In order to effectively explain just how a blockchain works, we need to spend a few minutes understanding the basic terminology.

Throughout 2017, early adopters including Ethereum , Omni and the SAFE Network began capitalizing on the disruptive blockchain model and birthing to a new software quasi-cyber-religion people are affectionately referring to as “DAOism.”

Engineers far and wide are rejoicing in the exciting new technology shaking things up in the technology industry itself, as well as startup businesses and investing opportunities. Cryptocurrencies have taken off and are drawing lots of eyeballs to this new model of low cost, supremely secure, and massively scalable technological applications.

Bitcoin is a branded cryptocurrency that most people are familiar with. This cryptocurrency works as a decentralized global peer to peer network with no issuer or acquirer. This means that no single entity can control it, as a central authority is bypassed. The coin is open source, meaning it has wallet and transaction verification. And best part - it can be used by anyone with a smartphone or computer.

Before we get into the nitty gritty of technical blockchain and cryptocurrency, let’s first take the time to understand the definitions of terms associated with blockchain. You might consider bookmarking or printing this glossary of blockchain terms for future reference.

Basically put, a blockchain is a specialized type of data system. The system uses a non-centralized network to create a digital ledger of transactions. Users then engage with the ledger through Cryptography, the operator allowing these transactions to occur. And because there’s no central figurehead, the speed of these transactions is fast.

As opposed to the prior approach of networks being made by one person or company, with blockchain, people and computers all over the world work with each other to create a network. Many different “blocks” make up the blockchain, which is constantly growing as new blocks are added to the chain. Cryptography enables and protects the blockchain network. We have seen this used in currency, data transfer and startup ICO funding.

Block

Blocks are synonymous with digital pages in a ledger, also known as a record keeping book. These files store unalterable data related to the network.

Dapp

Distributed-apps are a new type of architecture being used in the blockchain. Dapps are extremely beneficial in that it stores data and source code in a decentralized manner that is distributed in the blockchain. The biggest advantage to this structure is that a Dapp ensures the blockchain application is always online and is not reliant on a single servers’ availability. Daaps are an extremely disruptive application architecture as compared to the current cloud architectures. While Dapps aren't a complete replacement of the cloud (yet), they could potentially replace it someday.

Farmer

Each computer connected to the blockchain is a single node that contains a copy of the blockchain. When a computer is mining cryptocurrency, it is systematically committing transactions to the blockchain. A blockchain farm refers to a situation of many computers connected together over a network, making it possible to mine many cryptocurrency transactions simultaneously. For those not interested in the mining work themselves, there are businesses and individuals, farmers, providing mining services.

Hash

Hash is an algorithm or data function used to encrypt information within a block in the blockchain. Each block is identified by a unique Hash. There is only one cryptographic hash function per blockchain at a time. The more complex the hash function, the more secure it is, but the slower it is to encrypt.

Node

A computer is connected to the blockchain network through a node. The node is the backbone of the network, validating and relaying transactions. The node also receives a copy of the full blockchain itself.

Miner

A miner is responsible for maintaining a blockchain through validation. Miners use computer power, also known as hash power, to solving mathematical problems. The result of this process is the creation of verified data strings that are then added to the blockchain.

If a miner is the first to verify a block, they are given a new token as a reward. Verifying a block is no simple task, as a block can contain hundreds of individual transactions. And just how children’s blocks connect to one another, new blockchain blocks also contains data from the preceding block. This means that the system builds upon itself, making it difficult to go back and alter an individual block. This process also makes it difficult for tampering to occur. As you can see, mining the major blockchain systems takes up considerable energy and requires equipment that is highly specialized.

Mining

Transactional records are added to the public ledger of past transactions, also known as the blockchain - a chain of blocks linked by hash, through mining. Mining was engineered to be be extremely challenging and resource draining so the number of blocks found each day by miners remains steady. Mining results in a new token as payment.

Proof of Work (PoW)

Proof of work (PoW) is a requirement for successful mining on the blockchain. PoW involves distributed trustless consensus. Once a valid ledger state is observed, transactions of a certain age cannot be negated. This is because creating a ledger longer than the one seen requires computing power to compete with the network that exists. As a result, it’s deemed that these transactions are valid and have lasting consensus. Individual blocks in the blockchain are required to have a PoW in order to be validated. This PoW is confirmed by other blockchain notes each time a new block is received.

Proof of Stake (PoS)

Proof of stake (PoS) has is an alternative to PoW. While PoW requires computational work to occur by the prover, a PoS system offers a different way to achieve distributed consensus. Using this model, the creator of the next block is chosen by different combinations of random selection and proof of ownership of money or stake.

Fork

A fork is the creation of a continuous alternative version of the blockchain. It involves creating two blocks at the same time, but on different parts of the network. As a result, two parallel blockchains are created, one of which ends up being the winning blockchain. Users end of determining the winning blockchain by a majority choice.

Public/Private Key

In the blockchain world, a public key is a cryptographic key that is used to encrypt a message by any party. Another party then receives and decodes the message using a key that is only known to that individual or group. Now’s the time to let out that inner child squeal of secret spy encrypted code excitement.

Address

Just like your home and business have an address, a blockchain also has an address to identify its location. A blockchain address is a long alphanumeric reference to access the precise location of your transaction home, or where you’d like to receive, send or hold on to blockchain transactions. An example of a blockchain address is: 5TdA55HeLopzzwe3Lg7W335tGdCc623PoQ