A Bitcoin Glossary for Beginners
Bitcoin is the largest cryptocurrency of the 21st Century. It provides a revolutionary approach to payments. Digital currency has been around for 13 years now. There are a lot of people who are not familiar with the terms attached to the cryptocurrency, and for some, the concept of Bitcoin is still new. You may have heard some words before but do not understand the purpose behind them. In this article, we have mentioned new words that are part of the Bitcoin vocabulary now.
To know more about Bitcoin, please read our detailed guides on cryptocurrency.
Let us get started with the Bitcoin glossary for terms!!
Bitcoins can be sent to and from through a string of alphabets and numeric characters known as addresses. It is similar to a physical or an email address, that is shared publicly with others that wish to send you Bitcoin. However, each Bitcoin address can only be used for a single transaction.
The bit is referred to as the sub-unit of Bitcoin – 1,000,000 bits is equal to 1 bitcoin (BTC).
Bitcoin with capital “B” is used when referring to the Bitcoin network or concept. e.g., “Bitcoin is the largest cryptocurrency of the 21st Century.”
bitcoin with a small a “b” is used when talking about a unit of bitcoin. e.g., “I received twenty bitcoins yesterday”. It is often abbreviated as BTC or XBT.
Blockchain is a public record and shared between Bitcoin users. It is an authoritative record of every Bitcoin transaction in chronological order. The purpose is to prevent double-spending and to verify the permanence of the transaction.
Block is a record of Bitcoin transactions that occurred over a period (roughly every 10 mins). To understand, take blockchain as a ledger book, then a block is a page from that book.
It is an abbreviation for Bitcoin (like USD for US Dollar or EUR for Euro).
A bitcoin transaction cannot be recorded as confirmed until it has been added to the block on the blockchain. For low-value transactions, a single confirmation is considered secure. But for high-value transactions such as USD 1,000, it can take up to 6 confirmations or more. Once the transaction is confirmed, it is almost impossible to reverse it. Each confirmation on a transaction exponentially decreases the risk of reversal.
Cryptography is a mathematical branch that uses mathematical codes to provide high levels of security. It is also used by the banking and e-commerce sector. In Bitcoin, cryptography prevents spending funds from another user’s wallet. Also, sign transactions and verify the blockchain.
An attempt to send the same bitcoins to two different recipients at the same time. Blockchain and Bitcoin mining makes it impossible for malicious users to double spend as they create a consensus on the network about which transaction to be confirmed and validated.
The Bitcoin network undertakes intensive mathematical proofing for security purposes. The Bitcoin network undertakes intensive mathematical proofing for security purposes. If the hash rate reaches 10 Th/s, it means that the network can make10 trillion calculations every second.
Ledger is used for record-keeping purposes. It can be a physical or electronic logbook that contains a list of transactions and balances typically includes financial accounts.
Mining is a process that enables the computer hardware to do mathematical calculations for the Bitcoin network to confirm each transaction. The process involves adding the transaction to the blockchain.
Peer-to-peer or P2P network connects the user directly with each other instead of connecting them through a centralized server. In the Bitcoin network, each user is broadcasting the transaction of other users. Also, to execute a transaction, no third party (such as banks) is required.
It is a secret string of data that allows a Bitcoin owner to spend from his/her Bitcoin wallet. The private key allows users to spend BTC from their respective wallets so it must not be revealed to others.
Proof-of-work or commonly known as PoW is a decentralized consensus mechanism that requires a significant amount of effort from the members of the network to solve an arbitrary mathematical puzzle to prevent double-spending. In Bitcoin, PoW is used to generate new blocks.
A signature is part of a bitcoin transaction that proves that the private key owner approved the transaction.
Satoshi – the smallest unit of bitcoin is equivalent to 100 millionth of a bitcoin. Bitcoins can be divided into smaller units to facilitate smaller transactions. 1 satoshi = 0.0000001 bitcoins.
Bitcoin wallet is like a physical wallet that stores relevant information such as private keys and is used for accessing Bitcoin addresses and execute transactions.