Blockchain Flashcards PDF

Blockchain: A digital ledger distributed across multiple computers that records all transactions securely and transparently. Double Spending Problem: The risk of spending the same digital currency twice. Blockchain prevents this by verifying every transaction. Each Bitcoin can be traced from its cre...

Blockchain: A digital ledger distributed across multiple computers that records all transactions securely and transparently. Double Spending Problem: The risk of spending the same digital currency twice. Blockchain prevents this by verifying every transaction. Each Bitcoin can be traced from its creation to its current owner Decentralization: Decision-making and data are spread across many nodes instead of being controlled by a central entity Ledger: A digital record-keeping system that keeps track of all transactions Pseudonymity: Using addresses or digital identities that are not directly tied to a real-world identity Private Keys: A secret code that allows you to access and control your digital assets. unlocks the ability to send money from that address. Think about it as a signature that verifies that you approved the transfer of funds Mempool: A temporary waiting area for unconfirmed transactions in the blockchain Blocks: Units of data containing multiple transactions, forming the blockchain. Mining: The process of validating and adding new transactions to the blockchain, often rewarded with coins. Validating: The act of checking if transactions are legitimate according to the blockchain’s rules. Consensus Mechanism: A method used by blockchain networks to agree on the state of the ledger. Examples include Proof of Work and Proof of Stake. “The set of ideas, protocols and incentives that enable a distributed set of nodes to agree on the state of a blockchain” Proof of Work: A consensus mechanism where miners solve complex puzzles to validate transactions and secure the network Proof of Stake: A consensus mechanism where validators are chosen based on the amount of coins they hold and are willing to "stake" as collateral. Staking: Locking up coins to help validate transactions in Proof of Stake networks, earning rewards. Bitcoin: The first and most popular cryptocurrency using blockchain technology. Based around facilitating payment in bitcoin Ethereum: A blockchain network known for enabling smart contracts and decentralized applications (DApps). NOT created for a P2P payment system, though it can be Ether: The native cryptocurrency of the Ethereum network. serves as the currency to complete any digital transaction on the Ethereum blockchain Coins: Digital assets that operate on their own blockchain (e.g., Bitcoin, Ether) Tokens: Digital assets created on existing blockchains (like Ethereum) but don't have their own network. NFTs (Non-Fungible Tokens):Unique digital assets representing ownership of specific items like art, music, etc Decentralized Applications (DApps): Applications built on blockchain networks that operate without central control Smart Contracts: Self-executing contracts with terms directly written into code on the blockchain. Gas Fees: price paid for each blockchain transaction to miners to incentivize maintaining the blockchain Tips: Additional fees users can pay to prioritize their transactions. Oracles: Services that provide real-world data to smart contracts on the blockchain. serves as the bridge between the blockchain and the real-world Oracles obtain data from reliable sources in the real world and bring that information onto the blockchain Forks: Updates or splits in a blockchain that result from changes in its protocol. They can be hard (major change) or soft (minor change). instances where one blockchain is divided into multiple blockchains due to a disagreement in consensus Burning: Permanently removing tokens from circulation to reduce supply. Minting: Creating new coins or tokens on the blockchain. Exchanges: Platforms where you can buy, sell, and trade cryptocurrencies. Coinbase: A popular centralized exchange where users can buy, sell, and trade cryptocurrencies. Uniswap: A decentralized exchange using an automated market maker model instead of traditional order books Liquidity Pool: A pool of funds that enables trading on decentralized exchanges by providing liquidity. Constant Product Rule: An algorithm used by Uniswap to set prices based on the size of liquidity pools. Slippage: The difference between the expected price of a trade and the actual price due to market changes or low liquidity. Stablecoins: Cryptocurrencies designed to maintain a stable value, usually pegged to a fiat currency like USD. Collateral: Assets that back or secure a loan or a stablecoin. Collateral Ratio and Collateral Factor: Ratios indicating how much collateral is needed to secure a loan. A higher ratio means more collateral Vaults: Secure storage for digital assets or a mechanism for issuing stablecoins backed by collateral. MakerDAO: A decentralized protocol behind DAI, a stablecoin pegged to the USD. USDC: A widely used stablecoin pegged to the USD DAI: A stablecoin created by MakerDAO, pegged to the USD, but backed by crypto collateral. Compound: A DeFi protocol that allows users to lend and borrow cryptocurrencies. Leverage: Using borrowed funds to increase potential returns on an investment. Perpetual Futures: A type of futures contract without an expiry date, allowing continuous trading based on an underlying asset dYdX: A decentralized exchange focusing on derivatives like perpetual futures and margin trading.