7 Crypto Terms That Confound Most Users

The world of cryptocurrency is packed with intricate terminology that can be overwhelming. Even those who have a grasp on Bitcoin and Ethereum often find themselves wrestling with more complex concepts. Here, we explore seven crypto terms that many users struggle to fully comprehend.

Blobs

In the realm of Ethereum, “blobs” refer to Binary Large Objects, which are sizable data chunks not utilized by the Ethereum Virtual Machine (EVM). These blobs are stored on-chain for approximately 20 to 90 days before being discarded. Their introduction enhances blockchain scalability and cost-effectiveness as part of Ethereum’s Dencum upgrade. Additionally, blobs can denote data segments on decentralized storage systems like IPFS or Filecoin, where they are encrypted and distributed across multiple nodes. In Monero, blobs indicate the binary data of a transaction awaiting network broadcasting, designed to ensure user privacy.

Rollups

Rollups represent a method for handling transactions on layer-2 protocols, streamlining space on the base layer. They combine multiple transactions at the layer-2 level and send this aggregated data back to layer-1. There are two major varieties:

• Optimistic Rollups: These rollups accept transactions as valid unless proven otherwise during disputes.
• ZK Rollups: Utilizing zero-knowledge proofs, these provide transaction validation without disclosing transaction data, offering instant finality.

In essence, rollups serve to optimize transaction efficiency much like how a calzone allows for more filling than a standard pizza slice.

Byzantine Fault Tolerance

Byzantine Fault Tolerance (BFT) is a fundamental concept in blockchain technology, originating from the Byzantine Generals problem—a thought experiment on achieving consensus among decentralized parties without a central authority. BFT ensures the resilience of blockchain systems against deceitful actions that could lead to erroneous outputs.

Satoshi Nakamoto addressed this challenge for Bitcoin by implementing a proof-of-work system, which relies on significant investments in time and resources to create a block, motivating participants to act honestly.

Proto-Danksharding

Sharding refers to partitioning a blockchain into smaller sections, or shards. Proto-danksharding is a nuanced term that can cause confusion. It relates to transaction types that incorporate data blobs to address Ethereum’s persistent issues with high gas fees and limited transaction capacity. The concept simplifies the submission of transactions to the Ethereum base layer through layer-2 rollups.

For clarity, this process is also known by the more descriptive term EIP-4844.

Distributed Validator Technology (DVT)

DVT enhances the validation process in proof-of-stake systems by decentralizing responsibilities across various validators. Interpreted as a multi-signature scheme for running a validator, it fortifies the network’s robustness by reducing reliance on any single operator, thus minimizing potential vulnerabilities.

Dynamic Resharding

A relatively new concept, dynamic resharding is considered a major advancement in sharding technology. The approach allows networks to adjust the quantity of shards based on operational load—merging two underperforming shards into one or splitting an overloaded shard into two.

Nonce

The term “nonce” pops up often in foundational discussions about cryptocurrency but may easily be forgotten. In the Bitcoin blockchain, the nonce is a number included in the block header that is cryptographically hashed. This number is determined through trial and error to identify which miner will generate the next block. The process of nonce generation requires substantial computational power and energy, ensuring a fair and transparent mining process.