Bitcoin glossary

Bitcoin glossary of terms

Bitcoin address: This is a unique string of 27-34 alphanumeric characters. You can easily create your own Bitcoin address by opening a Bitcoin Wallet. Your unique Bitcoin address will always start with a 1 or 3. Your Bitcoin address is where you send, receive and store your bitcoins.

Cryptocurrencies: This is a sweeping name for all digital currencies such as Bitcoin, Litecoin and Feathercoin. You can read more about cryptocurrencies at our active cryptocurrencies page.

Application Specific Integrated Circuit: Also known as ASIC. This is referring to the technology that does the ‘mining’ for bitcoins. You can read more about Bitcoin here.

Blockchain: The Blockchain is the public record (anyone can download and view it) of every transaction in Bitcoin ever. You can simply follow the record of any mined bitcoins through this ledger.

Block: A block is a single entry in the Blockchain. It comprises of 10 minutes worth of verified Bitcoin transactions. These are actual transactions made by people buying, selling and transferring bitcoins from one peer to another over a 10-minute period. Once these transactions have been verified and secured by the Miners they are then added to, and become a ‘block’ in, the Blockchain.

Brain wallet: This refers to storing private keys (essentially your bitcoins) in your head. If you do this properly it makes it almost impossible for your bitcoins to be stolen because there is no physical code to steal.

Cold storage: Generally people store their bitcoins online, or on a computer-based Bitcoin wallet. Cold storage refers to bitcoins stored where there is no internet connection, or you simply have written down your Bitcoin codes.

Confirmed transaction: This is a completed transaction on the blockchain.

Mining difficulty: This refers to how hard it is to generate a new block in the blockchain. Around every two weeks this difficulty level is adjusted to make sure there are not too many new blocks created.

Mining pool: Mining pools are groups of people using shared computing power to mine Bitcoin. Due to this multiplication of computing power, being a part of a mining pool increases your chances of securing blocks in the Blockchain and, in turn, your chance of being rewarded with the new bitcoins. The pool owners split the rewarded bitcoins proportionally, depending on contribution, between the members of the pool.

Bitcoin tumbling: The basic idea behind Bitcoin tumbling is to make traceable bitcoins untraceable. Bitcoin tumblers co-ordinate groups of users, anonymously pool their bitcoins, mix them up, and redistribute them back to the group, making the trail almost impossible to follow.

Nonce: A nonce is a random number which gets used in the proof work. It stands for Number Used Once.

The Genesis Block: This was the very first block in the blockchain.

Hash rate: The hash rate is a mining term. It refers to how quickly computers are completing tasks in the Bitcoin code. For a miner, the higher the hash rate the better, because it means tasks are being completed quicker.

Mining: New bitcoins are created using this process. Bitcoin transactions are verified on the blockchain using this process and new bitcoins are issued if your pool or mining group is successful in completing the block.

Private key: Protect your private key. Every Bitcoin user who has a wallet will have a private key. This is what allows you to keep your bitcoins. You lose this key, or have it stolen, and other people can access your bitcoins.

Proof of work: The proof of work is a number that is hard for a computer to solve. This is what keeps transactions and in turn Bitcoin safe from hackers and other malicious people. Each block in the blockchain refers to previous blocks in the chain for validation, thus finding proof of work and creating the blockchain.

Satoshi Nakamoto: This could be anyone, but it is believed he/she or they are the inventors of Bitcoin. Check out our ‘Who Invented Bitcoin?’ page for further information.

Bitcoin Wallet: There are downloadable, online and offline wallets. This is a program which allows you to store you bitcoins. It has a unique code for each user which allows them to keep their bitcoins safe.