Block - Data structures within the network database, where transaction data in the network is permanently recorded. A block records some or all of the most recent transactions not yet validated by the network. Once the data are validated, the block is closed.
Block Mining Time - Interval of time required for a new block to be created and sealed by a validator.
Block Size - Size of a block sealed and stored in the network's ledger. It determines the maximum amount of computing power the network will dispend or use on a determined time interval, thus indirectly capping the maximum number of transactions that the network can process on that same given interval.
Centralised Exchange - Centrally controlled exchange, that can be used for trading, and most of the times for fiat onboarding and offboarding. Commonly referred to as CEXs, these exchanges usually charge high fees and require KYC from users.
Custodial Wallet - wallet services offered by a centralized business such as a cryptocurrency exchange. Custodial wallets have certain benefits, such as less user responsibility regarding private key management.
DAG - Stands for Directed Acyclic Graph, which, in simple terms, is an alternative more efficient way to order the blocks on a network. It differs from the standard concept of a blockchain because the blocks are not necessarily ordered linearly.
dApp - Stands for Decentralised Application, and are generically used to describe decentralised platforms and protocols deployed on a public network.
DDoS Attack - A denial-of-service attack is a cyber-attack in which the perpetrator seeks to make a machine or network resource unavailable to its intended users by temporarily or indefinitely disrupting services of a host connected to a network.
Decentralized Exchange - An exchange that operates on a decentralized manner. Normally uses AMM (Automated Market Making) mechanisms, and are known for its relatively lower fees compared to Centralized Exchanges, and all its transactions take place on chain.
Decentralized Autonomous Economy (DAE) - An Economy That operates In a decentralized manner. A Smart contract Governed Economy Secured Using Cryptography.
Ethereum Virtual Machine (EVM) Aka "Smart Chain" - The Ethereum Virtual Machine is the software platform that developers can use to create decentralized applications (dApps) on PHI Network, Ethereum, and other compatible networks. This virtual machine integrates & is 100% compatible with PHI Smart Chain.
Faucet - Script or platform that distributes free tokens to users. It's most commonly used by new users joining or bridging assets from another network to pay for initial transaction fees.
Finality - State in which a particular transaction is considered final and irreversible by the blockchain.
Gas - Usage fee paid by users to interact with the network.
Hashpower - Amount of computing power available to the network to process new blocks.
Liquidity Pools- Liquidity pools enable users to buy and sell crypto on decentralized exchanges and other DeFi platforms without the need for centralized market makers.
Miner - Validator node with mining enabled.
Mining - The act of applying computing power to solve a mathematical problem, in order to seal a and add a new block to the ledger.
Mnemonic Phrase - A mnemonic sentence (“mnemonic code”, “seed phrase”, “seed words”) is a way of representing a large randomly-generated number as a sequence of words, making it easier for humans to store. These words are then used to create a seed, which can be used for generating extended keys in a hierarchical deterministic wallet.
Network Difficulty - Indirectly determines how much computing power is needed for a validator to successfully seal a new block.
Node - Node is either or both a redistribution point or a communication endpoint for PHI Network.
Non-Custodial Wallet - you have sole control of your private keys, which in turn control your cryptocurrency and prove the funds are yours. With a custodial wallet, another party controls your private keys. Most custodial wallets these days are web-based exchange wallets.
Non-Fungible Token (NFT) - A non-fungible token is a financial security consisting of digital data stored in a blockchain, a form of distributed ledger. The ownership of an NFT is recorded in the blockchain, and can be transferred by the owner, allowing NFTs to be sold and traded.
PHI20 - Is a programming standard for fungible blockchain based assets, usually called tokens.
PHI721 - Is a programming standard for non-fungible blockchain based assets, commonly called NFTs. There are currently alternatives to the ERC721, such as the ERC11155.
PHI1155 - Is a modern and very efficient multi-token programing standard, compatible with both fungible and non-fungible tokens. It can cut gas usage by 90% in comparison to ERC721 tokens, and its main drawback - in comparison - is that token ownership is harder to track.
PoA - Stands for Proof of Authority, which is a consensus mechanism that users identity verification as a disincentive to misbehave or tamper the network.
PoS - Stands for Proof of Stake, which is a consensus mechanism used by many networks today, and leverages on financial disincentive to avoid misbehaving or tampering of the network by its validators.
PoW - Stands for Proof of Work, which implies on applying using hardware and computing power to seal new blocks on a network.
Private Key - Is a key used to resolve a public key, and can be used to sign transactions. For simplicity, they are usually represented as strings of alphanumeric characters. A cryptocurrency wallet consists of a set of public addresses and private keys.
Private Ledger - A ledger, or database, that is centrally controlled and maintained.
Private Network - A DAG or blockchain network that is centrally controlled and maintained. Usually used for enterprise-level and software development applications.
Public Key - Commonly referred to as the 'wallet address' it can be publicly shared and other participants can use it to send funds to a particular wallet or individual.
Public Ledger - A ledger, or database, that is publicly accessible.
Progressive Web Application (PWA) - is a website that looks and behaves as if it is a mobile app. PWAs are built to take advantage of native mobile device features, without requiring the end user to visit an app store, make a purchase and download software locally.
RPC - Stands for Remote Procedure Call, and in this document RPCs are referred to as the network's connection endpoint, used by participants to interact with a public or private ledger.
Smart Contracts - Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary's involvement or time loss.
Solidity - Is the programming language used to write smart contracts on PHI Network.
Throughput - Normally measured in TPS (transactions-per-second), it refers to the speed in which a network can process incoming transactions.
TPS - Stands for transactions per second, and it's usually a subjective measure of how fast a network can process transactions.
Transaction Fee - Also referred to as Usage Fee or Gas Fee, is the fee users pay when submitting a transaction to the network.
Validator - Individual, group of individuals, or entity responsible for setting up and maintaining a Execution Layer Validator Node. Validators have to consign funds with PHI Network to be granted the right to mine, and play a key role on keeping the network fully operational.
Validator Key - Hash key that allows validators to connect to a Bridging Layer node to syncronise, and mine new blocks.
Wallet - In the context of this document, wallet is the equivalent of a users' account on the network, that is used to store and manage digital assets. An address can hold a balance of digital assets, and a wallet can control a set of different addresses.
— A private key and a recovery phrase: two closely related concepts that are central to crypto security. — Both provide a vector for accessing your blockchain assets, but do so in different ways and have different vulnerabilities. — Private keys in raw form are 256 digits long, making them impractical for storing, securing and transacting with. That’s why we have the humble crypto wallet to protect them! — But what if you lose your crypto wallet? This is where your recovery phrase comes in. Unlike a private key, the seed phrase doesn’t just relate to one blockchain address, but all the addresses secured by the private keys in your wallet. — Recovery phrases and private keys are two halves of the same whole, but need to be managed differently. Let’s take a closer look!
Private key, seed phrase, wallet, blockchain address – man crypto can be confusing! If you feel like you’re not sure which one’s which, then this is the article for you. Here, we get into the nitty-gritty of private keys and recovery phrases, their relationship and the differences between them.
So you’ve bought yourself some crypto – congratulations! But how do you keep it secure? With a crypto wallet, of course.
The purpose of a crypto wallet is actually not to store your crypto – your coins and tokens live on the blockchain – but instead, to secure your private keys. And when you begin using your wallet, it will also generate an important piece of data that you need to safeguard – your 24-word recovery phrase.
Your private key and recovery phrase are two halves of the same whole – in fact, your recovery phrase is simply your private key in a different format. This can make it hard to understand the purpose and differences between these two concepts, and consequently, how to keep them safe.
So here, let’s take a deep dive into your private key and recovery phrase, the relationship between them, and the risks faced by each one, so you can manage your crypto with absolute confidence.
HWG!
When all is said and done, private keys are the central element of crypto ownership. Blockchain is a digital storage network, and having the private key for a given blockchain address means that you control everything at that address.
You generate a private key (along with a corresponding public key) any time you create a blockchain address.
The best way to think about them is by imagining your public key as your email address: it allows others to find you, and send you things. But only the private key (think of this as your email password) lets you open the address, access what’s inside and send things from it.
So in essence your private key is what gives control over crypto assets. This is why it is so important to manage your private key responsibly and ensure nobody else can access it – yet this can be a challenge.
Private keys might well be at the centre of your crypto control, but they come with some difficulties.
In raw form, a private key is a string of 256 alphanumeric characters. Imagine trying to type those digits in accurately each time you transact! A number this complex isn’t really a practical way for human to sign transactions, and is prone to mistakes. Remember – a mistake on the blockchain cannot be undone, so the sheer length of private keys makes them a risky piece of data.
And that’s not all. Since your private key gives access to your blockchain address, it is a huge target for opportunists looking to steal your crypto. So although you need this data on a regular basis if you’re transacting with crypto, you also need to ensure it stays completely private and unseen.
The recovery phrase – sometimes called the seed phrase or mnemonic phrase – is a 12, 18, or 24-word pattern generated each time a new wallet is created. Unlike your private key, which relates to just one blockchain address, the recovery phrase is a derivative of your entire wallet, and all private keys stored there.
In layman’s terms, a recover phrase is the “master key” for all of your crypto accounts – it is your private keys in mnemonic form. These words, when entered into another crypto wallet (in the correct order) will recover all of the private keys you were storing on your original wallet. The purpose? Giving you control. Having this phrase means that even if you lose your physical hardware device, you’ll still have access to your blockchain assets.
It may seem like a string of random words, but in fact the format of your recovery phrase is exactly what enables you to stay in control of your crypto.
Any time a crypto wallet generates a recovery phrase, the words are selected from a list of 2048 possibilities, referred to as the BIP-39 standard Word List – more or less all wallets, including the Ledger Nano, generate recovery phrases using words from this list.
By doing so, we ensure that you, the user, can access your crypto accounts from any other wallet – sort of like having a charger that fits any phone. Imagine if every wallet required a recovery phrase in a different format – your access to your crypto would be dependent on whichever type of recovery phrase you were using, meaning you don’t really control your crypto at all.
So by using the BIP-39 standard for generating your recovery phrase, Ledger (and all other wallets using the same standard) makes sure that you own your crypto assets, not your wallet provider.
So your recovery phrase is sort of a shorthand for all of your private keys which gives you absolute control over all of your assets, even without your wallet – but it also entails some major vulnerabilities, and these need to be factored into the way you manage it.
Unlike a private key, which corresponds to just one crypto account, the recovery phrase gives instant access to every currency in your wallet. So if it falls into the wrong hands, the potential risk to your crypto is far greater.
And more importantly, unlike a private key, which is always concealed inside your wallet, the recovery phrase needs to be physically written down and managed by you.
How you do this will define your security, because it can be used by anyone, on any other wallet – so if someone else gets hold of this phrase, consider your assets gone. So let’s take a look at the best ways of storing your recovery phrase, to make sure your private keys stay absolutely safe when you’re using your wallet.
The whole objective of using a hardware wallet is to keep your private keys away from threats, including both online and offline vectors. So it is essential that you treat your recovery phrase with the same care.
Storing your recovery phrase on a connected device completely defeats the purpose of using a hardware wallet: just like a private key, a hack or malware deployed via your connection could simply target your phrase, and access your whole wallet.
In crypto, there is no customer service, no support team and no online database of your details. There’s just you and your recovery sheet. That’s it.
It might seem obvious, but keeping your recovery sheet in a place where it cannot be damaged by fire or water is a must – either of these things could potentially destroy your only backup.
Luckily, products like the Cryptosteel Capsule Solo and the Billfodl both enable you to record your recovery phrase on a steel back-up, making it resistant to fire, water damage and more or less all physical threats. That means your recovery phrase stays safe and secure on a medium that cannot be destroyed.
Your recovery phrase is a record of all your private keys. This means that storing it in a place known only to you is a fundamental part of keeping it safe.
With your private keys safely inside your Ledger device, yet readily available to you for transactions, you will rarely use your recovery phrase. That’s the way it’s meant to be! So take your time, think carefully about where to store your phrase and make sure that safety is your top priority when deciding. It may be the most important thing you do.