Blockchain Journal Glossary

Confused about all the blockchain terminology and phraseology? So were we. Especially given how there are so many different definitions for the same things. We at Blockchain Journal don’t necessarily want to add to the confusion with yet another blockchain glossary (yes, there are many). However, any productive multi-stakeholder conversation about blockchain in the enterprise must be rooted in a common blockchain vernacular. And the same is true of all of our content. Therefore, over time, the terms in our glossary will not just be about simple definitions to which you and your stakeholders and our content can align. For each blockchain term and phrase in our glossary, we will also help you to understand the enterprise relevance.

What is the definition of an airdrop?An airdrop is the act of distributing tokens (fungible or non-fungible) to numerous wallet addresses. Airdrops or “drops” are often used as a marketing tool for cryptocurrency start-ups. What are examples of fungible and non-fungible token airdrops?There are some subtle differences between the typical drop of actual cryptocurrency (fungible tokens) and non-fungible tokens. In the case of a cryptocurrency airdrop, a project may announce that it is offering fre...

Community Integrated Development Environments (IDE)NFT Customer Engagement

Algorithm

What is the definition of an algorithm?An algorithm is a sequence of instructions or steps that can help ensure that a specific task or computation is completed. Additionally, algorithms also can deterministically achieve predictable results given the same inputs and/or conditions at the start of the sequence. Algorithms don’t need to be digital or computerized algorithms. For example, some or all of a math proof on a blackboard can be an algorithm. But, when an algorithm is represented as progr...

Algorithmic Stablecoin

What is the definition of an algorithmic stablecoin?In order to understand how algorithmic stablecoins are supposed to work, it’s important to know the definition and role of a stablecoin. Briefly, a stablecoin is a type of cryptocurrency that remains stable in its value relative to a fiat currency such as the US dollar. The value of one unit of stablecoin is therefore said to be “pegged” to one unit of the associated fiat currency. As examples, each unit of the stablecoins USD Coin (USDC) and T...

Stablecoins Tokenomics

Altcoin

What is the definition of an altcoin?Altcoin (alternative coin) is a term that’s often used to describe any cryptocurrency coin that is not Bitcoin. The term also includes the projects and distributed ledgers on which the so-called altcoins are based. For example, Solana, the public distributed ledger on which SOL (the native cryptocurrency of Solana) is based, is sometimes referred to as an altcoin network, altcoin blockchain or altcoin ledger. Or, in an especially lazy reference, even though S...

Decentralized Finance (DeFi)

Annual Percentage Yield (APY)

What is the definition of Annual Percentage Yield?Annual Percentage Yield (APY) refers to the annualized rate of return from a financial investment — usually into something like a savings account (or a similar financial instrument that resembles a savings account such a cryptocurrency account) — that grows through some form of compounding. What is a real-life example of Annual Percentage Yield?For example, with a savings account, after an initial deposit earns its first round of interest, the ne...

Decentralized Finance (DeFi)

Anonymity Enhanced Cryptocurrency (AEC)

The key to understanding an Anonymity Enhanced Coin (AEC) lies in the varying degrees to which different cryptocurrencies (including standard cryptocurrencies like Bitcoin) offer anonymity and transaction confidentiality to the parties that are involved in a transaction. When transactions involve a cryptocurrency like Bitcoin, the parties involved in those transactions are psuedonymously represented through the public keys that are associated with their Bitcoin accounts. In contrast to the recor...

Anti-Money Laundering (AML)

Anti-Money Laundering (AML) is a set of policies, regulations and laws to prevent concealing crimes that produce monetary gain. These crimes include tax evasion, drug and human trafficking, fraud, selling stolen goods, terrorism and corruption.The international AML watchdog, Financial Action Task Force (FATF), sets standards to prevent these illegal activities, and more than 200 countries and jurisdictions have committed to implementing them.In the US, laws have been implemented to combat money ...

Regulation Legal

Blockchain

In a nutshell, a blockchain is a database that technologically consists of a chain of digital blocks with each block constituting one of the multiple sequentially ordered chain links that make up a digital chain — a so-called “blockchain.” Each of these blocks (or links) contains an immutable record of one or more transactions (in some cases, thousands of transactions). Although a gross oversimplification of how blockchain technology works, blockchains involve a continually repeating process whe...

Burn

When cryptocurrency is burned, it means that a certain amount of tokens have been removed from the total number in circulation. There are different ways that tokens can end up getting burned. For example, on some ledgers, as transactions go through the consensus algorithm, a transaction fee is paid and, subsequently, a specific fraction of that transaction fee is burned. Ethereum is one ledger that works this way. However, not all ledgers burn tokens as a part of the validation process. Algorith...

Candidate Block

A candidate block is one of multiple blocks that have been prepared with the intention of being added as the newest block onto a blockchain. Not all candidate blocks make it through the process, which is why they are initially considered to be candidates. For a public distributed ledger based on blockchain technology, the ledger itself consists of a continuously growing chain of chronologically ordered digital blocks (basically, the “links” in the chain), each of which is essentially a batch of ...

Mining

Central Bank Digital Currency (CBDC)

A Central Bank Digital Currency (CBDC) is a digital currency that is issued by a central, nation-state-backed bank. The US Federal Reserve, the European Central Bank and the Bank of England — all of which are yet to authorize a CBDC — are examples of central banks. For all intents and purposes, a nation’s CBDC should be considered the digital equivalent of the nation’s fiat currency. For that reason, the value of one unit of a nation’s digital currency (one token or coin) will likely be pegged t...

Centralized Exchange (CEX)

Coin-Operated

In the digital world, “coin-operated” is an on-demand business and payment model that resembles coin-operated use cases in the physical world such as laundromats and game arcades. Throughout the latter half of the 20th century and well into 2000s, many laundromats and arcades worked on a pay-as-you-go basis where the customer would deposit coins into the machines for a single cycle of usage (i.e., one laundry cycle or a single session with the game). In some cases, the machines only accepted spe...

Commodity

A commodity is a basic, fungible good used in commerce. Fungibility denotes that one unit of the commodity is equally exchangeable for another unit of the same commodity, such as one barrel of West Texas crude oil being equivalent to any other. Often, commodities are inputs for other goods or services, as when lumber becomes an input for homes.“Soft” commodities tend to be relevant in agriculture, where commodities are grown (e.g., soy beans, livestock, coffee and corn). “Hard” commodities are g...

Regulation Legal

Custodial Wallet

A custodial wallet is used for the digital safekeeping of fiat and cryptocurrencies; a theoretically trusted third-party (custodian) is empowered with their own private key to manage and secure the wallet on behalf of the wallet holder. In many ways, a custodial wallet in the blockchain industry is similar to how an airline handles the custody of a traveler’s frequent flier miles. The traveler never actually takes possession of the miles as though they were a currency. Instead, the airline holds...

Security

Digital Transformation

Thanks to the way many technology marketing outfits look to hijack the latest tech trends regardless of whether those trends apply to their wares or not, the meaning of “digital transformation” has become perverted to the point that it means everything to everyone (which often results in it meaning nothing to anyone). However, digital transformation is an important big-picture objective for enterprises and businesses looking to use digital technology — everything from smartphone apps to low-code...

DLT Strategy

Distributed Ledger Account

A distributed ledger account, often referred to as an “account” in Blockchain Journal’s articles, pertains to the provision that all distributed ledgers make it possible for their users to have an account in which the current balance of their funds is stored (usually in the form of a cryptocurrency and often the cryptocurrency that’s native to the chain in question). Distributed ledger accounts are akin to bank accounts in that the same entity that maintains a ledger of your account also maintai...

Distributed Ledger Technology (DLT)

Distributed Ledger Technology (DLT) and its relevance to businesses and enterprises as a platform for digital transformation, business innovation and industry disruption are what Blockchain Journal is all about. The idea of a ledger is probably as old as any form of recordkeeping known to mankind. Throughout history, ledgers have been used to make not just a record of transactions; they also keep a record of the order of those transactions. If you think about it, we can make a record of each dep...

Ethereum Virtual Machine (EVM)

An Ethereum Virtual Machine (EVM) is used to turn blockchains and other distributed ledgers into application platforms that are capable of hosting custom business logic and supporting organizational strategies for digital transformation, innovation and industry disruption. When businesses, startups, decentralized autonomous organizations (DAOs) and individual developers use Distributed Ledger Technology (DLT) to host their custom-developed applications (known as smart contracts), a virtual machi...

Exchange of Value

The phrase “exchange of value” can technically be referred to as a trade that encompasses servitization and/or any trade in which services or products are traded (exchanged) for digital currency. However, in the blockchain world, exchange of value is more idiomatically used to distinguish Digital Ledger Technology (DLT) operations that are designed to transfer cryptocurrency (between an originating account and target account) from DLT operations that are intended for the business outcome to be l...

Fiat Currency

Unlike other terms and phrases which are unique to the blockchain industry, fiat currency (aka “fiat” or “fiat money”) is a phrase more widely used across the financial industry (and even beyond) to refer to government-backed national currencies such as the US dollar or the British pound. Even so, the concept of fiat currency is deeply intertwined into multiple aspects of distributed ledger technology (DLT) and cryptocurrency usage. One of those aspects has to do with how individuals and organiz...

Total Cost of Ownership Regulation

Fungible Token

Fungibility denotes that one unit of a commodity is equally exchangeable for another unit of the same commodity, such as one barrel of West Texas crude oil being equivalent to any other.Therefore, a fungible token is a physical currency or digital asset that is always equal in value and is mutually interchangeable with assets of the same type. For example, a Bitcoin is always valued the same as another Bitcoin.

Regulation Legal

Governance Token

Governance tokens are a special utility token that can theoretically be used to help democratize decision making when it comes to the ongoing management of a public Distributed Ledger Technology (DLT), decentralized apps (dApp) and other decentralized protocols, or organizations that depend on them (e.g., a decentralized exchange, aka DEX or decentralized autonomous organization, aka DAO). In the spirit of the decentralized ethos behind public DLT, the idea behind governance tokens is to disinte...

Howey Test

In the context of potential government regulation of cryptocurrency and blockchain technology, the billion-dollar question (sometimes literally) about any cryptocurrency coin or token is whether it passes the Howey Test. Given the emerging state of US cryptocurrency regulation, the answer at the time this glossary entry was published has not been officially resolved for all coins and tokens. However, unofficially, the current answer is “it depends.” Regulatory uncertainty, both in the US and int...

Regulation

Originating Account

To help define this term, we strongly suggest that you read Blockchain Journal’s definition of distributed ledger account. The phrase “originating account” is a Blockchain Journal standard phrase that’s used to distinguish between: (a) distributed ledger accounts that start the transaction process by submitting a transaction, and (b) the target accounts that are the object of the transaction’s final outcomes.

Protocol

What is the definition of the word “protocol” as used in the blockchain industry?The blockchain industry’s definition for the word “protocol” is essentially any distributed ledger-based service, including the distributed ledgers themselves, that can receive and respond to programmatic requests. For example, if a public distributed ledger can programmatically (via software as opposed to a user interface for humans) receive a request (and respond to it accordingly) to transfer cryptocurrency from ...

Security

There are multiple unrelated definitions for the term “security,” each of which is relevant to the blockchain industry. This glossary page is intended to disambiguate the term into its multiple contexts. Currently, the two disambiguations of the term “security” in the Blockchain Journal glossary are:Security (finance): This involves the definition of “security” as it applies to investment-related activities or the possible treatment of cryptocurrencies as securities. Security (protection): This ...

Security Regulation Legal Compliance Exploits

Security (finance)

Securities are financial assets that have monetary value and can be bought, sold or traded. Types of securities include equity securities, debt securities, derivative securities and hybrid securities.Typically, an equity security represents some amount of ownership in a company, usually as stocks or shares. Equity securities can be preferred stock, common stock and convertible stock.A debt security represents a loan made by an investor to a borrower. Debt securities are typically issued by gover...

Regulation Legal Compliance

Security (protection)

Security (protection) is one of Blockchain Journal’s two disambiguated versions of the term “security.” The other is security (finance), which relates to the treatment of cryptocurrency assets as securities from an investment and regulatory point of view. In a protection context, “security” refers to all of the technologies, best practices, precautions and measures that play a role in helping to secure Distributed Ledger Technology (DLT). These include but are not limited to:The cryptographic te...

Security Compliance Exploits

Smart Contract

What is the definition of a smart contract?When software developers use distributed ledgers to host custom-developed business logic and applications, those applications are often referred to as smart contracts. The phrase “smart contract” may semantically sound narrow in terms of possible use cases. However, the workflows and business processes to which smart contracts are suited are only limited by the innovative imaginations of developers and others who understand the unique value propositions...

Smart Contracts

Source Code

When it comes to Distributed Ledger Technology (DLT), there are four forms of source code (often referred to as simply “source”) that get discussed. The first of these forms involves the source code (the code that was programmed by software developers) used to automate the business processes and algorithms behind the operation of a given chain (e.g., Bitcoin, Ethereum, etc.). It’s important to note that few if any chains rely on the same exact source code for their operation. While some of the s...

Spot Price

Regardless of of the financial instrument that’s being traded (stocks, commodities, bonds, cryptocurrencies, etc.), the spot price (aka “cash price”) is the current momentary price at which the buyers and sellers are transacting with one another during a spot trade. At any given moment, the spot price is also regarded as the going rate or market price for an asset. It’s the price you’ll pay for the asset if you want it now (or the price you’ll sell the asset for if you want to sell it now).When ...

Spot Trading

Regardless of the financial instrument that’s being traded (stocks, commodities, bonds, cryptocurrencies, etc.), a spot trade happens when a seller offers an asset for a certain price that buyers are prepared to pay; the resulting transactions are settled (the seller receives payment and the asset is delivered to the buyer) immediately or “on the spot.” A spot trade can also happen in the reverse context where buyers bid for certain assets at certain prices, and holders of those assets accept th...

Decentralized Exchange (DEX)Centralized Exchange (CEX)

Target Account

Before getting to understand the definition of this term, we strongly suggest that you read Blockchain Journal’s definition of distributed ledger account. Target account is a Blockchain Journal standard phrase used to distinguish between: (a) originating accounts (the distributed ledger accounts that start the transaction process by submitting a transaction), and (b) the target accounts that are the object of the transaction’s final outcomes.

Transaction Fee

Most public distributed ledgers involve a novel financial model that doesn’t involve pre-arranged software licenses or contracts, financial obligations to the end user, and monthly or annual bills or subscription fees. Instead, public distributed ledgers operate on a purely on-demand pay-as-you go basis, otherwise known as a coin-operated business model. Charges for using public Distributed Ledger Technology (DLT) are levied in terms of transaction fees and, in the case of smart contract-enabled...

Total Cost of Ownership

Trustless

“Trustless” is a term associated with Distributed Ledger Technology (DLT) such as blockchain-based networks because participants involved do not need the support and systems of a "trusted" central party, such as a bank, broker, lawyer or other centralized authority to facilitate the validation, execution and journaling of transactions between multiple parties. Instead, those parties rely on DLT and its algorithms to take the place of a central party. Recognizing the absence of a central trusted ...

Utility Token

Utility tokens grant holders rights to perform specific actions or claim specific benefits within a given ecosystem. For example, Filecoin’s token (FIL) is a utility token that enables holders to use the Filecoin decentralized storage platform for storing files that may contain information or data that supplements certain transactions as those transactions are immutably recorded to a distributed ledger. One possible use case for a scenario like this is when a transaction is recorded to a distrib...

Virtual Machine (VM)

A virtual machine (VM) is a software representation of a computer and VM technology that’s significantly relevant to Distributed Ledger Technology (DLT) as a platform for digital transformation, business innovation and industry disruption. A VM is able to run software that is completely independent from the underlying machine, aka “the host,” that it runs on. For instance, even though Microsoft’s Windows operating system and the applications that are written for it are technically incompatible w...

Smart Contracts

Volatility

Volatility in finance describes when a market, security or currency (fiat or cryptocurrency) experience fluctuations in value. These fluctuations could involve both sharply rising or sharply falling values over some period of time. Unlike with a fiat currency such as the US dollar, which remains relatively stable over time, the value of most cryptocurrencies constantly changes. In fact, relative to a given fiat currency, the values of many cryptocurrencies change every minute of every hour of e...

Wholecoiner

Wholecoiner refers to a person who possesses one whole Bitcoin (BTC). Of course, the value of that single BTC in terms of US dollars changes every second of every day (see the definition of volatility for more on that). At its height (November 1, 2021), 1 BTC was worth US$69,025.05. However, by November 20, 2022 (just over one year later), the value of 1 BTC had dropped to US$15,468.58. By the time Bitcoin is fully mined, reaching a theoretical maximum circulating supply of 21 million BTC, a who...