold ether, or store data. A library serves as previously deployed code that other contracts can call for read-only computation.
A Lightning message is an encrypted data string that can be sent between two peers on the Lightning Network. Similar to other communication protocols Lightning messages consist of a header and a body. The header and the body have their own HMAC. This ensures that the headers of fixed length will also be encrypted and adversaries won’t be able to figure out what messages are being sent by inspecting the length.
Lightning Network is an implementation of Hashed Timelock Contracts (HTLCs) with bi-directional payment channels which allows payments to be securely routed across multiple peer-to-peer payment channels. This allows the formation of a network where any peer on the network can pay any other peer even if they don’t directly have a channel open between each other.
An Ethereum client that does not store a local copy of the blockchain, or validate blocks and transactions. It offers the functions of a wallet and can create and broadcast transactions.
Locktime, or more technically nLockTime, is the part of a transaction which indicates the earliest time or earliest block when that transaction may be added to the block chain.
The bitcoin Mempool (memory pool) is a collection of all transaction data in a block that have been verified by bitcoin nodes, but are not yet confirmed.
A data structure used in Ethereum to efficiently store key–value pairs.
The root node of a merkle tree, a descendant of all the hashed pairs in the tree. Block headers must include a valid merkle root descended from all transactions in that block.
A tree constructed by hashing paired data (the leaves), then pairing and hashing the results until a single hash remains, the merkle root. In Bitcoin, the leaves are almost always transactions from a single block.
An internal transaction that is never serialized and only sent within the EVM.
Mastering Ethereum Token. An ERC20 token used for demonstration in this book.
The third development stage of Ethereum, launched in October 2017.
The smallest unit of account on the Lightning Network. A millisatoshi is one hundred billionth of a single bitcoin. A millisatoshi is one thousandth of one Satoshi. Millisatoshis do not exist, nor can they be settled on the Bitcoin network.
A network node that finds valid proof of work for new blocks, by repeated hashing.
A network node that finds valid proof of work for new blocks, by repeated pass:[hashing].
The reward miners receive in return for the security provided by mining. Includes the new coins created with each new block, also known as a block reward or coinbase reward, and the transaction fees from all the transactions included in the block.
The first Ethereum-enabled browser, built by the Ethereum Foundation. It contains a browser-based wallet that was the first implementation of the ERC20 token standard (Fabian Vogelsteller, author of ERC20, was also the main developer of Mist). Mist was also the first wallet to introduce the camelCase checksum (EIP-55; see ). Mist runs a full node and offers a full DApp browser with support for Swarm-based storage and ENS addresses.
A multipart payment (which is often also refered to as multipath payment) is a method for payments where the sender can split the payment amount into multiple smaller parts and deliver them potentially along multiple potentially disjoint paths. As the MPP strategies do not require one to send the smaller splits along different paths we find the term multipart payment more accurate than multipath payment.
Multisignature (multisig) refers to requiring a minimum number (M) of keys (N) to authorize an M-of-N transaction.
A peer-to-peer network that propagates transactions and blocks to every bitcoin node on the network.
Referring to the Ethereum network, a peer-to-peer network that propagates transactions and blocks to every Ethereum node (network participant).
Neutrino is a later alternative to SPV that also verifies whether certain transactions are contained in a block without downloading the entire block. However, it offers a number of improvements over SPV: Neutrino does not transmit any information that would allow a third party to determine users’ identities, it facilitates the use of non-custodial apps, and it reduces the computational load on full nodes. The trade-off for these improvements is that Neutrino requires more data from the full node than SPV.
A non-fungible token (also known as a “deed”). This is a token standard introduced by the ERC721 proposal. NFTs can be tracked and traded, but each token is unique and distinct; they are not interchangeable like ERC20 tokens. NFTs can represent ownership of digital or physical assets.
A software client that participates in the network.
See Lightning Network Node
The “nonce” in a bitcoin block is a 32-bit (4-byte) field whose value is set so that the hash of the block will contain a run of leading zeros. The rest of the fields may not be changed, as they have a defined meaning.
In cryptography, a value that can only be used once. There are two types of nonce used in Ethereum: an account nonce is a transaction counter in each account, which is used to prevent replay attacks; a proof-of-work nonce is the random value in a block that was used to satisfy the proof of work.
An off-chain transaction is the movement of value outside of the block chain. While an on-chain transaction—usually referred to as simply __a transaction__—modifies the blockchain and depends on the blockchain to determine its validity an off-chain transaction relies on other methods to record and validate the transaction.
A child block of an ancestor that is not itself an ancestor. When a miner finds a valid block, another miner may have published a competing block which is added to the tip of the blockchain. Unlike with Bitcoin, orphaned blocks in Ethereum can be included by newer blocks as ommers and receive a partial block reward. The term “ommer” is the preferred gender-neutral term for the sibling of a parent block, but this is also sometimes referred to as an “uncle.”
Operation codes from the Bitcoin Script language which push data or perform functions within a pubkey script or signature script.
The Open Assets Protocol is a simple and powerful protocol built on top of the bitcoin blockchain. It allows issuance and transfer of user-created assets.
Blocks whose parent block has not been processed by the local node, so they can’t be fully validated yet. Not to be confused with stale block.
Transactions that can’t go into the pool due to one or more missing input transactions.
Output, transaction output, or TxOut is an output in a transaction which contains two fields: a value field for transferring zero or more satoshis and a pubkey script for indicating what conditions must be fulfilled for those satoshis to be further spent.
In the most specific sense, a paper wallet is a document containing all of the data necessary to generate any number of Bitcoin private keys, forming a wallet of keys. However, people often use the term to mean any way of storing bitcoin offline as a physical document. This second definition also includes paper keys and redeemable codes.
One of the most prominent interoperable implementations of the Ethereum client software.
A passphrase is an optional string created by the user that serves as an additional security factor protecting the seed, even when the seed is compromised by a thief. It can also be used as a form of plausible deniability, where a chosen passphrase leads to a wallet with a small amount of funds used to distract an attacker from the “real” wallet that contains the majority of funds.
A micropayment channel or payment channel is class of techniques designed to allow users to make multiple bitcoin transactions without committing all of the transactions to the bitcoin blockchain. In a typical payment channel, only two transactions are added to the block chain but an unlimited or nearly unlimited number of payments can be made between the participants.
Look at the Breach Remedy Transaction.
Pooled mining is a mining approach where multiple generating clients contribute to the generation of a block, and then split the block reward according the contributed processing power.
See “secret key.”
A method by which a cryptocurrency blockchain protocol aims to achieve distributed consensus. PoS asks users to prove ownership of a certain amount of cryptocurrency (their “stake” in the network) in order to be able to participate in the validation of transactions.
A piece of data (the proof) that requires significant computation to find. In Ethereum, miners must find a numeric solution to the Ethash algorithm that meets a network-wide difficulty target.
Proof-of-Stake (PoS) is a method by which a cryptocurrency blockchain network aims to achieve distributed consensus. Proof-of-Stake asks users to prove ownership of a certain amount of currency (their “stake” in the currency).
A piece of data that requires significant computation to find. In bitcoin, miners must find a numeric solution to the SHA256 algorithm that meets a network-wide target, the difficulty target.
A number, derived via a one-way function from a private key, which can be shared publicly and used by anyone to verify a digital signature made with the corresponding private key.
An attack that consists of an attacker contract calling a victim contract function in such a way that during execution the victim calls the attacker contract again, recursively. This can result, for example, in the theft of funds by skipping parts of the victim contract that update balances or count withdrawal amounts.
Data returned by an Ethereum client to represent the result of a particular transaction, including a hash of the transaction, its block number, the amount of gas used, and, in case of deployment of a smart contract, the address of the contract.
Relative Timelock is a kind of timelock that allows an input to specify the earliest time it can be added to a block based on how long ago (which is relative) the output referred by that input was included in a block. Such a feature is jointly achieved by nSequence field and CheckSequenceVerify opcode, which are introduced by BIP68/112/113.
An amount of ether included in each new block as a reward by the network to the miner who found the proof-of-work solution.
Recursive Length Prefix. An encoding standard designed by the Ethereum developers to encode and serialize objects (data structures) of arbitrary complexity and length.
A satoshi is the smallest denomination of bitcoin that can be recorded on the blockchain. It is the equivalent of 0.00000001 bitcoin and is named after the creator of Bitcoin, Satoshi Nakamoto.
Satoshi Nakamoto is the name used by the person or people who designed Bitcoin and created its original reference implementation, Bitcoin Core. As a part of the implementation, they also devised the first blockchain database. In the process they were the first to solve the double-spending problem for digital currency. Their real identity remains unknown.
Bitcoin uses a scripting system for transactions. Forth-like, Script is simple, stack-based, and processed from left to right. It is purposefully not Turing-complete, with no loops.
ScriptPubKey or pubkey script, is a script included in outputs which sets the conditions that must be fulfilled for those satoshis to be spent. Data for fulfilling the conditions can be provided in a signature script.
ScriptSig or signature script, is the data generated by a spender which is almost always used as variables to satisfy a pubkey script.
The secret number that allows Ethereum users to prove ownership of an account or contracts, by producing a digital signature (see “public key,” “address,” “ECDSA”).
Segregated Witness is an upgrade to the Bitcoin protocol in which signature (“witness”) data is separated from sender/receiver data to further optimize the structure of transactions. Segregated Witness was implemented as a soft fork; a change that technically makes Bitcoin’s protocol rules more restrictive.
The fourth and final development stage of Ethereum. Serenity does not yet have a planned release date.
A procedural (imperative) smart contract programming language with syntax similar to Python.
The Secure Hash Algorithm or SHA is a family of cryptographic hash functions published by the National Institute of Standards and Technology (NIST).