New to World of Bitcoin?This is for you,Glossary for Bitcoin’s Terminology

in #bitcoin6 years ago

Address
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.

Bit
Bit is a common unit used to designate a sub-unit of a bitcoin - 1,000,000 bits is equal to 1 bitcoin (BTC or B⃦). This unit is usually more convenient for pricing tips, goods and services.

Bitcoin
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.

Block
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 (https://bitcoin.org/en/vocabulary#block-chain) through mining (https://bitcoin.org/en/vocabulary#mining).

Block Chain
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 (https://bitcoin.org/en/vocabulary#double-spend).

BTC
BTC is a common unit used to designate one bitcoin (B⃦).

Confirmation
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 (https://bitcoin.org/en/vocabulary#block) and for each subsequent block. Even a single confirmation can be considered secure for low value transactions, although for larger amounts like 1000 US$, it makes sense to wait for 6 confirmations or more. Each confirmation exponentially decreases the risk of a reversed transaction.

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 (https://bitcoin.org/en/vocabulary#block-chain). It can also be used to encrypt a wallet, so that it cannot be used without a password.

Double Spend
If a malicious user tries to spend their bitcoins to two different recipients at the same time, this is double spending. Bitcoin mining (https://bitcoin.org/en/vocabulary#mining) and the block chain (https://bitcoin.org/en/vocabulary#block-chain) are there to create a consensus on the network about which of the two transactions will confirm and be considered valid.

Hash Rate
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.

Mining
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.

P2P
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.

Private Key
A private key is a secret piece of data that proves your right to spend bitcoins from a specific wallet through a cryptographic signature (https://bitcoin.org/en/vocabulary#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.

Signature
A cryptographic (https://bitcoin.org/en/vocabulary#cryptography) signature is a mathematical mechanism that allows someone to prove ownership. In the case of Bitcoin, a Bitcoin wallet (https://bitcoin.org/en/vocabulary#wallet) and its private key(s) (https://bitcoin.org/en/vocabulary#private-key) 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.

Wallet
A Bitcoin wallet is loosely the equivalent of a physical wallet on the Bitcoin network. The wallet actually contains your private key(s) (https://bitcoin.org/en/vocabulary#private-key) which allow you to spend the bitcoins allocated to it in the block chain (https://bitcoin.org/en/vocabulary#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.

Altcoin
Altcoin is a form of cryptocurrency that has the same decentralized, peer-to-peer principles as bitcoin, but which uses its own blockchain and has its own rules of operation.

51% Attack
A 51% attack is a situation where more than half of the computing power on a network is operated by a single individual or concentrated group, which gives them complete and total control over a network. Things that an entity with 51% of the computing power can do include, but are not limited to:

  • Halting all mining.
  • Halting and manipulating all interpersonal transactions.
  • Use singular coins over and over.
    Block Reward
    Block reward is the reward allotted for hashing, or solving the mathematical equation related to a block. The reward for mining a Bitcoin block is 25 bitcoins per block mined, which will halve every 210,000 blocks!
    Distributed and Central Ledger
    A distributed ledger is an agreement of shared, replicable and synchronized data, in this case spread across multiple networks, across many CPU’s. A central ledger is the opposite in that all of the data, while being synchronized and replicable is controlled by a singular network or individual.

Fork
A fork is the permanent divergence of an alternative operating version of the current blockchain. Forks come into existence when a 51% attack occurs, a bug in the program, or more commonly a new set of consensus rules come into existence. These happen when a development team creates and inserts notably substantial changes into the system. The successful fork is decided by the height of their blocks.

Halving
Halving is the reduction of minable reward every so many blocks. For Bitcoin the reward is halved (http://www.bitcoinblockhalf.com/) after the first 210,000 blocks are mined and then every 210,000 thereafter.

Hashrate
Hashrate is the speed at which a block is discovered and the rate at which the related math problem is solved. Certain tools have been created to allow for higher hashrates. See ASIC.

Multisig
Multisig, or multisignature refers to having more than one signature to approve a transaction. This form of security is beneficial for a company receiving money into their BTC wallet. If a company wants to keep it so that one employee doesn’t have sole access to a transaction, multisig allows for a transaction to be verified by two separate employees before it’s complete.

Smart Contract
A two way smart contract is an unalterable agreement stored on the blockchain that has specific logic operations akin to a real world contract. Once signed, it can never be altered. A smart contract can be used to define certain computational benchmarks or barriers that have to be met in turn for money or data to be deposited or even be used to verify things such as land rights.

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