Glossary
Hedera & Web3 Glossary - Comprehensive Guide for Developers
This glossary intends to provide a reference for Hedera and general web3 key terms. The purpose is to assist developers, particularly those new to the field or non-specialists, in understanding essential definitions related to various aspects of this technology. It covers basic to complex concepts and essential development tools and is an accessible resource for developers.
A 51% attack, also known as a majority or double-spend attack, is a recognized threat in distributed networks like blockchains. This occurs when a miner or group gains control of more than half the network's mining power, thereby gaining the ability to disrupt transactions. While this is a widely acknowledged issue in the blockchain community, all DLTs are susceptible to 1/3 attacks when an attacker can establish a firewall.
A 1/3 attack is a less discussed threat in distributed networks such as Hedera, which occurs when over 1/3 of the network's nodes are compromised by bad actors using malicious code. This can potentially halt the acceptance of the correct block, making it impossible for others to identify the longest, correct chain and thereby preventing the processing and recording of valid transactions.
📹 For a more comprehensive breakdown of these attacks, check out Dr. Leemon Baird’s talk at Harvard here.
An account alias is a user-friendly identifier that can be classified as either a public key or an Ethereum Virtual Machine (EVM) address. It serves as a reference to the account object, in addition to its account number, and is assigned during the auto account creation process. The purpose of an account alias is to facilitate easier management and recall of accounts, particularly in distributed ledger technology and cryptocurrency contexts where addresses are often complex and difficult to remember. Instead of inputting a long string of characters, users can use simpler and more memorable aliases.
A unique identifier associated with an account on a distributed ledger. Each account on the ledger has a unique account ID, which is used to track and manage all transactions associated with that account.
A unique identifier that represents a user or a destination on the network. It's similar to how an email address works: it's a location where cryptocurrency can be sent. In Hedera, an address could refer to an account ID associated with a specific user or smart contract.
An algorithm is a sequence of instructions that ensures a task or computation is completed. It can also predict results based on a specific input. Distributed ledger technology uses consensus algorithms to help reconcile a customer’s bank account.
A set of regulations and laws to help prevent crimes that produce monetary gain, such as tax evasion, fraud, selling stolen goods, drug and human trafficking, and corruption. Similar laws are being created for the blockchain industry to prevent money laundering activity.
Asynchronous Byzantine fault tolerance (aBFT) is a property of Byzantine fault tolerant consensus algorithms, which allow for honest nodes of a network to guarantee to agree on the timing and order of a set of transactions fairly and securely. It's considered the highest degree of security in distributed systems.
In the context of Hedera, aBFT means that the network can reach consensus on the order and validity of transactions, even if some nodes aren't trustworthy or become compromised. This is achieved through the hashgraph consensus algorithm, which allows all nodes to agree on the order of transactions in a fair and secure way.
A snapshot of the state of all accounts within the Hedera Network at the time of their creation. These files, which are stored and made accessible by mirror nodes, include details such as account balances and account status information. They are created at regular intervals and can be used to independently verify the state of the network.
The first cryptocurrency based on a Proof of Work (PoW) blockchain. Bitcoin was created in 2009 by Satoshi Nakamoto — a pseudonym for an individual or group whose real identity is unknown — and the concept of cryptocurrency was outlined in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
A block is a batch of transactions that are linked together using cryptographic hashes. Each block contains a reference to its parent block, preserving the transaction history in a strictly ordered manner. Blocks are created approximately every 12 seconds to allow consensus on the network and contain a wide range of information.
In the context of Hedera, as per HIP-415, a "block" is a record file that contains all Record Stream Objects within a specific timeframe. Key properties of a block include the block number, block hash, and block timestamp. The concept of blocks is introduced to enhance interoperability with Ethereum Virtual Machine (EVM) based tools and platforms.
A type of distributed ledger technology (DLT) that maintains a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. The design of a blockchain is inherently resistant to data modification, making it secure and reliable for recording transactions across many computers. Please note that Hedera is a directed acyclic graph (DAG) and not a blockchain.
A 32-byte prefix of the running hash of the last Record Stream Object from the previous record file.
A successive number assigned to each record file, incremented by one for each new file. For pre-existing networks, this value is bootstrapped through mirror nodes and subsequently maintained by service nodes.
A digital currency that’s issued by a central, nation-state-backed bank. The US Federal Reserve, the European Central Bank, and the Bank of England are examples of central banks. A nation’s CBDC should be considered the digital equivalent of the nation’s fiat currency.
A marketplace for buying, selling, and trading cryptocurrencies. A CEX is owned and operated by a centralized authority that maintains control over accounts and transactions. Some examples of a CEX are Coinbase and Crypto.com.
A unique identifier for a specific chain within a network. In networks that support multiple chains or side chains, the chain ID helps distinguish between different chains.
In the context of the Hedera SDK, a client is an object that allows you to interact with the Hedera Network by submitting transactions and queries. It is used to set up the operator account, configure the network, and set default transaction fees and query payments. Here is how to build a Hedera Client.
Sometimes referred to as a hardware wallet, and is a physical cryptocurrency device not connected to the internet. A cold wallet is considered to be more secure than a hot wallet.
In the context of distributed ledger technologies (like blockchain and Hedera), consensus refers to the agreement of all nodes in the network on the validity and order of transactions. Hedera uses an algorithm called the Hashgraph Consensus Algorithm. Other consensus mechanisms include Proof of Work and Proof of Stake.
Contract accounts are accounts that are controlled by the code of a smart contract. They don't have a private key; instead, their behavior is determined by the smart contract's code. They can hold Ether and send transactions, but only in response to a transaction they received (i.e., as part of the execution of a smart contract's code).
A type of digital or virtual currency used for payment transactions. Unlike fiat currencies, such as the U.S. Dollar, it is not issued or controlled by governments or financial institutions. Instead, it is monitored on a peer-to-peer network, such as a distributed ledger.
A platform, application, or website that rewards users in cryptocurrency when they complete certain tasks. Rewards tend to be in tiny increments of cryptocurrency. Rewardable tasks can include browser mining, playing games, watching videos, completing surveys, referring new users, etc.
Cryptography is the art of disguising data, so that only the intended recipient can read it. Encryption and decryption are the main components of cryptography. In blockchain technology, cryptography offers security by ensuring transactions between nodes are encrypted.
The use of cryptography in conjunction with distributed networks allows for these networks to be both public and secure. Each DLT address generated for a user is paired with a private key, which allows the user to send and receive transactions with that address.
A form of digital wallet designed for web3. Crypto wallets help you manage permissions with whom you share data, store, and send cryptocurrency, NFTs, and more. Your crypto wallet contains a private key that identifies and assesses the assets that are yours. In this way, you can think of a wallet like MetaMask or HashPack as a digital identity management system.
A wallet used to digitally store fiat and cryptocurrencies. A trusted third party (custodian) is empowered with their own private key to manage the wallet for the owner of the wallet holder. For example, the custodian can send and receive payments at the owner’s request.
Custody refers to the secure storage of digital assets by a specialized provider on behalf of clients. It involves safeguarding private keys and providing insurance, audits, and reporting to prove holdings.
A fundamental concept in distributed ledger technology that refer to the distribution of power and decision-making across a network or system rather than being controlled by a single entity or authority. Decentralization is a key feature that allows for trustless and transparent transactions without intermediaries.
Hedera, for example, is governed by a decentralized council of diverse organizations. A distributed network of nodes validates transactions on the Hedera Network, and the source code for the Hedera protocol is open review.
Decentralized applications that run on peer-to-peer distributed ledger technology networks rather than a centralized server. They are sometimes referred to as web3 applications.
A member-owned group or organization that operates without centralized leadership using distributed ledger technology. Instead of a centralized authority, a DAO is owned and governed by community members (token holders). A DAO's financial transactions and rules are encoded in smart contracts and recorded on a distributed ledger. The token-holders vote on any changes to the rules or organizational structures, and voting power is typically distributed across users based on the number of tokens they hold. All DAO activity is transparent and fully public.
A marketplace for users to buy, sell, and trade cryptocurrencies without a centralized intermediary to provide liquidity and verify transactions. Instead, other users provide liquidity, and transactions are verified through the distributed ledger.
A peer-to-peer financial technology built on distributed ledgers without intermediaries. DeFi services cover lending, borrowing, trading, derivatives, insurance, and prediction markets. Services are decentralized and not controlled by a single authority, such as those from traditional banking systems.
W3C Decentralized Identifiers (DIDs) are a new type of identifier that enables verifiable, decentralized digital identity. A DID refers to any subject (e.g., a person, organization, thing, data model, abstract entity, etc.) as determined by the controller of the DID. DIDs are URIs that associate a DID subject with a DID document allowing trustable interactions associated with that subject.
A structure used for data organization and representation of associations using circles and lines. DAGs are good for mapping an efficient process and visualizing relationship flows, such as family trees, and are viable replacements for blockchains due to their speed and data-storage capabilities. Hedera is a DAG and not a blockchain.
A Distributed Denial-of-Service (DDoS) attack is a malicious attempt to disrupt the normal operations of a network, service, or website by overwhelming it with a flood of internet traffic from multiple sources.
In the context of Hedera, a DDoS attack would involve an attempt to overwhelm the network with a flood of transactions or requests, aiming to disrupt its normal operation. However, due to Hedera's unique consensus mechanism and its use of asynchronous Byzantine Fault Tolerance (aBFT), it is designed to be resilient to such attacks.
A distributed ledger is a database shared by multiple participants in which each participant maintains and updates a synchronized copy of the data. Distributed ledgers allow members to securely verify, execute, and record their own transactions without relying on an intermediary, such as a bank, broker, or auditor. A distributed ledger can also be called a DLT, the acronym for Distributed Ledger Technology.
A technology that allows the existence of distributed ledgers, such as blockchains and DAGs, that use distributed ledgers stored on separate, connected devices in a network to ensure data accuracy and security. Unlike traditional databases, distributed ledgers have no central data store or administration functionality.
Spending the same coins more than once, especially at the same time. This is one of the primary “attacks” distributed ledger networks have been designed to resist.
A cryptographic algorithm for digital signatures is a crucial component in distributed ledger technology. It is a variant of the Digital Signature Algorithm (DSA) that operates on elliptic curve cryptography. Elliptic curve cryptography, and thus ECDSA, offers a high level of security with relatively small keys, which makes it more efficient than some other cryptographic systems. As a result, ECDSA is widely used in many systems that require secure digital signatures, including Bitcoin, Ethereum, and other distributed ledger networks.
A cryptographic algorithm used for data integrity and widely used in cryptocurrencies. In this term, "secp256k1" refers to the specific parameters of the elliptic curve used, making it efficient for computations. Hedera supports this signature scheme for generating cryptographic keys and signing transactions.
In the context of Hedera, Ed25519 is one of the signature schemes supported for the creation and verification of digital signatures. It's often used for signing transactions, as it provides a strong level of security while still being efficient to compute.
A technical standard for fungible tokens created using the Ethereum blockchain. A fungible token is interchangeable with another token—where the well-known non-fungible tokens (NFTs) are not interchangeable. ERC-20 allows developers to create smart-contract-enabled tokens that can be used with other products and services. These tokens represent an asset, right, ownership, access, cryptocurrency, or anything else that is not unique in and of itself but can be transferred.
Hedera supports the creation and management of custom tokens through the Hedera Token Service (HTS).
A type of token standard — a template or format that other developers agree to follow. Following the same standards makes writing code easier, more predictable, and reusable. Each ERC-721 token is unique and not interchangeable with any other token - hence the term non-fungible. This unique characteristic allows ERC-721 tokens to represent ownership of unique items like a particular piece of real estate or a specific piece of art.
Hedera supports the creation and management of both fungible and non-fungible tokens using the ERC-721 token standard.
An open-source, decentralized blockchain platform with smart contract functionality. Ether (ETH) is the native cryptocurrency of Ethereum. Developers can use Ethereum or an Ethereum Virtual Machine (EVM) to create and run decentralized applications containing smart contract functionality, as well as issue new crypto assets, known as tokens.
The runtime environment in Ethereum, where smart contracts are executed. It is a Turing-complete virtual machine that executes scripts used to implement certain operations on the Ethereum blockchain. The EVM is contained within the client software needed to run a node on Ethereum, and it manages the state of the blockchain and enables smart contract functionality.
Event files record the history of transactions that have occurred on the Hedera Network. They contain the details of all the transactions and the order in which they were processed. The files are created on each node in the network and are then shared with mirror nodes, which are nodes that maintain a copy of the network's history but do not participate in consensus.
An account controlled by private keys that can send transactions to other accounts or deploy smart contracts onto the network. An EOA is created by generating a public-private key pair. Transactions sent from an EOA are initiated by an external actor who holds the private key. Some popular web3 wallets (e.g., MetaMask, HashPack) are EOAs.
The principle that all transactions on a distributed ledger should be treated equally, without preferential treatment and describes the consistency of records for the transaction queue of a ledger. Transactions in fair order are recorded on a ledger consistent with the order in which they are transmitted.
A "fallback fee" in the context of Hedera and smart contracts is a type of custom fee that is charged to the recipient of a token transfer, rather than the sender. This can lead to vulnerabilities in smart contracts if they unknowingly accept a token with a high fallback fee, resulting in a loss of funds. Discussions on mitigation strategies, such as sender-pays models or limits on custom fees, are ongoing. Here's a comprehensive blog post covering fallback fees.
A fee collector account is an account designated to receive transaction and custom token fees on the Hedera network. The account collects the fees users pay for executing transactions and queries on the network.
A term widely used across the financial industry (and even beyond) to refer to government-backed national currencies such as the U.S. dollar or the British pound. Even so, the concept of fiat currency is deeply intertwined with multiple aspects of distributed ledger technology and cryptocurrency usage. One of those aspects concerns how individuals and organizations onboard themselves into the worlds of DLTs and cryptocurrency.
The assurance or guarantee that completed transactions or blocks can't be reversed, revoked, canceled, or changed in any way. The latency level of a ledger will ultimately affect the chain's finality rate.
A fork is an event in which a blockchain splits into two separate chains. A fork occurs when software updates to its functionality are introduced, but not all participants (miners, developers) agree on them.
A token or digital asset that is 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.
The cost of performing a transaction or smart contract operation.
The maximum amount of gas a sender is willing to spend in a transaction.
The first block of data that is processed and validated to form a new blockchain, often referred to as block 0 or block 1.
The history of how events are related to each other through their parent hashes in a hashgraph. It expresses itself as a directed acyclic graph, a graph of hashes, or a hashgraph. The hashgraph records the history of how members communicated and grow directionally over time as more gossip syncs take place and events are created. All members keep a local copy of the hashgraph, which updates as members sync with one another.
A protocol for communication between network nodes in a distributed, peer-to-peer network and sometimes used in distributed systems such as ledgers, databases, and file systems because they are secure, reliable, fault-tolerant, and efficient & decentralized.
Gossip protocol is based on the construct of "gossiping", or spreading information from one node to another. Every few seconds, each node sends a message to a random node in the network about itself and other nodes, then that message moves from node to node until its communication reaches across the entire network.
Several DLTs, such as blockchains, utilize the Gossip protocol. It is used in Hedera (along with Gossip about Gossip) for nodes to distribute transaction-related data. The Bitcoin network uses the Gossip protocol to broadcast block-mining solutions. It is also used in the Hyperledger Fabric network and Ethereum, among others.
The system of proposing, managing, and implementing changes to distributed ledgers, including management of transaction fee allocation, user interface changes, developer recruitment, licensing, product roadmaps, development fund distribution, and other policies.
On-chain governance: stakeholders can vote on changes via rules encoded into the blockchain protocol. Stakeholders typically hold governance tokens, including miners, developers, and investors. Developers propose changes through code updates, and each node votes to accept or reject the proposed changes. Voting mechanisms for on-chain governance vary but likely include smart contract functionality. Decentralized Autonomous Organizations (DAOs) utilize on-chain governance to run operations without a central authority.
Off-chain governance: changes are made in online forums, social media, conferences, email groups, and other public spaces. Off-chain governance is successful when all stakeholders agree and make all updates and implementations in unison. If consensus cannot be reached, the network can split, or fork, into two chains running different versions of the software, and the chain with the most transactional hashing power is considered to be the successor to the original chain.
A governance token is a utility token that can help democratize decision-making related to managing a public ledger, decentralized apps, and other decentralized protocols. One governance token represents one vote in any decision-making process where the outcome is determined by the option that registers the most votes.
A development environment for Ethereum software. It consists of different components for editing, compiling, debugging, and deploying smart contracts and dApps, all working together to create a complete development environment.
A mathematical function in which an input of a string of information (numbers, letters, media files) is output into a fixed size. Hash functions are used for data integrity, generating unique identifiers, digital signature creation, and consensus mechanisms in DLTs.
A Hashgraph, in the context of Hedera, is a way to chart events created by members in order to achieve consensus order and consensus timestamps, where an event is a circle: a container for a blockchain transaction, and members are full nodes.
A metric of cryptocurrency computing power determined by measuring how many hashes are generated by all the miners who are simultaneously trying to solve the current block or any given block on a mined distributed ledger such as Bitcoin.
HashScan is a ledger explorer and analytics platform for the Hedera network. It allows users to easily search for transactions, as well as provide information about each transaction.
This service enables developers to create a verifiable timestamp and order of events for any application. In other words, it allows any application to send messages to the Hedera Network and receive consensus timestamps and fair order. This can be useful for various applications, including supply chain tracking, fair order for marketplaces, and distributed systems coordination.
The Hedera File Service provides a decentralized file storage platform that allows developers to securely store and access files on a distributed network of computers using hash as a file identifier.
A Hedera Improvement Proposal (HIP) is a proposal that can range from core protocol changes to the applications, frameworks, and protocols built on the Hedera public network and used by the community. HIPs are reviewed and evaluated by the Hedera Council, core developers, and editors.
The Hedera Smart Contract Service (HSCS) is a service provided by the Hedera network that integrates the features of Hedera's native entity functionality with a highly optimized and performant Ethereum Virtual Machine (EVM). It allows developers to deploy and interact with smart contracts on the Hedera network, offering high throughput, fast finality, predictable and affordable fees, and fair transaction ordering.
This service provides the ability to issue and manage tokens on the Hedera Network. With the Hedera Token Service, users can define, mint, burn, and configure tokens without deploying a smart contract. It supports both fungible tokens (like ERC-20 tokens) and non-fungible tokens (like ERC-721 tokens). The HTS is designed to be fast, secure, and efficient, with low fees and finality of transactions.
A cryptocurrency wallet that is always connected to the internet and can be either a mobile application, web application, or browser extension. As they are always connected to the Internet, hot wallets are not as secure as cold wallets, which are only connected to the Internet during transactions.
An open-source Ethereum client developed under the Hyperledger project and a virtual machine that replaced the EthereumJ virtual machine in the Hedera Services release 0.19 as a result of HIP-26. This migration enables Hedera to maintain parity with Ethereum Mainnet evolutions, such as the EVM container formats, new opcodes, and precompiled contracts. The Besu integration is configured to use the “London” hard fork of Ethereum Mainnet.
The property of a distributed ledger technology, such as blockchain that prevents data from being altered or tampered with. Once cryptographically secured and stored, the ledger record cannot be altered. Because each hash on each block in a chain is unique, data cannot be tampered with after it is logged. This creates an ultra-high-integrity record of information about the whole blockchain.
Initial Coin Offering, or ICO (also stands for Initial Cryptocurrency Offering), is a funding opportunity for a new cryptocurrency coin, application, or service. Unlike IEOs and IDOs, tokens are purchased from a project website, not an online exchange platform.
Interoperability on distributed ledgers means the ability to connect and communicate (exchange & comprehend data) with other distributed ledger networks, creating a pathway to the easy exchange of assets. (In a broader sense, interoperability refers to the power of communication between systems.) Interoperability protocols allow a distributed ledger to read and write messages to other networks, easily exchanging data.
InterPlanetary File System (IPFS) is a hypermedia protocol and peer-to-peer network for storing and sharing data files. Unlike HTTP, an IPFS network does not require a host server. Instead, IPFS is decentralized and stores the information on hundreds of thousands of nodes (servers) worldwide. IPFS was created by Juan Benet of Protocol Labs and launched in February 2015.
ISO 20022 is a global standards scheme for financial industry messaging which includes methodology, process, and repository standards. It covers financial information transferred between financial institutions that includes payment transactions, securities trading and settlement information, credit and debit card transactions, and other financial information.
Currently, seven DLTs adhere to ISO 20022 standards: Algorand (ALGO), Hedera (HBAR), IOTA (MIOTA), Quant (QNT), Ripple (XRP), Stellar (XLM), XDC Network (XDC).
An open-source project implementing the Ethereum JSON-RPC standard. The Hedera JSON-RPC relay allows developers to interact with Hedera nodes using familiar Ethereum tools. This allows Ethereum developers to deploy, query, and execute contracts on the Hedera Network as they would on Ethereum.
A standard for the investment industry in which an investor’s identity can be verified and evaluated for business relationships. Players in the blockchain industry must heed to KYC standards because cryptocurrency exchanges require them for Anti-money laundering (AML) compliance.
A collection of shared cryptocurrency coins/tokens locked under a smart contract, ensuring liquidity that allows participants to trade easily. They are used for trading in decentralized exchanges (DEX), and for providing liquidity to decentralized financed (DeFi) protocols, which makes them an important part of yield farming.
Mainnet (main network) is a distributed ledger network that is developed, tested, and fully deployed for public use. In contrast, a testnet (test network) is a distributed ledger network used by developers to test smart contracts and dApps before they are deployed to the live mainnet.
Merkle root is a mathematical method of confirming Merkle tree hashes. It is the root hash of all other hashes in the Merkle tree.
A Merkle tree, a hash tree, is a data structure used in distributed ledger technology for efficient data verification and transfer on peer-to-peer networks. It consists of leaf nodes (hashes of crypto transactions in a block), non-leaf nodes (hashes of leaf nodes), and the Merkle root (the final hash). Merkle Trees enhance data integrity and enable Simplified Payment Verification (SPV), allowing wallets to verify transactions without needing the entire distributed ledger network.
A non-custodial wallet used to interact with Ethereum and other EVM-compatible networks. It allows users to access their wallets through a browser extension or mobile app, which can then be used to interact with decentralized applications.
The creation of a token on a distributed network. Most often used in the context of non-fungible tokens (NFTs).
A mirror node is used to store and cost-effectively query historical data from the public ledger while minimizing the use of Hedera Network resources. Mirror nodes support the Hedera Network services currently available and can be used to retrieve transactions and records, event files, and balance files.
Native cryptocurrency is the digital currency inherent to a DLT such as a blockchain. For some examples, Bitcoin (BTC) is the native cryptocurrency for the Bitcoin blockchain, or Hedera (HBAR) for Hedera.
A network explorer, sometimes called a blockchain or ledger explorer, is an online tool or application that allows users to browse and search the blocks, transactions, addresses, and other data on a distributed network.
In web3, a node is any participating computer in a peer-to-peer network that is propagating the verification of transactions, creating blocks, and/or maintaining the distributed network.
A non-custodial wallet is a decentralized wallet where the user has complete control over their private keys, allowing them to store and manage their digital assets. Ledger, Exodus, HashPack, and MetaMask are examples of popular non-custodial wallets.
A unique digital asset with ownership rights that are stored on a distributed network. An NFT can be a one-of-a-kind image, video, composed music, game asset, medical record, event ticket, domain, or other creative media that is tokenized, therefore, can be bought, sold, or traded on a distributed ledger using various cryptocurrencies.
A cryptographic nonce is an arbitrary, single-use, whole, binary number used for communication in security functions. The acronym “nonce” is an abbreviation of "number only used once." A basic nonce in Bitcoin is 32-bit (4-byte). A strong nonce has at least 128 bits of entropy. Solving the hash on a block is how a miner finds the nonce.
Uses for a nonce: authentication, initialization vectors, hashing, indexing, smart contracts, and block validation.
Within a distributed ledger, a nonce is proof of work for an encrypted (or hashed) block. Transaction verification and other data contained within that block can then be verified via the added nonce.
Off-chain refers to transactions that occur off of the distributed ledger. These transactions can be peer-to-peer or through a third-party intermediary, and they are not subject to the DLT's protocols. As a result, they can be faster and cheaper than on-chain transactions but might not offer the same level of security or decentralization. Off-chain transactions can also be private, as they are not necessarily visible to all nodes in the network.
Off-chain storage is a provided service for storing data that cannot be stored on a ledger and is useful for off-chain data, such as real-world data, data that is required to be changed or deleted, and data that is too large to store on-chain efficiently.
On-chain refers to transactions that occur on the distributed ledger, and as a result, they are fully subject to the DLT's protocols. This includes the consensus protocol, and therefore these transactions are public, immutable, and auditable. The ledger secures on-chain transactions and are visible to all nodes in the network.
In distributed ledger technology, oracles are third-party services that connect distributed ledger (on-chain) data to data coming from external (off-chain) systems. With this function, oracle technologies can provide the off-chain data needed to meet the conditions of a smart contract.
A decentralized network interaction model where individual nodes ("peers") connect directly with each other instead of through centralized servers or authorities.
In a peer-to-peer network, each node can act both as a client and as a server. This contrasts with the traditional client-server model, where client nodes request resources or services, and server nodes fulfill those requests.
Permissioned DLTs are private distributed ledgers that require user access from an entity (or entities) that control the network.
Permissionless means a system or property accessible by anyone without permission from a central authority. Permissionless ledgers are public distributed ledgers, including public blockchains, that allow anyone to join at any time, to read, write, or participate in the ledger network. There are no entities that regulate or control the network or its users.
A free and open-source relational database management system emphasizing extensibility and SQL compliance. Mirror nodes use a PostgreSQL database to store the transaction and event data organized in a structure that mirrors the Hedera Network.
In Ethereum and other smart contract platforms, precompile (or precompiled contract) is a special kind of smart contract with a fixed address that is implemented in the blockchain client itself rather than in the Ethereum Virtual Machine (EVM).
The main advantage of precompiles is that they can be executed more efficiently than regular smart contracts. This is because they are written in low-level code and don't need to be interpreted by the EVM. This makes them useful for computationally intensive operations, such as cryptographic functions or mathematical operations.
For example, Ethereum includes precompiled contracts for operations like elliptic curve multiplication and pairing, as well as for hash functions like SHA-256.
A private key is an alphanumeric string of data that corresponds to a single specific account in a wallet. Private keys can be thought of as a password that grants access to, and control over, that specific crypto account. Never reveal your private key to anyone, as whoever controls the private key controls the account. If you lose your private key, you lose access to that account.
A Proof of Reserves (PoR) is an independent audit conducted by a third party that seeks to ensure that a custodian holds the assets it claims to on behalf of its clients.
A consensus mechanism in which an individual runs distributed ledger software (a “validator node”) responsible for validating transactions, blocks, and the state of the network.
The individual must first “stake” an amount of cryptocurrency, such as ether, in a smart contract; this allows them to participate in consensus-building. If the individual’s validator node functions within specifications, they are rewarded, usually with cryptocurrency. If, on the other hand, the node functions poorly or maliciously, the staked tokens can be “slashed” or taken away.
PoS requires a negligible amount of computing power compared to Proof of Work consensus.
Proof of Work (PoW) is a consensus mechanism for confirming transactions and adding new blocks to blockchains.
Here’s how it works: To create a new block, a cryptocurrency miner competes with other miners to solve a cryptographic puzzle. This is done by generating a cryptographic hash that needs to match the target hash for the current block. The first miner that correctly generates the hash can add the block and once the hash solution is verified, receives block rewards in the form of cryptocurrency.
When the puzzle gets solved and verified, PoW consensus is established, as the solution itself "proves" that "work" was done to solve it.
In the blockchain industry, the word “protocol” refers to any distributed ledger-based service, including the blockchains themselves and any services or applications that run on them, that can programmatically receive and respond to specially formatted requests.
For example, if a public 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 one ledger account to another (which most chains can do), then it’s a protocol.
Cryptography, and the modern software tools built with it, often center around a key pair: public and private. You can derive a public key from a private key, but you cannot derive a private key from a public key.
In messaging, the public key is obtained and used by anyone to encrypt messages before they are sent to a known recipient with a matching private key for decryption.
By pairing a public key with a private key, transactions can be sent in public with no fear of someone “hacking” or altering them: the public key has encrypted the transaction into a format unreadable by anyone except the intended party and the intended party only.
A record file is a file that contains the details of a transaction that occurred on the Hedera Network. It provides greater detail about the transaction than a receipt, such as a consensus timestamp it received or the results of a smart contract function call. Hedera Mirror Nodes store the record file and can be accessed through the mirror node REST API.
REST APIs are used for interactions with services provided by Hedera, such as account balance checks, transaction submissions, and other actions related to the consensus service, token service, and file service.
Hedera's REST APIs allow developers to easily interact with the Hedera Network without needing to directly connect to the network's nodes. Instead, they can send HTTP requests to a server that acts as an intermediary between them and the Hedera Network, simplifying the process of building applications on top of Hedera.
A security model outlines network security measures designed to protect a network from threats and ongoing attacks. In distributed ledger technology, a security model includes consensus mechanisms, cryptographic techniques, permissions, and smart contract security.
For example, Hedera's security model relies on the unique Hashgraph consensus algorithm that ensures fairness, security, and speed. It utilizes digital signatures for transaction verification, and it operates a permissioned network with trusted entities as nodes. Hedera also provides services like the Hedera Token Service (HTS) and Hedera Smart Contract Service (HSCS), built with security considerations in mind.
A shard is a wedge of a blockchain network. Shards contain tokenized digital assets; a shard is defined by the contained asset and by the properties of the digital asset. Shards function as a distributed ledger: sharing data between shards is a cornerstone of their build.
A smart contract is a program consisting of a set of logic (state variables, functions, event handlers, etc.) or rules that can be deployed, stored, and accessed on Hedera. The functions within a smart contract can update and manage the state of the contract and read data from the deployed contract. Smart contracts are secure, tamper-proof, and transparent, offering a new level of trust and efficiency.
A Software Development Kit (SDK), sometimes called a devkit, is a set of tools provided to software developers for building software applications. Tools can include Application Programming Interfaces (APIs), Integrated Development Environments (IDE), frameworks, code libraries, debuggers, code samples, test projects, and documentation.
Solidity is a Turing-complete object-oriented programming language for developing smart contracts on the Ethereum Virtual Machine (EVM) and other compatible distributed networks. It supports various functions necessary for operating decentralized applications and systems, including facilitating transactions, voting, multi-signature wallets, creating dApps, and crowdfunding.
Soul-bound tokens, also known as non-transferrable NFTs (non-fungible tokens), are digital assets permanently tied to a specific individual (or crypto wallet) — meaning they cannot be transferred to others.
Examples of SBT uses include attendance verification for events, job achievement certification, digital identification storage, membership credentials, medical records management, and reputation-based voting for DAO governance models.
Source code, which software developers program, is data, metadata, and data schema that collectively form the basis of any given ledger’s transactional content. Source code is used to automate the business processes and algorithms behind the operation of a given distributed network (e.g., Bitcoin, Ethereum, Hedera, etc.).
A stablecoin is a specialized form of cryptocurrency engineered to maintain a stable value by pegging it to an external asset, such as a fiat currency like the US Dollar or a commodity like gold. By doing so, stablecoins seek to combine the programmability and ease of transfer inherent in cryptocurrencies with the price stability typically associated with traditional currencies. This low-volatility makes stablecoins particularly useful for transactions, cross-border payments, and as a stable asset within decentralized finance ecosystems. They essentially serve as a bridge between the conventional financial infrastructure and the emerging crypto-economic landscape, enabling fiat currencies to exist in a format that can be transferred with greater fluidity and efficiency across distributed networks.
The process of participating in a proof-of-stake system to validate transactions and earn rewards. When staked, coins are locked but can be unlocked for trading. Staking allows participants (stakeholders) to earn rewards on their holdings, typically in tokens or coins.
A state machine represents the state of the Hedera Network, including the balance of every account, the contents of any files stored via the Hedera File Service, and the details of any tokens created via the Hedera Token Service. Transactions in Hedera cause the state to transition from one state to another, and the Hedera Network achieves consensus on the order of these transactions and their resulting state transitions.
State proofs are a cryptographically secure, transferable, and storable mechanism for enabling trust and confidence in representations of the state of Hedera. The fundamental value proposition of a distributed ledger is that participants need not have special trust in any single node maintaining the state. Hedera’s state proofs ensure that clients querying the state can be given the necessary confidence that any data, even if returned by a single node, does indeed accurately represent the consensus state as maintained by the full network.
In the context of Hedera, the Hedera Testnet is a network used by developers for testing their applications before deploying them on the Hedera mainnet. It allows for testing and debugging in a controlled environment, ensuring that any potential issues are resolved before the application is launched for real use.
A timestamp is a piece of recorded data that verifies the data existed at a specific date and time. In distributed ledger technology, a timestamp reveals when a block has been mined and validated. With the Bitcoin blockchain, timestamps help solve the double spending problem.
A token generally refers to a type of cryptocurrency representing an asset or a specific use and resides on its own blockchain. Tokens can represent any assets that are fungible and tradable, from commodities to loyalty points to even other cryptocurrencies.
Tokenization is the process of underwriting the value of a token with a real-world tangible, such as gold, real estate, art, a stamp collection, etc.
In distributed ledger technology, a transaction (tx or TX) refers to an exchange of cryptocurrency on any distributed ledger network. The use of the ledger system ensures a record of all transactions. The speed of completion of the exchange depends on several variables, such as which network is used, traffic at the time of the exchange, the size of the transaction fee, etc. An exchange can be completed in as little as a few seconds or minutes, or in several hours, depending on these variables.
A fee associated with a transaction that compensates the Hedera Network for processing and maintaining the transaction in a consensus state.
Trustless is a term associated with distributed ledger technology such as blockchain-based networks because participants don’t need the support 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.
Turing Complete refers to a computer or a programming language that can run and solve any problem that a Turing machine could solve. A Turing machine can solve anything computable, given enough physical resources. The importance of Turing completeness as it pertains to distributed ledger technology is that it allows for the programmatic development of smart contracts.
A distributed network maintains its integrity and security through validation. The nodes in the network validate transactions before adding them to the ledger. This includes checking that the transaction is properly signed, that the sender's account has enough HBAR to cover the transaction and its fees, and that the transaction doesn't conflict with the current state of the ledger. By ensuring that all transactions adhere to the network's rules, validation helps prevent fraud, double-spending, and other forms of abuse.
A virtual machine (VM) is a software representation of a computer and VM technology related to distributed ledger technology as a platform for digital transformation, business innovation, and industry disruption. A VM can run software that’s independent of the underlying machine (aka the host) that it runs on.
A virtual Merkle tree, as proposed in HIP-25, is a virtualized on-disk data structure designed to support the scaling of billions of entities per node on the Hedera Network. It aims to optimize memory usage by moving much of the system state out of RAM and onto disk, enhancing the scalability and performance of operations like smart contracts and potentially NFTs without impacting the network's transaction processing speed.
A mechanism for achieving consensus in a distributed system, which can be used in some forms of distributed ledger technology. Virtual Voting is one of two consensus components created for the Hedera (the other consensus component is gossip about gossip). These two components function dynamically to build a fair (linear) ordering of transactions without explicitly casting ballots.
The first generation of the internet is primarily read-only and static information that links to each other. Think of a self-hosted, personal web page or a blog using a platform such as WordPress or Squarespace. You primarily share the information with others via URLs. Web1 is centralized or operated by companies that control servers that service customers.
The second generation of the internet, the current state of the internet, also referred to as the read-write web, is a web of social interactions linking users to each other. Think of social media sites such as Instagram and Twitter, where you share and consume algorithm-based data feeds managed by tech companies. You often share information within the platform by liking, sharing, re-posting with your own comments, and more. Though much of web2 content is created by users, it is not necessarily owned by them. Both web1 and web2 are centralized or operated by companies that control servers that serve customers.
The envisioned next generation of the internet is characterized by decentralization, distributed ledger technology, and real-time, persistent data, also referred to as the read-write-own web. Web3 is the Internet, plus added decentralization components such as DLTs & blockchains, cryptocurrencies, and NFTs. Whereas web2 is centralized or operated by companies that control servers that serve customers, web3 is decentralized, built, and operated by users.
In the DLT world, a white paper is a document containing technical information about a proposed project, such as an Initial Coin Offering (ICO). A white paper typically aims at potential investors and provides background information about the project, how the technology will work, what problems it may solve, and who would benefit from the solution. Bitcoin: A Peer-to-Peer Electronic Cash System, published by Satoshi Nakamoto in 2008, is a famous White Paper that "propose(d) a solution to the double-spending problem using a peer-to-peer network.”
zk-SNARK is an acronym for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. In a ledger, zk-SNARK is a multi-theorem proof system that grants the power to control access to validated transaction information. This means that ledger data can be gated.
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