Internets Ultimate Bitcoin Glossery
Here at Cryptoexchangehelp we strive to deliver the best casino guide possible for players who enjoy to gamble with bitcoin. One of the reasons we do that is not only because we love to gamble but we are also huge bitcoin enthusiasts.
As a consequence of bitcoin starting to evolve to what we all is hoping bitcoin to be, so is also everything surrounding it. What started out as a ”simple” idea of creating something that would change the world has now a whole industry backing it.
As everything grows the details get more intricate and the information sometimes feels a bit overwhelming. In an effort to help the bitcoin community, we here at Cryptoexchangehelp , has decided to compile the best bitcoin glossery possible in one place.
There has been attempts at creating a glossery all over the internet, with great information in them, but its time to combine our efforts to create the Ultimate Bitcoin Glossery.
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The maximum number of bitcoins that there will ever be. The number has been hard-set into the protocol and cannot be changed, ensuring that Bitcoin is a deflationary currency.
An attack when a miner or a mining pool extend its computing resources to the level that it becomes possible to control 51% of the Bitcoin Network computing power, thus block generation is only up to the one player giving no chance to the others.
Each Bitcoin transaction is broadcast to all nodes, or computers using the Bitcoin client. When the miners confirm a block, a page in the Bitcoin ledger is published attesting that the transactions in that block are valid and that no effort has been made to spend those bitcoins on two things at the same time. This process is known as a confirmation and occurs every 1o minutes on average. One confirmation is considered secure, but having 6 confirmations is considered proof that there is statistically no chance that any cheating has occurred.
A Bitcoin address is similar to a physical address or an email. It is the only information you need to provide for someone to pay you with Bitcoin. An important difference, however, is that each address should only be used for a single transaction.
The process of awarding a newly created Altcoin to existing Bitcoin holders. Usually, this process requires users to enter their private keys into the Altcoin client—a dangerous move that requires the user to move their Bitcoin first before they claim their airdrop.
The name for cryptocurrencies that are alternatives to Bitcoin. An example of altcoins is Litecoin.
One of the main arguments made for the need of governments to regulate or pass laws against Bitcoin is its usefulness to pass money nearly instantly and nearly anonymously. Anti-Money Laundering legislation has been used along with KYC laws to prosecute some Bitcoin businesses. Additionally, banks have been known to close the accounts of Bitcoin related businesses and even individual users, supposedly due to the possibility of money laundering.
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.
Used to make large numbers shorter and easier to parse than binary or the commonly used base10 (using the familiar system of numbers of 0-9). Base58 is the encoding scheme used for common Bitcoin addresses, starting with 1 or 3. It includes the numbers 1-9, all uppercase characters except for I & O and all lower case characters except for l (as they could be mistaken for similar characters).
A person pessimistic about Bitcoin.
Bitcoin Improvement Proposals. RFC-like documents modeled after PEPs (Python Enhancement Proposals) discussing different aspects of the protocol and software. Most interesting BIPs describe hard fork changes in the core protocol that require supermajority of Bitcoin users (or, in some cases, only miners) to agree on the change and accept it in an organized manner.
Bit is a common unit used to designate a sub-unit of a bitcoin – 1,000,000 bits is equal to 1 bitcoin (BTC). This unit is usually more convenient for pricing tips, goods and services.
a decentralized, peer-to-peer online currency with open source software.
Bitcoin – with capitalization, is used when describing the concept of Bitcoin, or the entire network itself. e.g. “I was learning about the Bitcoin protocol today.”
bitcoin – without capitalization, is used to describe bitcoins as a unit of account. e.g. “I sent ten bitcoins today.”; it is also often abbreviated BTC or XBT.
Like a regular ATM, Bitcoin ATMs provide people with Bitcoins after depositing regular currencies.
In August 2017, a group of Bitcoin enthusiasts changed the consensus rules of Bitcoin, particularly those governing the Block Size. As only a few miners and participants joined them, the network permanently forked. Everybody who held Bitcoin before the fork received an equal amount of Bitcoin cash (known as an airdrop), which can be traded on other exchanges.
Bitcoin Core is the most popular Bitcoin client.
Bitcoin-qt (pronounced cute) is the graphical interface of Bitcoin Code, the most popular Bitcoin client. Named after the QT widget toolkit, on which it is built.
Written by Satoshi Nakamoto in 2008, it describes the original plan and protocol for Bitcoin.
The Bitcoin Price Index, showing the price of Bitcoin against a number of other crypto and fiat currencies.
A block is a record in the block chain that contains and confirms many waiting transactions. Roughly every 10 minutes, on average, a new block including transactions is appended to the block chain through mining.
The block chain is a public record of Bitcoin transactions in chronological order. The block chain is shared between all Bitcoin users. It is used to verify the permanence of Bitcoin transactions and to prevent double spending.
A web service running a Bitcoin node and displaying statistics and raw data of all the transactions and blocks. It also provides a web wallet functionality with lightweight clients for Android, iOS and OS X.
Brain wallet is a concept of storing private keys as a memorable phrase without any digital or paper trace. Either a single key is used for a single address, or a deterministic wallet derived from a single key. If done properly, a brain wallet greatly reduces the risk of theft because it is completely deniable: no one could say which or how much bitcoins you own as there are no actual wallet files to be found anywhere. However, it is the most error-prone method as one can simply forget the secret phrase, or make it too simple for anyone to brute force and steal all the funds. Additional risks are added by a complex wallet software. E.g. BitcoinQT always sends change amount to a new address. If a private key is imported temporarily to spend 1% of the funds and then the wallet is deleted, the remaining 99% will be lost forever as they are moved as a change to a completely new address. This already happened to a number of people.
BTC is a common unit used to designate one bitcoin.
A person optimistic about Bitcoin.
Usually measured in transactions per second, or TPS, the capacity of the Bitcoin network varies, depending on the types of transactions. Generally, it is between 3 and 5 TPS depending on what types of transaction we assume are being used
Informal name for a portion of a transaction output that is returned to a sender as a “change” after spending that output. Since transaction outputs cannot be partially spent, one can spend 1 BTC out of 3 BTC output only be creating two new outputs: a “payment” output with 1 BTC sent to a payee address, and a “change” output with remaining 2 BTC (minus transaction fees) sent to the payer’s addresses. BitcoinQT always uses new address from a key pool for a better privacy. Blockchain.info sends to a default address in the wallet.
A common mistake when working with a paper wallet or a brain wallet is to make a change transaction to a different address and then accidentally delete it. E.g. when importing a private key in a temporary BitcoinQT wallet, making a transaction and then deleting the temporary wallet.
A Bitcoin client is software that interacts with the network. Can be a full node, an SPV node, or specialized software.
An informal term that means either 1 bitcoin, or an unspent transaction output that can be spent.
The length of time since a coin has last been spent. Noting how long since a number of coins have been transacted is one indication of velocity in the Bitcoin economy. However, since transactions may not be between people, but merely individuals moving their holdings from one address to another, this can be overstated.
A technique that mixes the transactions of multiple people to obfuscate which inputs belong to which outputs.
A security measure for Bitcoin that is disconnected from the internet. Could be a paper, USB stick or hardware wallet.
A transaction can be attributed (colored) with a special meaning, such as representing a deed. This deed can then be moved around and stored like a regular Bitcoin transaction, without you accidentally mixing and spending it with your regular Bitcoin.
Confirmation means that a transaction has been processed by the network and is highly unlikely to be reversed. Transactions receive a confirmation when they are included in a block and for each subsequent block. Even a single confirmation can be considered secure for low value transactions, although for larger amounts like $1000 USD, it makes sense to wait for 6 confirmations or more. Each confirmation exponentially decreases the risk of a reversed transaction.
A currency based on mathematics and cryptography.
Cryptography is the branch of mathematics that lets us create mathematical proofs that provide high levels of security. Online commerce and banking already uses cryptography. In the case of Bitcoin, cryptography is used to make it impossible for anybody to spend funds from another user’s wallet or to corrupt the block chain. It can also be used to encrypt a wallet, so that it cannot be used without a password.
An experimental Bitcoin wallet using stealth payments and coinjoin to allow for more anonymous transactions
A number defining how difficult it is to hash a new block. As computing power for hashing increases, the difficulty level increases.
A distributed network is designed so that there is no central server or entity that others must connect to. Instead, network participants connect directly to each other. Bitcoin is a distributed network.
If a malicious user tries to spend their bitcoins to two different recipients at the same time, this is double spending. Bitcoin mining and the block chain are there to create a consensus on the network about which of the two transactions will confirm and be considered valid.
A bitcoin can be divided into one-hundred million pieces, known as satoshis. Very small amounts of bitcoins are known as dust as they have no practical value. Some websites, like faucets, may attempt to make many dust transactions, which clutter up the block chain. Small transaction fees and limits on how many satoshis can be sent have been imposed to limit dust transactions.
The Elliptic Curve Digital Signature Algorithm is the lightweight cryptographic algorithm used to sign transactions in the Bitcoin protocol.
The use of cryptography to encode a message such that only the intended recipient(s) can decode it. Bitcoin uses encryption to protect wallets from unauthorized access.
A resource for exchanging currencies. Bitcoin exchanges are used to convert fiat currencies into Bitcoin and vice versa, or to exchange Bitcoin with other cryptocurrencies.
A resource that provides free Bitcoins, usually in the form of hourly or daily deposits of several Satoshis.
“Regular” currencies such as Dollars or Pounds that are given value based on people giving them a value.
Fear of missing out. A feeling in which you want to get onboard a skyrocketing price rally.
Refers either to a fork of a source code or, more often, to a split of the blockchain when two different parts of the network see different main chains. In a sense, fork occurs every time two blocks of the same height are created at the same time. Both blocks always have the different hashes (and therefore different difficulty), so when a node sees both of them, it will always choose the most difficult one. However, before both blocks arrive to a majority of nodes, two parts of the network will see different blocks as tips of the main chain.
Term fork or hard fork also refers to a change of the protocol that may lead to a split of the network (by design or because of a bug). On March 11 2013 a smaller half of the network running version 0.7 of bitcoind could not include a large (>900 Kb) block at height 225430 created by a miner running newer version 0.8. The block could not be included because of the bug in v0.7 which was fixed in v0.8. Since the majority of computing power did not have a problem, it continued to build a chain on top of a problematic block. When the issue was noticed, majority of 0.8 miners agreed to abandon 24 blocks incompatible with 0.7 miners and mine on top of 0.7 chain. Except for one double spend experiment against OKPay, all transactions during the fork were properly included in both sides of the blockchain.
Fear, Uncertainty and Doubt related to the market.
A node which implements all of Bitcoin protocol and does not require trusting any external service to validate transactions. It is able to download and validate the entire blockchain. All full nodes implement the same peer-to-peer messaging protocol to exchange transactions and blocks, but that is not a requirement. A full node may receive and validate data using any protocol and from any source. However, the highest security is achieved by being able to communicate as fast as possible with as many nodes as possible.
The very first block in the Blockchain.
The amount of hashes possible every second, measured in billions of hashes.
Graphical Processing Unit. In the early days, bitcoins were mined with regular computers. Soon after, someone discovered that the GPUs used for gaming were more efficient and most mining switched over to those before transitioning to ASICs.
It is the 50% reduction in block reward after a certain number of blocks are mined. In Bitcoin, the halving happens after every 210,000 blocks.
Some people use term hard fork to stress that changing Bitcoin protocol requires overwhelming majority to agree with it, or some noticeable part of the economy will continue with original blockchain following the old rules.
hashing is an action of performing a hash function to output data. Used in order to confirm and process Bitcoin transactions.
The hash rate is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second.
A misspelling of hold. Represents the ethos of saving and long-term planning, as opposed to simply spending your coin. Often criticized for its ‘hoarding’ mentality, many Bitcoiners prefer a culture of savings and long-term planning. For some reason, HODL is often seen as an acronym of Hold On for Dear Life in the press.
A Bitcoin wallet that resides on a device that is connected to the internet. A wallet installed on a desktop computer or smartphone is usually a hot wallet.
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.
A physical or electronic log book containing a list of transactions and balances typically involving financial accounts. The Bitcoin blockchain is the first distributed, decentralized, public ledger.
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.
The Lightning Network is a network that sits ‘on top’ of Bitcoin. Participants can connect to the network by depositing Bitcoin into specialized smart contracts. They can then make infinite transactions with each other at very low fees, without being limited by Bitcoin’s capacity constraints.
The name for the live Bitcoin network, as opposed to testnet.
Somebody who only owns or uses Bitcoin, and who believes it is the only cryptocurrency or blockchain system worth spending time and effort on. Often coupled with the belief that strong network effects will lead to only one cryptocurrency dominating global payments.
1 thousandth of a Bitcoin (0.001 BTC).
memory pool, files with data about valid transactions that are not included into the block as they are unconfirmed.
M of N
The number of cosigners that must provide signatures (M) out of the total number of cosigners (N) in order for a multi-signature bitcoin transaction to take place. A common M of N value is “2 of 3” meaning two of the three cosigners’ signatures are required.
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.
Bitcoin mining is the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security. As a reward for their services, Bitcoin miners can collect transaction fees for the transactions they confirm, along with newly created bitcoins. Mining is a specialized and competitive market where the rewards are divided up according to how much calculation is done. Not all Bitcoin users do Bitcoin mining, and it is not an easy way to make money.
A computer or group of computers that add new transactions to blocks and verify blocks created by other miners. Miners collect transaction fees and are rewarded with new bitcoins for their services.
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.
Where is Bitcoin going? To the moon!
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.
The Bitcoin network is made up of nodes, which may be mining or simply verifying. SPV or light clients are only used to make transactions.
A computer connected to the Bitcoin network in order to input and process transactions.
A random number used in a hash in an attempt to find a block. Using a nonce ensures that the hash calculation is cryptographically secure (can’t be hacked) since it can’t be repeated without that random number.
Software whose code is made publicly available and that is free to distribute. Bitcoin is an open source project and arguably the first open source money.
A block which is not included into the valid blockchain. It occurs when two or more miners simulataneously find a block. In this situation only one block can be confirmed and stored in blockchain while the other one will be rejected by the network, thus the finder will not be rewarded with the coins that the block contained.
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.
Peer-to-peer refers to systems that work like an organized collective by allowing each individual to interact directly with the others. In the case of Bitcoin, the network is built in such a way that each user is broadcasting the transactions of other users. And, crucially, no bank is required as a third party.
Paper versions of Bitcoins that are meant to be more secure due to being offline.
A pending transaction is one that has been broadcasted to the network, but has not been included in a block yet. Typically, it sits in the mempool.
On May 22, 2010, developer Laszlo Hanyecz bought two pizzas for a total sum of 10,000 BTC. This was the first known transaction in which Bitcoin was used to buy a physical good. Satoshi’s favorite pizza seems to be Pineapple and Ham, as revealed in a comment, although many hope he was only joking.
As the amount of computing power needed to mine a block has risen, those who don’t have the resources or skills needed to compete can merge their computing power with others and get a proportional return on the blocks discovered.
The rise in pools has also given rise to concentrations of hashing power, making some people worry about the possibility of a 51% attack. In practice, thus far, miners have been careful not to come too close to this limit to protect the trust of the system and the value of their holdings.
Used in connection with the private key, and also known as the Bitcoin address.
Pump and dump
When a group of people heavily hype a new coin, driving the price up, and then quickly sell leaving other investors with a worthless asset. This is not new to crypto currencies, but the excitement surrounding them make pump-and-dump schemes common. Be careful when checking out altcoins.
Another type is when groups of traders buy bitcoin back and forth between themselves to drive the price up and then sell a larger amount, crashing the price, and buy back in cheap. The relative smallness of the Bitcoin economy makes these more of a possibility than in the larger market.
Mining of a cryptocurrency before it is actually public and live, generally performed by its creator.
A private key is a secret piece of data that proves your right to spend bitcoins from a specific wallet through a cryptographic signature. Your private key(s) are stored in your computer if you use a software wallet; they are stored on some remote servers if you use a web wallet. Private keys must never be revealed as they allow you to spend bitcoins for their respective Bitcoin wallet.
Proof of stake
A system used by some altcoins in which the amount of coins that you own determines that amount of coins that you can mine.
Proof of Work
A piece of data that requires a significant amount of computation to generate but requires a minimal amount of computation to be verified as being correct. Bitcoin uses proof of work to generate new blocks.
The official rules that dictate how participants on a network must communicate. Bitcoin’s protocol specifies how each node connects with the others, how many bitcoins will exist at any point in time, and defines other aspects of the network.
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.
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.
A Bitcoin “cent”, the smallest form of Bitcoins. One Bitcoin is equal to 1 million Satoshis.
The creator of Bitcoin and the author of the original Bitcoin whitepaper and code. His real identity is unknown to the world.
A new transaction type that fixes the malleability problem of legacy Bitcoin transactions. Was implemented as a soft fork, but in combination with the lack of Block Size increase became a controversial issue that contributed to Bitcoin Cash fork.
A cryptographic signature is a mathematical mechanism that allows someone to prove ownership. In the case of Bitcoin, a Bitcoin wallet and its private key(s) are linked by some mathematical magic. When your Bitcoin software signs a transaction with the appropriate private key, the whole network can see that the signature matches the bitcoins being spent. However, there is no way for the world to guess your private key to steal your hard-earned bitcoins.
The specific hash function used in the mining process to secure bitcoin transactions.
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.
Sometimes the soft fork refers to an important change of software behavior that is not a hard fork (e.g. changing mining fee policy).
Solo mining means an entity is not part of a pool but instead attempts to mine full blocks itself. Due to Bitcoin’s enormous hash power and the luck involved in finding valid blocks, solo mining is increasingly difficult and rare.
Simplified Payment Verification. In the Bitcoin Whitepaper, Satoshi discusses the possibility of SPV. It would allow nodes to alert each other about invalid blocks, without the need to verify the full block. SPV has not been successfully implemented yet and might be impossible, as a negative (that the block is not valid) cannot be proven.
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.
Some transactions are considered standard, meaning they are relayed and mined by most nodes. More complex transactions could be buggy or cause DoS attacks on the network, so they are considered non-standard and not relayed or mined by most nodes. Both standard and non-standard transactions are valid and once included in the blockchain, will be recognized by all nodes. Standard transactions are: 1) sending to a public key, 2) sending to an address, 3) sending to a P2SH address, 4) sending to M-of-N multi-signature transaction where N is 3 or less.
A way of linking addresses by tracking how a bitcoins move between addresses. Taint analysis can show where stolen bitcoins go and suggest that a set of addresses belong to a single individual. If any addresses are publicly associated with an individual (like the donation QR on this site), then that entire set of addresses might be identified.
An alternative to the Blockchain, used for testing, as the name suggests.
A token is an object that represents a right. Under this definition, Bitcoin can be considered a token (the right to transact on the Bitcoin blockchain). More commonly, tokens are meant to represent deeds, contracts, or physical objects.
A program used by internet users for anonymity online. Also used many times by those attempting to access Silk Road.
An entry in the blockchain that describes a transfer of bitcoins from address to another. Bitcoin transactions may contain several inputs and outputs.
A set of transactions that have been broadcast to the Bitcoin network which are then bundled together to create the next block.
Also known as “miners’ fee”, an amount that an author of transaction pays to a miner who will include the transaction in a block. The fee is expressed as difference between the sum of all input amounts and a sum of all output amounts. Unlike traditional payment systems, miners do not explicitly require fees and most miners allow free transactions. All miners are competing between each other for the fees and all transactions are competing for a place in a block. There are soft rules encoded in most clients that define minimum fees per kilobyte to relay or mine a transaction (mostly to prevent dos and spam). Typically, the fee affects the priority of a transaction.
Every transaction has an identifier. While legacy transactions allow for a bug that makes this ID malleable, SegWit transactions have a deterministic transaction ID. This allows for second layer networks like Lightning.
The unit for a microbitcoin (0.000001 BTC).
Transaction that is not included in any block. Also known as “0-confirmation” transaction. Unconfirmed transactions are relayed by the nodes and stay in their mempools. Unconfirmed transaction stays in the pool until the node decides to throw it away, finds it in the blockchain, or includes it in the blockchain itself (if it’s a miner).
A Bitcoin address that is personalized, like a vanity license plate.
Bitcoins obtained as a reward for discovering a block that have not been spent.
How wildly the price of Bitcoin moves within a specific time frame. Bitcoin has had periods of truly wild swings, and will continue to do so until many more people adopt its use.
A Bitcoin wallet is loosely the equivalent of a physical wallet on the Bitcoin network. The wallet actually contains your private key(s) which allow you to spend the bitcoins allocated to it in the block chain. Each Bitcoin wallet can show you the total balance of all bitcoins it controls and lets you pay a specific amount to a specific person, just like a real wallet. This is different to credit cards where you are charged by the merchant.
A web service providing wallet functionality: ability to store, send and receive bitcoins. User has to trust counter-party to keep their bitcoins securely and ready to redeem at any time. It is very easy to build your own web wallet, so most of them were prone to hacks or outright fraud. The most secure and respected web wallet is Blockchain.info. Online exchanges also provide wallet functionality, so they can also be considered web wallets. It is not recommended to store large amounts of bitcoins in a web wallet.
Somebody trading with a large amount of Bitcoin.
A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body’s philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.
Informal currency code for 1 Bitcoin (defined as 100 000 000 Satoshis). Some people proposed using it for 0.01 Bitcoin to avoid confusion with BTC. There were rumors that Bloomberg tests XBT as a ticker for 1 Bitcoin, but currently there is only ticker XBTFUND for SecondMarket’s Bitcoin Investment Trust. See also BTC.
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.