Blockchain is a word passing through the lips of many in all types of industries these days. Blockchain terminology, however, is often misunderstood or not understood at all. This makes grasping the concept and implementing it quite difficult. The concept of blockchain can be considered a public, digital ledger. The technology allows users to keep track of information unalterable and transparently. 

A network of computers store and add information in the form of blocks. When each block is added, it becomes unchangeable and can only be added after being unanimously verified by participants. The technology is so special and revolutionary because it is a completely decentralised way of keeping track of information. It has disruptive implications for almost all industries once it becomes widespread. To get ahead and understand this potentially revolutionary technology, learning some blockchain terminology is a good place to start. 

The Most Important Words In Blockchain Terminology

As with most things, there are some blockchain terminology jargons you need to know and you don’t. You’ll need to know the following terms to get started. You’ll struggle to get by if you don’t understand these terms.   


Encrypting data or information hides it so that the only ones who can access it are those with a password. Encryption ensures that a database’s private information or sensitive data is secure and protected. Transactions on a blockchain are encrypted. 


In most ways, cryptocurrency (one of the most important points in basic blockchain terminology) is just like regular money. It is a means through which a person can pay for goods and services. The characteristic that most distinctly differentiates it from regular cash is that it is completely digital. Since the development of the first form of cryptocurrency (Bitcoin) in 2009, over a thousand more have been established and are available today. Cryptocurrencies often function on a blockchain. 


Bitcoin is a digital form of money and the most popular type of cryptocurrency. It is based on the decentralised, public ledger of a blockchain. Being a totally decentralised currency means that no authority (such as a bank) backs it, controls it, or holds important information about transactions privately. There is no need for a bank since the currency can be transferred from person A to person A using the peer-to-peer network. 

This network allows everyone access to the public ledger to see how many bitcoins exist, where they come from, how they are moving from user to user, and how they are being used. This means that there is complete transparency. Complex mathematical problems are solved to verify transactions and create new bitcoins. As these number-crunching tasks are completed, new bitcoins are released as a reward for finishing. This ensures that all transactions are verified and continue to be verified. 



Ethereum is a blockchain application that allows users to develop decentralised ledgers to be used for any purpose they need it for. It was established to move past programming limitations faced by Bitcoin. The main thing that differentiates it from Bitcoin is its ability to create smart contracts, which can be understood as software that automates and protects the execution of programmed orders. In other words, it has a smart contract that self-executes and terms of the agreement or transaction written into its code. Ether is the name of the cryptocurrency which is associated with Ethereum. It is the second most popular cryptocurrency after bitcoin. 


The nodes are the network of computers on which the technology runs. Each node on the network stores and distributes the information contained in the chain. Whenever additional information (a block) is added to the chain, all nodes receive this addition. 


Bitcoins are released into the market through a process of mining. Mining is completing complex mathematical problems to validate and verify transactions on the blockchain and create new blocks. This requires powerful computers. Once the mathematical puzzle is solved, the reward is the release of a new bitcoin. Those performing these tasks are called miners. All miners are also nodes forming part of the chain, but not all are miners. These overlapping concepts can be confusing, so you need knowledge of blockchain terminology. 


Each block carries its unique identifying code. This code called a hash, functions as a digital fingerprint for the block. A hash is never repeated, and it cannot be changed. Miners find eligible hashes for new blocks through a process called hashing. They insert random digits into formulae until they discover a desirable hash that can function as a signature. 


A token (blockchain terminology often used across cryptocurrencies) is a unit of value or a representation of an asset which can be used to make purchases. Tokens are sent and received via technology.    

Public Key

As a participant on a blockchain, you’ll have a public key. This functions similarly to an account number for an account you hold at the bank. If another user wants to send you currency, connect with you, or process transactions toward you, they will need your public key. 

Private Key

Following the bank account analogy, the private key functions as your ATM pin. Only you know your private key, whereas everyone knows your public key. You’d use a private key to authorise transactions from your public key directed at other users. 

Blockchain Terminology: Additional Terms to Note

A list of blockchain terminology is incomplete without some more complicated terms and concepts. This helps potential users delve into a deeper understanding of the concept they’re studying and learning. Below are some of the more complex words encompassed within blockchain terminology. If you can grasp these, you’ll be good to go. While you may be able to get by without knowing them, it’s better for you in the long term to understand and know as much as you can. 

Proof-Of-Work (POW)

This algorithm (consensus algorithm – more complex blockchain terminology) prompts miners to solve mathematical problems to verify transactions. The first miner to show proof of work validates the block and is rewarded with cryptocurrency. Once a miner generates proof of work by inputting various collections of data – including transaction information and clusters of digits – into a formula, and they obtain a preferable outcome (proof of work), it is tested. The additional miners verify the proof of work by inputting identical information used by the “winning” miner to check if the outcome is correct.   


Proof-Of-Stake (POS)

This is another consensus algorithm. However, this one decides who the owner of a new block is based on their stake. Miners stake currency in hopes that they are chosen to validate a block. The currency put at stake by miners functions as a deposit, ensuring that they validate the block in the way that the rules require. Should they violate the rules, the currency they have deposited will be forfeited or destroyed. The more technical term for destroying currency this way is “burned”. 

Permissioned Blockchains

A permissioned blockchain only allows certain users or nodes to authorise or validate transactions; it has a central authority. A user needs to be granted permission to access this chain. This type of blockchain is often used within a business to keep track of operations. 

Permissionless Blockchains

On this type of chain, users need not acquire permission to join the network or perform actions. The chain is public, transparent, and has no authority figure. Bitcoin is an example of a permissionless blockchain. Knowing this blockchain terminology can save you from mistaking the two types. 

51% Attack

Blockchain technology is often said to be hacker-proof, one of its many selling points. However, it isn’t completely immune to malicious activity. Miners can cheat the system if they form a large rogue collective. The system of verifying transactions requires most users to agree for the transaction to be valid. If over 50% (i.e. 51%) of miners come together, they can falsify information, thus launching a 51% attack. This could lead to fraud-like activities and more. 

Understanding Terminology Is the Foundation On Which To Move Forward

Like any other subject you’re learning, the basics are a great place to start building your knowledge. Knowing commonly used blockchain terminology will be a great help for those new to the technology, as it allows you to understand and follow the source material easily. This list of blockchain terminology equips you with the basics and some extras, ensuring that you’re well on your way to mastering the subject.