Golden Encyclopedia | Seven Encryption Terms You Must Know

Author: Robert D. Knight, Cointelegraph; Compiler: Baishui, Golden Finance

Mastering cryptocurrency is not easy. Even if you already understand the difference between Bitcoin and Ethereum and proof of work and proof of stake, there are still a lot of new terms to learn and understand.

But even for fairly experienced cryptocurrency enthusiasts, there are still some terms that are difficult to understand. Here are seven terms that almost no one in the blockchain field can fully or deeply understand.

Blobs

In the 1958 movie starring Steve McQueen and the 1988 remake, the Blob is an amoeba-like jelly monster that terrorizes the residents of a small town, growing larger and redder as it devours them.

In cryptocurrency, especially Ethereum, a blob (binary large object) is a large block of data that is not needed by the Ethereum Electronic Virtual Machine (EVM). Blob data is kept on the chain for about 20-90 days and then deleted.

Source: John Irving

The result is a more cost-effective and scalable blockchain. As part of Ethereum's Dencum update, blobs are often discussed in conjunction with the next term on this list.

A blob may also refer to a block of data stored on a decentralized storage system such as IPFS or Filecoin. These blobs are encrypted and stored on multiple nodes.

Finally, a blob can also refer to a transaction blob on Monero, which is the binary data of a transaction before it is broadcast to the network. Since Monero is a privacy chain, the structure of these blobs can remain anonymous.

And that’s a lot of blobs.

Rollups

Rollups are a way of processing transactions on a Layer 2 protocol that frees up valuable space on the base layer. Rollups fold transactions one by one on the second layer, sometimes dozens of times, and then roll them together before sending the data back to Layer 1.

There are two main types of Rollups, optimistic and zero-knowledge (ZK) proofs.

Optimistic Rollup is a fairly clear term. It means that the Rollup runs with an “optimistic” approach, assuming that transactions are valid unless proven wrong by validators. Only in the event of a dispute do they check the validity of the transaction.

ZK Rollup proves transactions without revealing any of the transaction data. Hence, the term “zero knowledge”.

ZK Rollup provides instant finality because cryptographic proofs guarantee that the data is valid.

In many ways, a Rollup is to your standard blockchain transaction what a Calzone is to your regular pizza slice. With a rollup, you can fit more stuff in.

Byzantine Fault Tolerance

This is one of the classic terms for blockchain and a key feature of the technology, but for most people, they simply don't take the time to think about it.

The Byzantine Generals Problem is a theoretical exercise that describes the difficulty of decentralized parties reaching consensus in the absence of a trusted centralized entity. That is, it grapples with the possibility that a bad actor could create false information to produce an undesirable outcome in a particular situation.

Specifically, generals who are not in direct communication must attack the Byzantine at the same time to achieve victory. If one of the generals retreats, or signals an attack but then retreats, the battle will end in a rout; worse than if all the generals coordinated a retreat.

On the left, if all generals attack at the same time, they will win. On the right, if two generals mistakenly signal an attack and then retreat, the others will be defeated. Source: Lord Belbury

Satoshi Nakamoto solved Bitcoin's Byzantine Generals Problem by using a proof-of-work consensus mechanism. Creating blocks takes a lot of time and effort, so they have an incentive to provide accurate information.

Byzantine faults are errors in a decentralized computing system that show different errors or results to different participants, just like the Byzantine Generals Problem.

Byzantine fault tolerance, then, is the resilience of a computing system to such failures.

We hope this isn’t a too Byzantine interpretation.

Proto-Danks Sharding

Sharding is a way of splitting a ledger into smaller parts, called shards.

But proto-danksharding is one of the most opaque terms in the crypto world’s vocabulary. The term doesn’t particularly have a guiding meaning. Is proto short for prototype? Is this the same dank from your favorite meme folder? Both assumptions are probably quite plausible, but both are wrong.

First proposed by protolambda and Dankrad Feist, who named the idea after themselves, proto-danksharding is a transaction type that accepts blobs like the one above. The solution using blobs is designed to overcome Ethereum’s long-standing problems with high gas fees and low transaction throughput.

Layer 2 rollups use blobs to bundle transactions and submit them to the Ethereum base layer without overwhelming it.

But if proto-danksharding seems like a confusing and cryptic term, you could opt for a more instructive name for the process; EIP-4844.

On second thought, the term proto-danksharding isn’t that bad.

DVT — Distributed Validator Technology

Most people in the crypto space are already familiar with validators who approve transactions in a proof-of-stake consensus model.

DVT takes that concept and spreads the process across multiple validators. As Lido describes it, DVT “as a system operates similarly to a multisig setup where validators run.”

They call it “Simple DVT,” but its simplicity remains a mystery.

Ultimately, DVT leverages multiple operators rather than relying on a single operator, which increases resiliency and mitigates single points of failure.

Dynamic Resharding

Dynamic resharding isn’t your grandmother’s old sharding. Dynamic resharding is a relatively new term that the marketing team at Near Protocol calls “the holy grail of sharding,” but it also coined a new vocabulary that isn’t immediately understandable.

Based on the concept of blockchain sharding, resharding occurs when the network adjusts the number of shards based on load.

An overloaded shard can become two shards, while two underutilized shards can become one.

Nonce

Nonce is one of those terms that most people encounter when discovering cryptocurrency in the early days and then completely forget about, like the personal names of a bunch of people you just met at a party.

In the Bitcoin blockchain, a nonce is a number used in the block header, which is then cryptographically hashed. This is the number guessed through trial and error that decides which miner generates the next blockchain.

The data structure of a Bitcoin block containing a random number. Source: Research Gate

Random number generation makes the mining process fairer and more transparent. This requires a lot of computing power and energy, and in some cases, miners may need to adjust the random number multiple times to solve a block.