bitcoin glossary

We’ll be the first to admit it – the world of Bitcoin can be a bit overwhelming at times. That’s why we’ve put together this handy glossary of the most important Bitcoin terms and terminology with accompanying definitions. More than just Bitcoin, we also look at words associated with Bitcoin and cryptocurrency terms. Some of them will be familiar to you, while others might be new.

  • Address – a Bitcoin address is used to send and receive Bitcoin transactions. The address is made up of sequence of letters (both upper and lower case) and numbers, but can also be represented as a QR Code [see below].
  • Altcoin – the name for cryptocurrencies that are alternatives to Bitcoin. Litecoin is an example of an altcoin.
  • ASIC – the acronym for Application Specific Integrated Circuit, which is a chip meant to do one thing. In Bitcoin’s case – they are used to process hashing problems to mine Bitcoins.
  • Bitcoin – a decentralized, peer-to-peer online currency with open source software. You cannot have a Bitcoin glossary without mentioning Bitcoin!
  • Bitcoin Whitepaper – written by Satoshi Nakamoto in 2008, it describes the original plan and protocol for Bitcoin. Read it here.
  • Blockchain – this is a list of every block that has been mined since Bitcoin began. Each block has a referrence to a block before it, whihc is why they are “chained” together forming a blockchain. All Bitcoin transactions are displayed within blocks in the Blockchain in order to provide transaction transparency and an independently verifiable distributed transaction ledger.
  • BPI – the Bitcoin Price Index, showing the price of Bitcoin against a number of other crypto and fiat currencies.
  • BIP – Bitcoin Improvement Proposal: the formal proposals that anyone can suggest to upgrade the network. There must be a consensus around a BIP to push the changes through.
  • BTC – the shorthand name for Bitcoin, and also the unit for 1 Bitcoin.
  • Cold Storage – a security measure to store Bitcoin private keys offline. It could be a paper wallet [see below], USB stick or hardware wallet.
  • Confirmation – hashing a Bitcoin transaction successfully, which provides a referrence to it on the distributed ledger/Blockchain.
  • Difficulty – a number defining how difficult it is to hash a new block. As computing power for hashing increases, the difficulty level increases.
  • Dogecoin – a cryptocurrency featuring a Shiba Inu dog from the famous “Doge” internet meme. This is one of the top altcoins.
  • Exchange – a platform to exchange currencies. Bitcoin exchanges are used to convert fiat currencies into Bitcoin and vice versa, or to exchange Bitcoin with other cryptocurrencies.
  • Faucet – a resource that provides free Bitcoins, usually in the form of hourly or daily deposits of several Satoshis [see below].
  • Fiat Currency – traditional currencies such as Dollars or Pounds that are backed by a government and issued by a central bank but have no intrinsic value.
  • Gigahashes/sec – the amount of hashes possible every second, measured in billions of hashes.
  • Hash – hashing is an action of performing a hash function to output data. Used in order to confirm and process Bitcoin transactions.
  • Hashrate – the level of performance of mining computer hardware expressed in hashes/second.
  • Hodl – holding onto Bitcoin rather than selling even when times are rough. Coined by a reddit user posting under the influence of alcohol. Read the storey behind hodl.
  • Input – the input side of a given Bitcoin transaction is the side where the Bitcoin payment is coming from. Usually, this is expressed with a Bitcoin address.
  • Liberty Reserve – a digital currency processors located in Costa Rica that was shut down and seized by the United States government after it was found to be laundering money.
  • Lightning Network (LN) – a second layer built as an independent network that allows users to send and receive micro payments quickly without paying high fees. At the end of a given period, those payments are settled on the blockchain.
  • mBTC – 1 thousandth of a Bitcoin (0.001 BTC). Learn more about Bitcoin denominations. 
  • Microtransaction – the ability to pay for things in very small sums thanks to the fact that Bitcoin may be extended to 8 decimal places. Microtransactions are especially important to Bitcoin casinos by providing players the ability to deposit and gamble fractions of Bitcoins.
  • Mixing Service – the act of combining Bitcoins from different people by switching their addresses. This can help improve privacy and anonymity, but also can be used for money laundering.
  • Mt. Gox – one of the first Bitcoin exchanges that began liquidating after more than 850,000 of its users’ Bitcoins were lost or stolen – an amount equal to more than $450,000,000 at the time.
  • Namecoin – an altcoin allowing people to use the currency to purchase domain names.
  • Node – a computer connected to the Bitcoin network that runs the software necessary to broadcast, relay and independently verify transactions.
  • Output – the output side of a given Bitcoin transaction is the side where the Bitcoin payment is being sent to. Usually, this is expressed with a Bitcoin address.
  • Paper Wallet – paper versions of Bitcoins that are meant to be more secure due to being offline.
  • Pre-mining – mining of a cryptocurrency before it is actually public and live, generally performed by its creator.
  • Private Key – an alphanumeric string of characters used to sign messages and transactions on cryptocurrency networks. It should be kept private because whomever has the private key tacitly owns the cryptocurrency associated with its public address. This, in connection with the public key, is used for digital communication and completing Bitcoin transactions.
  • Public Key – used in connection with the private key, and also known as the Bitcoin address.
  • QR Code – like a barcode on products, the QR Code contains a pattern that is meant to be scanned by cameras and can be used to directly connect to a Bitcoin address.
  • Reward – when mining for new Bitcoins, the miner may claim new coins in a new block as a reward for helping to add new Bitcoins into circulation.
  • Satoshi – a Bitcoin “cent”, the smallest Bitcoin denomination. One Bitcoin is equal to 100 million Satoshis.
  • SegWit – or Segregated Witness, is a malleability fix that allows users to segregate the transaction signature, keeping it off a block. This frees up space on the block to record more transactions and enables compatibility with the Lightning Network.
  • Signature – a series of bytes that is a digital signature to connect someone to their public key in performing Bitcoin transactions.
  • Silk Road – an underground website, as part of the “dark web”, that was essentially the black market online. One could purchase illegal drugs, organs or hire assassins online. The site used cryptocurrencies such as Bitcoin and was shut down in 2013 by the FBI.
  • Stale – when a Bitcoin clock is successfully hashed, the act of hashing it becomes ‘stale’, which means that no other miner may attempt to hash it.
  • Testnet – an alternative to the Blockchain, used for testing, as the name suggests.
  • TOR – a program used by internet users for anonymity online. Also used many times by those attempting to access Silk Road.
  • Vanity Address – a Bitcoin address that is personalized, like a vanity license plate.
  • Wallet – a method for storing Bitcoins, and is generally the first step for anyone looking to buy or own Bitcoins. There are various forms of wallets – online, offline (software), hardware and paper – with varying levels of security. Learn more about Bitcoin wallets.
  • Zero-Confirmation Transaction – during a Bitcoin transaction, the seller may choose to send the product before the transaction has received confirmations. This is generally a show of good faith but also runs the risk of using the Bitcoins twice.

 

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