Bitcoin Glossary & FAQ
A theoretical situation where a single entity controls more than half of the networks computing power and decides to use this power to his advantage. The attacker can double spend his money – meaning he can pay with the same Bitcoin twice or even more. The attacker will also be able to prevent transactions from being confirmed and prevent other miners from generating new Bitcoins.
A General name given to cryptocurrencies other than Bitcoin. For example Litecoin, Feathercoin, Dash, etc.
Application Specific Integrated Chip. A chip that was manufactured with the sole purpose of mining Bitcoins.
A Bitcoin miner equipped with an ASIC. These are the most powerful miners today. The term Bitcoin Miner can also refer to a person who mines Bitcoins.
A Bitcoin Improvement Proposal (BIP) is a design document for introducing features or information to Bitcoin. This is the standard way of communicating ideas since Bitcoin has no formal structure. for example BIP38:
A decentralized digital currency which was invented in late 2008. The idea was originally published on January 2009.
A Bitcoin Automated Teller Machine. Basically this is a machine that accepts fiat money and dispenses Bitcoin in exchange. Some ATMs can also accept Bitcoin and return fiat in exchange. This is map of Bitcoin ATMs worldwide.
A name usually referring to the original Bitcoin software that also acts as a Bitcoin wallet called Bitcoin QT or Bitcoin Core. The term can also refer to any other Bitcoin program which is installed directly on your computer.
The original Bitcoin client which holds a complete copy of the Blockchain on your personal computer and also acts as a Bitcoin wallet. It is the software you would install in order to run a Bitcoin node. You can download Bitcoin core here.
The process of ordering the transactions on the Blockchain throguh solving complex mathematical problems. The reward for this resource intensive work are new Bitcoins which are generated in the process.
Any form used to store your private keys is referred to as your Bitcoin wallet. This could be a hardware wallet, paper wallet, hot wallet, cold wallet, desktop wallet and mobile wallet. Of course you can mix and match as well (e.g. hot desktop wallet, cold paper wallet, etc.)
An eight-page paper describing a peer-to-peer network for electronic transactions without relying on trust. The original paper was created on November 2008 by Satoshi Nakamoto (probably an alias). Download the original whitepaper here.
A group of transactions. Each block has a reference to the previous block and that is how a "blockchain" is built. Mining is the process that actually build the blockchain. Because of this there is no way for someone to tamper with the system and add their own "custom" block to the chain.
The full list of mined blocks since the creation of Bitcoin. There is also a company called Blockchain.info which supplies various Bitcoin services such as a block explorer and a bitcoin wallet but they have no control or authority over Bitcoin's blockchain.
A block explorer allows you to search and navigate through the block chain. Using a block explorer you can check the balance of different Bitcoin public addresses, track coin transfer histories watch how many confirmations a transaction has and get a wide variety of statistics about the network such as the current hash rate and more.
The reward Bitcoin miners get for successfully inserting their block into the blockchain (also known as "mining as block"). In Bitcoin this reward consists of a fixed amount of coins (currently 25) and the transaction fees attached to all of the transactions within that block.
The fixed reward halves whenever a certain amount of blocks are mined. For more information on the next block halving read this.
The basic idea of a brain wallet is that your private key is memorized by heart and not written down anywhere. Using this method the only way someone can gain access to your Bitcoins is by forcing you personally to tell them your private key. This of course is a much more secure way to store Bitcoins but also not very user friendly.
Each time a new block in mined on top on an old block, all of the transactions inside the old block receive one confirmation. On average this takes about 10 minutes. The more confirmations a transaction has the harder it will be to "cancel" it or double spend it. It's usually safe to say a transaction is irreversible after it acquires 6 confirmations or more.
An add-on to the Bitcoin protocol which allows users to "color" Bitcoins with a specific attribute. For example mark Bitcoin as a share of stock, or a physical asset. This would enable bitcoins to be traded as tokens for other property.
The coinbase is the content of the 'input' of a generation transaction (i.e. a transaction that generates the fixed reward for miners). While regular transactions use the 'inputs' section to refer to their parent transaction outputs, a generation transaction has no parent, and creates new coins from nothing.
Coinbase is also the name of a very large Bitcoin payment company that allows buying, selling Bitcoins and acceptance of Bitcoin for businesses.
Keeping your bitcoin anywhere that is not connected to the Internet. For example: A paper wallet, on a flashdrive, a brain wallet, a TREZOR device, etc.
A currency that is based on math alone (e.g. Bitcoin). Instead of being printed out, cryptocurrency is produced by solving mathematical problems based on cryptography.
The use of mathematics to create codes and ciphers that can be used to conceal information. Used as the basis for the mathematical problems used to verify and secure bitcoin transactions.
Distributed Denial of Service. An attack orchestrated through the use of multiple computer in order to swamp a network from functioning properly. In Bitcoin for example this can be done by sending massive small amount transactions which will overflow the network and create longer block confirmation times.
A number which determines how difficult it will be to mine the next block of transactions. The higher the number, the harder it will be to mine the next block. The number self adjusts to the number of miners that are active on the network so that the average confirmation time will remain at 10 minutes. Meaning, if more miners come onboard the number will increase proportionally.
The act of spending the same Bitcoin twice. This is why it's recommended to wait for at least 6 confirmations before considering a transaction valid. However since it's pretty hard to alter the blockchain and double spend your money for small amounts of money even 1 confirmation can be enough.
Amounts of very small value (e.g. 0.000001 bitcoin). Since these transactions have almost no financial value but still take space on the blockchain a minimum transaction amount was set to the bitcoin protocol. If you wish to send a smaller amount than the minimum transaction amount you will need to pay a fee.
A website that dispenses small amount of Bitcoins (or altcoins) to its visitors. The original Bitcoin faucet idea was created by Gavin Andersen as a way of giving people their first Bitcoins.
Currency that a government has declared to be legal tender, but is not backed by a physical commodity. For exmaple the US dollar, the Euro and almost any other country related currency you can think of.
An alternative version of the blockchain which can be caused either by a 51% attack, a bug in the system or simply when a core development team decides to introduce substantial new features into a new version of a client.
Stands for GigaHash per Second. This is a unit for measuring a bitcoin miner's computing power (or hashing power). There's a direct correlation between how fast a miner is and how profitable it will be. 1000 GH/s = 1 TH/s
Graphical Processing Unit. Basically it's a chip put into a computer that needs to display resource intensive graphics (e.g. hardcore gaming). In the past people used the calculation ability of this chip to also mine Bitcoin. Today these chips can't compete with the computation power of ASIC miners.
A mathematical process that takes a variable amount of data and produces a shorter, fixed-length output.
The number of hashes that a bitcoin miner performs in a specific amount of time (usually seconds).
Any Bitcoin wallet that is connected to the Internet. Hot wallets are considered far less secure than cold storage since they can be hacked easier due to their connectivity.
Stands for KiloHash per Second. This is a unit for measuring a bitcoin miner's computing power (or hashing power). There's a direct correlation between how fast a miner is and how profitable it will be. 1000 KH/s = 1 MH/s
Stands for MegaHash per Second. This is a unit for measuring a bitcoin miner's computing power (or hashing power). There's a direct correlation between how fast a miner is and how profitable it will be. 1000 MH/s = 1 GH/s
Can refer to either a piece of hardware used for mining bitcoins or the person who operates that hardware.
Miners that have grouped together in order to mine more efficiently with their mining power combined. After they successfully mine a block they split the reward between them.
Also known as a tumbler. Mixers provide you with the service of creating transactions that are mixed with other peoples bitcoins. This way the inputs and outputs all get mixed up and it stops people from being able to trace the origin of the transaction. One of the main use for these mixers is money laundering.
A bitcoin address which is controlled collectively by two or more people. The funds can be released from the address only when the agreed number of signatures is reached (e.g. you need 2 out of 3 signatures to release funds). For more information read out Multisig beginner's guide.
A computer that runs the Bitcoin software (Bitcoin Core) and is connected to the Bitcoin network (i.e. connected to the internet and allows other computers access to it). Nodes validate the transactions that go throughout the network and they are crucial to keep bitcoin secure and decentralized. For more information read our guide on setting up your own node at home.
An arbitrary number that may only be used once. A nonce is used when trying to mine bitcoins and it plays a rule in the hashing of a transaction. For more information see the Bitcoin Wiki.
A block that was part of a fork that is no longer in use. Meaning a block that is not part of the valid blockchain.
The receiving address of a Bitcoin transaction. There can be many outputs to a single transaction.
A type of physical Bitcoin wallet. Inside of keeping the private keys on a piece of hardware, it is written down on a piece of paper. For a full tutorial about paper wallets read this post.
A secret (long) number that allows bitcoins to be spent. The private key is mathematically related to all Bitcoin addresses (public keys) generated from it.
A form of fraud usually done with altcoins. It involves artificially inflating the price of an owned coins (sometimes by the creator) through false and misleading positive statements or mass purchase of the coin. This is done in order to sell the cheaply purchased coin later on at a higher price.
An alternative form to determining mining power. Proof of stake (or POS in short) states that the more you own of a specific cryptocurrency the more mining power you have in its network.
The system used in Bitcoin to decide the amount of mining power each user in the network has. Proof of Work (or POW in short) states that the more computational power you own, the more mining power you will have in the Bitcoin network. This is due to the fact that in order to mine bitcoins (i.e. hash a block of transaction) you need to make complex computations, so if you've managed to do so it shows proof that you've worked.
Similar to a Bitcoin address. This is a 26-35 alphanumeric characters, beginning with the number 1 or 3, that represents the destination for a Bitcoin payment. The public key is created from the private key. There can be many public keys to any private key but only one private key that matches any public key.
The names (probably alias) of the person who wrote the Bitcoin protocol. No one has heard from him since late 2010 but many have tried to find out his identity ever since.
An alternative method for mining used in many altcoins. Its main advantage is that it's much more friendly to CPU and GPU mining, making it possible to still mine these coins at home.
Also referred to as "Digital Signature". It's a mediator used in Bitcoin that proves I have a specific private key without exposing it to the public.
An illegal marketplace for drugs, guns and other illicit purchases only accessible through the darknet. It's main currency was Bitcoin. Its owner was Ross Ulbricht who was later was charged and arrested by the FBI. Ross was sentenced to life in prison with no chance for parol.
Simplified Payment Verification. A Bitcoin protocol feature that is usually implemented in wallets. It allow the creation of "lightweight" wallet clients - wallets that don't need to download the whole blockchain in order to operate. This makes it possible to install SPV wallets on mobile phones and other space limited devices.
A term used in mining pools to describe completed work. Once a block is mined, any other attempts to mine it are useless and will yield no reward - so the block is considered "stale".
A measure of how likely it is that two addresses are related, i.e. owned by the same person. 0% - no relation, 100% - next / previous address.
Stands for TerraHash per Second. This is a unit for measuring a bitcoin miner's computing power (or hashing power). There's a direct correlation between how fast a miner is and how profitable it will be. 1000 TH/s = 1 PH/s
A testing environment for Bitcoin. It's an alternative blockchain that can be used to simulate Bitcoin in order to allow development of bitcoin applications.
The Onion Router. It's a web browser that allows anonymous browsing as it hides your IP address. Can be used to access the deepweb. For more information read this post.
Each transaction on the blockchain can carry a fee added by its issuer. The fee will go to the miner who mined the block with the transaction in it and supplies an incentive for miners to process it faster.
"New Bitcoins" that haven't been spent anywhere - they were just created as a reward for a miner's work.
The non official International Standards Organization (ISO) currency code used for Bitcoin. If a currency is not associated with a country then it starts with an “X”. It has a similar meaning as BTC.
A transaction that has not received any confirmations yet. Some sellers accept zero confirmation transactions (also known as "zero-conf") but they are putting themselves at risk of double spending on the buyer's part.
Did we miss something? Suggest / request terms to add to this glossary