Crypto terminology glossary
The terminology surrounding crypto can be hard to understand sometimes. The ecosystem surrounding crypto also extends beyond digital currency. Refer to this glossary to get a better understanding of all the terminology that you hear regularly in conversations surrounding crypto. Check back often for new updates!
Blockchains are decentralized ledgers where transactions are recorded. The transaction data cannot be altered, making them immutable. Because the data is immutable, there is no need to rely on a 3rd party to verify the record of data. The reason they are called “blockchains” is because the data is stored in what is known as blocks, each block has a time stamp and is publicly accessible.
On-chain means the product is built with blockchain technology, where transactions are recorded on the public ledger of a given cryptocurrency. While Lion Gaming Group’s product suite supports on-chain, it is not a forced requirement: i.e. players can toggle the on-chain wagers off and be able to wager in a traditional iGaming manner.
Lion Gaming Group’s are blockchain-agnostic, and can be built on any given blockchain.
Non-fungible Token (NFT)
NFT refers to non-fungible token. A non-fungible token is a unit of data that exists upon a blockchain (such as Ethereum). NFTs are commonly associated with digital art, however they can also be used to represent in-game assets for video games, such as digital plots of land or clothing for players’ avatars.
Digital currency where transactions are stored on a publicly viewable ledger.
A smart contract is a self-executing, irreversible contract which is built over a blockchain. Presently, most smart contracts are built over the Ethereum blockchain. A common use of smart contracts is the creation of NFTs.
Tokens are similar to cryptocurrencies, and can in most cases be used interchangeably. While cryptocurrencies are the native asset of their respective blockchain (i.e. Bitcoin for the Bitcoin blockchain), tokens are built over an existing blockchain. An example of a token would be Uniswap (UNI), which is built over the Ethereum blockchain.
Proof-of-stake (PoS) is a consensus mechanism utilized by certain blockchains, such as Tron and Cardano, Ethereum is also shifting to PoS in 2022. PoS works by allowing those holding cryptocurrency to participate in validating the block transactions by “staking” coins they own. In-exchange for staking their coins, they receive compensation in the form of cryptocurrency.
Proof-of-work (PoW) is a consensus mechanism that was made popular by Bitcoin, and is premised on computing power. For PoW, members of a decentralized network are competing to solve an arbitrary math problem, where the first to solve it receives a block reward, this is known as “mining.”
A Layer 1 protocol, or “main chain” is the primary blockchain within its ecosystem such as Bitcoin or Ethereum.
A Layer 2 protocol is a blockchain that is built off of a Layer 1 protocol. The main purposes of Layer 2 protocols are to increase transaction speeds and reduce fees associated with transactions.
The size of a block is equivalent to the amount of data it stores. The maximum amount of data a block can store is referred to as the block size limit. The block size limit varies depending on the blockchain being used. Having a larger block size limit increases scalability by being able to process more transactions-per-second.
A sidechain is a blockchain that is separate from the parent blockchain (i.e. Bitcoin or Ethereum) that it connects to. Sidechains have their own consensus protocols, and digital assets are transferred between a sidechain and parent blockchain through the use of smart contracts. Smart contracts are used to reduce the risk of fraud by enlisting validators on the parent blockchain and sidechain when confirming cross-chain transactions.
Nodes are critical to ensuring a blockchain is decentralized. On a blockchain, all nodes are connected and communicate with each other. When a new block is mined and added to the blockchain, nodes can accept or reject the block. Nodes store and spread the blocks of data with each other in order to ensure all nodes are up to date.
Scalability refers to the capacity of a blockchain to process more transactions without sacrificing transaction times and incurring higher fees.
State channels allow multiple transactions to occur without submitting each one to the blockchain. With a state channel an opening transaction is published to the blockchain, a smart contract then executes multiple transactions off-chain, and a second transaction is then settled on-chain which captures all the transactions that occurred with the state channel. The only fees incurred are the opening transaction and the closing transaction that captured all that occurred through the state channel.
Sharding enables more transactions per second on a blockchain by splitting the network into smaller parts known as “shards.” Each shard can communicate with one another to maintain decentralization through the blockchain. Learn more about sharding here.
Consensus protocols are the different means by which blockchains verify transactions. Different types of consensus protocols include proof-of-stake, proof-of-work, proof-of-space, and proof-of-elapsed time. You can learn about the differences between each consensus protocol here.