Key Concepts

Bitcoin Blockchain

A blockchain is a decentralized ledger that can record transactions between two parties in a verifiable and permanent way without the need for a central authority[2]. Bitcoin was the first cryptocurrency introduced with Bitcoin Whitepaper paving the path for Blockchain and new innovations in decentralized technologies[3]. Bitcoin made it possible to do transfer of economic value without any third party intermediary dictating the rules.

At the core of Bitcoin's transactions is its non Turing complete scripting language, Script[22]. It enables complex transactions like Time Lock transactions[25], Multiig transactions[26] which allows transactions across multiple business use-cases.

Smart Contracts

As the Bitcoin blockchain grew in popularity, several teams started building over Bitcoin core and created independent blockchains that they felt were an upgrade.

It was fundamentally difficult to build applications directly on Bitcoin blockchain due to Script's limitations. The community efforts were being divided in different projects. It gave rise to the idea of Ethereum[4] and other Smart-contract[27] enabled blockchains.

Smart contracts are computer protocols intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. For instance, Smart-contracts allow us to code value in our programs and build secure trust less escrow systems. They are programs which run exactly as defined without any possibility of downtime, censorship, fraud or third-party interference.

Centralized Exchanges

As people were introduced to Bitcoin and other blockchain the market for buying and exchanging cryptocurrency grew. This was done over exchanges and helped in getting the initial adoption. These exchanges essentially had centralized architecture where the user's cryptocurrencies were held by these exchanges to facilitate the transaction. But this centralized architecture makes these exchanges prone to hacks, failure and internal frauds[24].

Token

Tokens are digital assets created over an existing blockchain to represent a particular set of utility or purpose. These tokens are generally created to facilitate some functions for a dApp(Decentralized Application) built over an existing blockchain.

Mnemonic Phrase

Mnemonic seed phrase or Mnemonic Phrase[29] is list of words randomly generated from some pre-approved dictionary words[30]. This seed phrase helps generate private keys to hold crypto-assets. Mnemonic phrase is interpretable by humans which makes it easier to store and remember, as compared to private keys[28].