A Meta-Glossary of Terms

We have been immersed in the virtual world and metaverse for quite some time but the landscape is still evolving and we're still learning. We've done some of the hard work so you don't have to by putting together a glossary of terms that might help unravel the mystery of the metaverse.

A Meta-Glossary of Terms

Insight / 30 Mar 2022

Blockchain – A digital ledger comprised of unchangeable, digitally recorded data in packages called blocks. Each block is ‘chained’ to the next block using a cryptographic signature. Ultimately, the blockchain is a decentralised system that records information in a way that is nearly impossible / impossible to hack or fraud.

Consensus – As cryptocurrencies are typically decentralised, there is no central authority running the show. In order to the network to arrive at the correct answer without the use of a central authority, consensus mechanisms are used (PoW, PoS). Consensus mechanisms allow these distributed systems to work together and stay secure. In theory, an attacker can compromise consensus by controlling 51% of the network. Consensus mechanisms are designed to make this "51% attack" unfeasible. Different mechanisms are engineered to solve this security problem in different ways, such as vis PoS (you would need 51% of the total staked crypto to defraud the chain) and PoW (you would need 51% of the networks computing power to defraud the chain).

Cryptocurrency – A digital currency in which transactions are recorded and verified by a decentralised system (such as the blockchain), rather than a centralised authority.

Decentralisation - The transfer of control and decision-making from a centralised entity (individual, organization, or group) to a distributed network. Thus, the decentralised structure exists outside of the control of central authorities.

Ledger – A record keeping system.

Mining – The process by which blocks or transactions are verified and added to a blockchain using a Proof of Work (PoW) consensus mechanism. In order to verify a block a miner must use a computer to solve a cryptographic problem. Once the computer has solved the problem, the block is considered “mined” or verified and the miner is rewarded with cryptocurrency.

NFT – Non-Fungible Token. Essentially means a digital item that is unique and not replaceable.

Proof of Stake (PoS) – In a proof of stake system, ‘staking’ serves a similar function to proof of work’s ‘mining’, in that it’s the process by which a network participant gets selected to add the latest batch of transactions to the blockchain and earn some cryptocurrency in exchange. So, PoS is a consensus mechanism in which an individual or in this case, the ‘validator’ validates transactions or blocks. The process upholds the network then starts with validators staking their cryptocurrency. The subsequent steps are then:

1) The network selects a winner based on the amount of crypto each validator has delegated into the staking pool and the length of time they’ve had it there — rewarding the most invested participants.

2) Once the winner has validated the latest block of transactions, other validators can attest that the block is accurate. When a threshold number of attestations have been made, the network updates the blockchain.

3) All participating validators receive a reward in the native cryptocurrency, which is generally distributed by the network in proportion to each validator’s stake (see step 1)

Due to not requiring significant ‘effort’ to solve complex mathematical problems, PoS requires a negligible amount of computing power compared to Proof of Work consensus.

Proof of work (PoW) – is a form of cryptographic proof. It is a consensus mechanism in which each block is ‘mined’ by a group of individuals or nodes on the network – involving computers solving arbitrary mathematical problems. Miners around the world race to solve the problem first and the winner of this race gets to update the blockchain with the latest verified transaction, consequently being awarded the associated cryptocurrency in return. Thus, the reason it’s called “proof of work” is because the network requires a huge amount of processing power.

Stake / Staking– Setting aside a cryptocurrency to earn rewards for holding them. Rewards are earned due to the blockchain putting the cryptocurrency to work in a Proof of Stake consensus mechanism.

Validators - A participant in Proof of Stake (PoS) consensus.

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