GLOSSARY

A Brief Blockchain Glossary

This glossary explains key concepts in blockchain technology and crypto-assets, including tokens, stablecoins, decentralised finance (DeFi), smart contracts, staking and custody.

Blockchain

A shared ledger in which records are grouped into successive blocks and verified according to the network’s rules. Participants can trace the history of those records without relying on a single central database to maintain it.

Crypto Wallet

An application or device used to manage access to blockchain accounts, view assets and authorise transactions. Crypto-assets are recorded on the blockchain; the wallet manages the keys or other means of accessing them.

Blockchain Address

A public identifier to which crypto-assets can be sent on a particular network. Before making a transfer, check both the address and the network: an address with a compatible format does not necessarily mean the selected network is correct.

Private key

A secret cryptographic value used to sign actions from an account. Someone who gains control of a private key may also gain control of the associated assets. A private key must never be shared.

Public key

A cryptographic value associated with a private key that can be used to verify a digital signature. A public key can be shared, but cannot by itself be used to sign transactions.

Recovery Phrase (Seed Phrase)

A sequence of words that can restore access to one or more accounts in a compatible wallet. It must be protected like a private key: anyone who obtains it may gain access to the assets managed through it.

Custodial Storage

An arrangement in which a provider manages the means of accessing crypto-assets on a client’s behalf. The client’s rights, the procedures for authorising transactions and the provider’s responsibilities depend on the agreement and applicable rules.

Self-custody

An arrangement in which a user directly controls the means of accessing their crypto-assets. This provides direct control but also places responsibility for protecting the keys and recovery phrase on the user. Losing them may make the assets inaccessible.

Multisignature Wallet (Multisig Wallet)

A wallet in which certain actions require approval from more than one authorised participant. For example, a transaction may require two signatures out of a possible three. The specific rules depend on the wallet’s configuration.

Hot wallet

A wallet whose keys are managed on an internet-connected device or in an online environment. It is convenient for frequent transactions but has greater exposure to remote attacks than offline storage.

Cold wallet

A method of keeping private keys outside a continuously internet-connected environment. It reduces some risks of remote access but does not eliminate the risks of loss, theft or misuse of the device and keys.

Gas fee

A fee paid to process a transaction or operation on a network such as Ethereum. Its amount depends on the computational resources used and network conditions. It is separate from any fees charged by an application or service provider.

Transaction

An instruction submitted to a blockchain network, such as a transfer of assets or an interaction with a smart contract. It contains information needed to process the action and, when initiated by a user-controlled account, is authorised with a digital signature.

Node

A computer running software that participates in a blockchain network. Depending on its role, a node may receive and verify transactions, relay information or store blockchain data. Not every node stores the entire history.

Validator

A participant in a proof-of-stake network that performs tasks such as proposing or confirming blocks. Validators may receive rewards for these activities, but can also face penalties for failing to follow the network’s rules.

Staking

Participation in the operation and security of a proof-of-stake network by staking assets, either directly as a validator or through a staking service. Rewards are variable and depend on the network’s rules, fees and method of participation.

Slashing

A penalty in which a portion of a validator’s staked assets is taken for certain breaches of the network’s rules. Depending on the service’s terms, the risk can also affect people participating through a staking provider or pool.

Liquid staking

A form of staking in which a protocol issues a transferable token representing the participant’s staked position. The token can be used or traded while the underlying assets are staked, but this introduces risks associated with both the protocol and the token.

Digital signature

A cryptographic proof created using a private key. Other participants can verify it using the corresponding public key without learning the private key. Signing a transaction does not encrypt its contents.

Hash function

A cryptographic function that converts data into a fixed-length output called a hash. Even a small change to the input normally produces a very different output, making hashes useful for checking data integrity.

Block

A group of transactions or other records added to a blockchain. A block typically refers to an earlier block, linking the records into a sequence whose history is difficult to alter without detection.

Block time

The time between successive blocks on a blockchain. It varies by network and may also vary from one block to the next.

Ethereum Gas Limit

Gas measures the computational work required to process operations on Ethereum. A transaction has a gas limit set for that transaction; the network also has a block gas limit, which constrains the total gas that transactions in a block can consume.

Decentralization

The distribution of control and responsibilities among participants in a network. It can relate to validation, software development, governance or infrastructure, so it cannot be captured reliably by a single number.

Cryptocurrency

A digital asset used as a medium of exchange or as the native asset of a blockchain network. Ether (ETH) is the native asset of the Ethereum network; Ethereum itself is the network, not the cryptocurrency.

Crypto token

A crypto-asset issued using an existing blockchain, often through a smart contract. Tokens can serve different purposes, such as providing access to a service, representing governance rights or tracking the value of another asset.

Stablecoin

A crypto-asset designed to maintain its value relative to a reference asset, most often an official currency. The mechanism differs between stablecoins; a stable price, redemption and preservation of capital are not automatically guaranteed.

Depeg

A situation in which a stablecoin’s market price moves away from the value it is designed to track. The deviation may be temporary or prolonged and may result from liquidity problems, reserve concerns, loss of confidence in the issuer or a failure of the token’s mechanism.

DeFi Lending

Providing assets to a protocol that uses them according to its rules, for example to facilitate borrowing. The terms and potential yield depend on demand, the protocol’s rules and the risks involved. Supplying assets to a protocol does not make the yield fixed.

Collateral

An asset provided to secure a borrowing position. If its value falls or the debt rises beyond the permitted thresholds, the protocol may allow some or all of the collateral to be sold.

Liquidation

The automatic or protocol-authorised reduction of a borrowing position when its collateral no longer meets the required thresholds. Some of the collateral is typically used to repay the debt, and the borrower may incur additional costs.

Liquidity

The ability to buy or sell an asset within a reasonable time without causing a substantial change in its price. A high reported value of assets in a protocol does not necessarily mean that every position can be withdrawn immediately.

Decentralised Finance (DeFi)

A broad term for financial applications that use blockchains and smart contracts for activities such as trading, lending and providing liquidity. “Decentralised” does not mean that every application is free of intermediaries, administrative controls or other dependencies.

Impermanent Loss

The difference between the value of assets supplied to certain types of liquidity pools and the value the provider would have held by keeping those assets outside the pool. It arises when the assets’ relative prices change. Trading fees may offset some or all of the difference, but this is not guaranteed.

Annual Percentage Rate (APR)

An annualised rate of interest or return that does not include the effect of compounding. Where conditions are variable, the displayed APR can change and does not promise a future result.

Annual Percentage Yield (APY)

An annualised rate that includes the effect of compounding when earned amounts are added to the calculation base. If the underlying yield is variable, the displayed APY is a calculation based on assumptions, not a guarantee that the same result will be achieved over a year.

Mining

In a proof-of-work network, the process through which participants expend computational resources to propose new blocks. Successful miners may receive newly issued assets and transaction fees, according to the network’s rules.

Consensus mechanism

The rules and processes through which a blockchain network agrees on valid transactions and the state of its ledger, despite participants operating independently.

Proof-of-Work (PoW)

A consensus mechanism in which miners compete to solve a computationally demanding problem to propose a block. Bitcoin uses proof of work.

Proof-of-Stake (PoS)

A consensus mechanism in which validators stake assets and participate in proposing or confirming blocks under the network’s rules. Ethereum uses proof of stake.

Permissioned blockchain

A blockchain network in which participation requires authorisation. Permissions may govern who can read data, submit transactions or validate blocks; they need not apply equally to all three activities.

Distributed Ledger Technology (DLT)

A broad term for systems that maintain a shared record across multiple participants. Blockchain is one form of DLT, but distributed ledgers do not all organise data into a chain of blocks or operate without central governance.

Layer 1 (L1)

The base blockchain network on which transactions are settled and whose own rules provide its security and consensus. Bitcoin and Ethereum are examples of Layer 1 networks.

Layer 2

A system designed to process activity outside a base blockchain while relying on that blockchain for important aspects of settlement or security. Ethereum rollups and Bitcoin’s Lightning Network are examples. Polygon PoS is generally classified as a sidechain, not an Ethereum L2 that inherits Ethereum’s security.

Blob

A temporary data structure introduced on Ethereum through EIP-4844. Blobs give rollups a less expensive way to publish transaction data without storing that data permanently as ordinary Ethereum execution data.

Smart contract

Code deployed on a blockchain that executes according to its programmed rules when triggered by a transaction or another contract. Its behaviour depends on the code and its inputs; using a smart contract does not guarantee that the code is error-free or that funds are safe.

Fork

A change or divergence in a blockchain’s software rules. Whether it produces a lasting split into separate chains depends on the type of change and how network participants adopt it.

Soft Fork

A change to consensus rules that remains compatible with the previous rules in a specific way: blocks valid under the new, more restrictive rules can still be accepted by nodes using the old rules.

Hard Fork

A change to consensus rules that is incompatible with the previous rules. It can result in two continuing chains if groups of participants follow different rule sets, but a permanent split is not inevitable.

Initial Coin Offering (ICO)

A method of raising funds in which a project offers newly issued tokens to purchasers. The rights, risks and applicable rules depend on the structure of the particular offering.

Sharding

A general approach to scaling a distributed system by dividing work or data into parts. Ethereum previously considered splitting transaction execution across shard chains; its current scaling approach centres on rollups and additional data capacity for them.

Zero-knowledge proof (ZKP)

A cryptographic method by which one party can prove a specific statement to another without revealing the underlying information used to establish it. Whether an application also protects users’ transaction privacy depends on how it is designed.

PeerDAS

Peer Data Availability Sampling is an Ethereum mechanism that lets nodes check whether blob data is available by sampling small portions rather than downloading all of it. It was introduced with the Fusaka upgrade in December 2025

Airdrop

The distribution of tokens by a project to eligible addresses, often to reward previous activity or encourage participation. An airdrop is not necessarily open to everyone or free of conditions.

Airdrop farming

Activity undertaken mainly to meet the expected eligibility criteria for a future token distribution. Receiving an airdrop is uncertain, and the activity may involve transaction costs and other risks.

Prediction market

A market in which participants trade positions linked to the outcome of a future event. Prices may reflect participants’ collective expectations, but they are not a guarantee that an outcome will occur.

Total Value Locked (TVL)

A measure of the value of assets deposited in, or otherwise attributed to, a DeFi protocol under a particular data provider’s methodology. TVL can change with asset prices as well as deposits and withdrawals. A higher TVL does not establish that a protocol is safer.

Ethereum Virtual Machine (EVM)

The execution environment used to run smart-contract code on Ethereum. Ethereum nodes execute the same instructions to determine how valid transactions change the network’s state.

Oracle

A service that provides smart contracts with information from outside the blockchain, such as an asset price or the result of a real-world event. The reliability of that information depends on the oracle’s design and data sources.

Liquidity pool

A pool of assets made available through a DeFi protocol for activities such as token swaps or lending. Depending on the protocol, liquidity providers may receive fees or other rewards while taking risks that can include asset-price changes and smart-contract failures.

Slippage

The difference between the expected price of a trade and the price at which it is actually executed. Slippage may increase when liquidity is low, an order is large or the market moves quickly.

Automated Market Maker (AMM)

A system that uses predefined rules or formulas to quote prices and enable trades against a liquidity pool. It provides an alternative to matching buyers and sellers through a conventional order book.

Decentralized exchange (DEX)

A service that enables crypto-asset trading through blockchain-based protocols rather than a conventional centralised exchange. Its trading mechanism may use liquidity pools or an order-book design.

DEX aggregator

A service that compares or routes trades across multiple decentralised exchanges or liquidity sources. It may divide a trade into parts to seek better execution, although the final outcome still depends on liquidity, fees and price movement.

Bridge

A system for transferring assets or messages between blockchain networks. Different bridges use different mechanisms and trust assumptions; a transfer between networks may introduce additional technical and counterparty risks.

Bridge aggregator

A protocol that aggregates liquidity from decentralized exchanges (DEXs) on one blockchain network to seek the best price for a token swap. It may split large orders across several DEXs to reduce slippage and costs.

Cross-chain DEX aggregator

A service that combines token swapping and cross-chain transfer routes so a user can exchange an asset on one network for an asset on another. Completing the route may involve several trades, bridges and fees.

State channel

A method that lets participants conduct multiple interactions away from the main blockchain while using on-chain transactions to open, close or resolve disputes about the channel. Its security depends on the protocol’s rules and participants’ ability to respond when required.

Rollup

A scaling system that processes transactions outside Ethereum’s base layer and posts the information needed for settlement or verification to Ethereum. Major designs include optimistic and zero-knowledge rollups, with different verification methods.

NFT minting

The creation of a new non-fungible token and its recording on a blockchain. The token may contain or point to metadata stored elsewhere; minting an NFT does not, by itself, transfer copyright or mean that an entire artwork is stored on-chain.