Navigating the world of Ethereum can sometimes feel like learning a new language. This comprehensive glossary is your essential guide to understanding the key terms, concepts, and technologies that define the Ethereum ecosystem. Whether you're a developer, investor, or simply curious, this resource will help you master the vocabulary needed to engage with confidence.
Core Blockchain Concepts
Blockchain
A blockchain is a decentralized, distributed digital ledger that records transactions across many computers. This ensures that the recorded data cannot be altered retroactively without altering all subsequent blocks and gaining consensus from the network. It provides a secure and transparent way to store information.
Block
A block is a fundamental unit in a blockchain, bundling together a set of transactions and other data. Once a block is filled with transactions, it is cryptographically linked to the previous block, forming a continuous chain. This structure ensures the integrity and chronological order of the entire transaction history.
Node
A node is any computer that connects to the Ethereum network and runs client software. Nodes maintain a copy of the blockchain and participate in validating and relaying transactions and blocks, ensuring the network remains decentralized and secure.
Decentralization
Decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group) to a distributed network. In blockchain, it means no single party has absolute authority, fostering transparency and resilience.
Accounts, Addresses, and Transactions
Account
An Ethereum account is a digital entity on the blockchain that can send transactions, hold a balance of Ether (ETH), and interact with smart contracts. There are two main types:
- Externally Owned Account (EOA): Controlled by a private key, typically managed by a user through a wallet.
- Contract Account: Controlled by its own smart contract code and not a private key.
Address
An Ethereum address is a unique identifier, akin to a bank account number, derived from the public key of an EOA or determined at the time a contract is deployed. It is used to send and receive ETH and tokens.
Transaction
A transaction is a signed data package that initiates a state change on the blockchain. It can involve sending ETH from one account to another or interacting with a smart contract to execute its functions. Every transaction requires a fee, known as gas, to be processed.
Gas
Gas is the unit that measures the computational effort required to execute specific operations on the Ethereum network. Users pay transaction fees in ETH, which are calculated as Gas Units Used * Gas Price Per Unit. This mechanism prevents network spam and allocates resources efficiently.
Nonce
In the context of an account, a nonce is a transaction counter. Each transaction from an account must have a unique sequential nonce, which prevents replay attacks where a transaction could be duplicated and broadcast multiple times.
Consensus and Staking
Proof-of-Stake (PoS)
Proof-of-Stake is the consensus mechanism that secures the Ethereum blockchain. Validators lock up, or "stake," ETH to gain the right to propose and validate new blocks. Their staked ETH acts as collateral, incentivizing honest behavior. This is a more energy-efficient alternative to the previous Proof-of-Work (PoW) system.
Validator
A validator is a participant in the Ethereum network who has staked 32 ETH to run specialized software. Their responsibilities include storing data, processing transactions, and adding new blocks to the blockchain. Validators are rewarded for honest participation and penalized (slashed) for malicious or lazy behavior.
Staking
Staking is the act of depositing 32 ETH into the official Ethereum deposit contract to become an active validator. It allows users to participate in securing the network and earn rewards. Users with less than 32 ETH can join staking pools to contribute collectively.
Finality
Finality is the guarantee that a set of transactions within a block is irreversible and cannot be changed. In Ethereum's PoS, a block is considered finalized after it has been approved by a supermajority (two-thirds) of the total staked ETH, making chain reorganizations economically prohibitive.
Smart Contracts and Development
Smart Contract
A smart contract is a self-executing program stored on the blockchain that automatically executes the terms of an agreement when predetermined conditions are met. They eliminate the need for intermediaries and enable trustless automation of complex processes.
Ethereum Virtual Machine (EVM)
The EVM is a globally decentralized, sandboxed virtual machine that executes smart contract bytecode. It is the runtime environment for every smart contract on Ethereum, ensuring that all nodes on the network process computations identically and reach the same consensus on state changes.
Solidity
Solidity is the most popular high-level, object-oriented programming language used for writing smart contracts on Ethereum. Its syntax is similar to JavaScript, C++, and Python, making it accessible for many developers.
Application Binary Interface (ABI)
An ABI is a JSON interface that defines how to interact with a smart contract. It maps smart contract functions and variables to machine-readable bytecode, allowing external applications and other contracts to call its methods correctly.
dApp (Decentralized Application)
A dApp is an application that runs on a decentralized peer-to-peer network, like Ethereum, rather than on centralized servers. A dApp typically consists of a front-end user interface and back-end smart contracts that define its application logic.
Scaling and Layer 2 Solutions
Layer 2 (L2)
Layer 2 refers to a secondary framework or protocol built on top of the Ethereum mainnet (Layer 1). L2 solutions are designed to improve transaction throughput and reduce fees by handling transactions off-chain or in a batched manner before settling the final results on the main chain.
Rollups
Rollups are a prominent type of L2 scaling solution. They execute transactions outside the main Ethereum chain (off-chain) but post transaction data back to Layer 1. This allows them to inherit the security of Mainnet while significantly increasing transaction capacity. There are two primary types:
- Optimistic Rollups: Assume transactions are valid by default and only run computation via a fraud proof if a challenge is issued.
- Zero-Knowledge Rollups (ZK-Rollups): Use validity proofs to cryptographically verify the correctness of all transactions before posting data to Mainnet.
Sidechain
A sidechain is an independent blockchain that runs parallel to Ethereum Mainnet and is connected by a two-way bridge. Sidechains have their own consensus mechanisms and parameters, often optimized for speed and lower costs, but they rely on their own security models rather than Ethereum's.
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Tokens and Standards
ERC-20
ERC-20 is the most common technical standard used for creating fungible tokens on Ethereum. A fungible token is interchangeable and identical to another token of the same type, much like traditional currency. It's used for stablecoins, utility tokens, and governance tokens.
ERC-721
ERC-721 is the standard for Non-Fungible Tokens (NFTs). Each ERC-721 token is unique and cannot be replaced or interchanged with another identical token. This standard is ideal for representing ownership of unique digital or physical assets like art, collectibles, and real estate.
ERC-1155
ERC-1155 is a multi-token standard that allows a single smart contract to manage multiple types of tokens, both fungible (like ERC-20) and non-fungible (like ERC-721). This is highly efficient for applications like gaming, where a user might hold various in-game items and currencies.
Frequently Asked Questions
What is the difference between ETH and Gas?
ETH (Ether) is the native cryptocurrency of the Ethereum network. It has value and can be traded or used as collateral. Gas, measured in gwei (a denomination of ETH), is the unit used to price the computational work needed to process transactions and smart contracts. You pay gas fees in ETH.
How do I choose between an EOA and a Smart Contract Wallet?
An Externally Owned Account (EOA) is controlled by a single private key and is simple to use with most wallets. A smart contract wallet (often using multi-sig) is controlled by code and can enable advanced features like social recovery, spending limits, and requiring multiple signatures for transactions. EOAs are more common, but smart contract wallets offer enhanced security and flexibility.
What happens if a validator goes offline?
If a validator is offline and fails to perform its duties (like attesting to the chain), it incurs an "inactivity leak" penalty. These penalties are minor compared to slashing for malicious acts but will slowly reduce the validator's staked ETH balance over time until it comes back online.
Are Layer 2 solutions secure?
Yes, major Layer 2 solutions are designed with security as a priority. Optimistic Rollups rely on fraud proofs and a challenge period, while ZK-Rollups use mathematical validity proofs that are verified on Layer 1. The core security assumption is that the Ethereum mainnet remains secure, as L2s ultimately derive their security from it.
What is the purpose of a seed phrase?
A seed phrase (or recovery phrase) is a series of 12 to 24 words generated by your cryptocurrency wallet. It is a human-readable representation of your private key. Anyone with this phrase can restore access to your wallet and funds on any compatible device, making it crucial to store it securely and offline.
Can a smart contract be changed after deployment?
By default, smart contract code on Ethereum is immutable and cannot be changed after deployment. This ensures trustlessness. However, developers can write contracts with upgradeability patterns using proxy contracts, which allow the logic to be updated while preserving the contract's address and state. This introduces complexity and requires trust in the upgrade mechanism.