Blockchain

Blockchain Glossary of Terms: 128 Blockchain Terms and Their Definitions | Object Computing, Inc

Peer-to-Peer (P2P)

Interactions between actors without a central intermediary.

P2P networks allow each peer to connect directly to all other peers in the network. P2P payments transfer value directly between actors without a processor or bank intermediary.

Private Key

One part of a public/private key pair used for asymmetric encryption and decryption.

A private key can be used to decrypt a message that is symmetrically encrypted using the corresponding public key. Private keys are kept secret from anyone that isn’t the owner. Once a private key is made public, it is useless as a point of authentication.

PRIVATE KEY INFRASTRUCTURE (PKI)

A set of rules and policies used to manage identification through public-key encryption in a network.

Typically, a certificate authority is also involved to certify that a specific private key corresponds to a specific user or domain. Private keys are typically stored in secure, unique files just for that key, while public keys are broadcast to everyone.

Public/private key pairs are a stronger form of authentication than username/password combinations because the owner of a private key never needs to reveal the private key in order to prove that he or she holds it. A private key can be used to sign messages using symmetric cryptography and probably assert that they came from a specific user.

The principles underlying private key infrastructures are also applied for many zero-knowledge proof applications.

PROOF-OF-LIQUIDITY

A cryptographically signed assertion by a trusted third-party auditor that an actor holds the declared number of resources. Proof-of-Liquidity is used for cryptocurrencies that are pegged to a real-world security or commodity.

Proof-of-Stake (PoS)

A consensus mechanism in which the ability to produce a block is proportional to the amount of the blockchain’s native cryptocurrency an actor holds. The more cryptocurrency the actor holds, the more likely it becomes that he or she will be assigned as a block producer.

Proof-of-Stake, Delegated (DPoS)

A consensus mechanism built on the principles of Proof-of-Stake (PoS) in which stakeholders may nominate block producers.

Proof-of-Work (PoW)

A consensus mechanism in which actors race to solve a computationally difficult problem in order to win the ability to produce the next block in a blockchain.

Generally, the process involves a degree of randomness that makes it impossible to find a solution based upon previous inputs; the only information obtained from a solution is that the particular solution is valid. Multiple solutions may by valid for solving the problem, although the odds of finding two unique solutions is incredibly small.

While finding the solution to these problems requires significant processing time, proving that a solution is correct is trivial in nature. Whoever solves the problem in the context of a specific block’s data is allowed to submit that block to the blockchain. The network must then start the race over with the updated data.

Proof-of-Work’s security is rooted in the computational difficulty of the algorithm. Because it is an essentially random process to find a solution, the probability of solving the problem is related to the actor’s processing speed and the acceptance criteria for the solution (the difficulty). Stricter acceptance criteria reduce the speed at which the network finds a solution, and varying the acceptance criteria can allow a network to control the solution rate.

PROOF-OF-WORK, DELEGATED (DPOW)

In Delegated Proof-of-Work, the solution-finding process remains the same as in Proof-of-Work, but the actor that finds the solution may assign block-producing rights to another actor.

Public Key

A cryptographic equation or set of parameters that corresponds to a paired private key. A public key can be used to decrypt a message that is symmetrically encrypted using the corresponding private key.

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