Understanding the Language of Digital Currency

Introduction

Welcome to the Bitcoin Veterans Glossary. This resource is designed to help you navigate the often complex world of Bitcoin and blockchain technology. Whether you’re a veteran just starting your Bitcoin journey or looking to deepen your understanding, this glossary will serve as your go-to reference for key terms and concepts.

Glossary Entries

A

Address –  A string of letters and numbers that serves as a destination for a Bitcoin payment, similar to an email address. Example: 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2

ASIC (Application-Specific Integrated Circuit) –  Specialized hardware designed specifically for Bitcoin mining, offering significantly higher performance and energy efficiency compared to general-purpose computers.

B

Bitcoin –  A decentralized digital currency created in 2009 by an unknown person (or group) using the pseudonym Satoshi Nakamoto. It operates on a peer-to-peer network without the need for intermediaries.

Block –  A group of Bitcoin transactions that have been verified by miners and added to the blockchain.

Blockchain –  A distributed ledger that records all Bitcoin transactions. It’s a chain of blocks, each containing a group of transactions, linked using cryptography.

C

Cold Storage –  Keeping Bitcoin offline in a way that is not connected to the internet, reducing the risk of hacking or theft. Examples include hardware wallets or paper wallets.

Cryptocurrency –  A digital or virtual currency that uses cryptography for security. Bitcoin is the first and most well-known cryptocurrency.

D

Decentralization –  The principle of distributing power away from a central point. In Bitcoin, this means no single entity controls the network.

E

Exchange –  A platform where you can buy, sell, or trade Bitcoin for other cryptocurrencies or traditional currencies.

F

Fiat Currency –  Government-issued currency that is not backed by a physical commodity. Examples include the US Dollar, Euro, and Japanese Yen.

H

Halving –  An event that occurs approximately every four years where the block reward for mining new Bitcoin is cut in half, reducing the rate at which new Bitcoin is created.

Hash Rate  – The speed at which a computer is completing an operation in the Bitcoin code. A higher hash rate increases a miner’s opportunity of finding the next block and receiving the reward.

K

Key (Private and Public) –  In cryptography, a key is a piece of information used to encrypt or decrypt data. In Bitcoin:

• Private Key: A secret number that allows you to spend your Bitcoin
• Public Key: Derived from the private key, it’s used to receive Bitcoin

L

Lightning Network –  A “layer 2” payment protocol that operates on top of Bitcoin’s blockchain, allowing for faster and cheaper transactions.

M

Mining –  The process of verifying and adding transaction records to Bitcoin’s public ledger (blockchain). Miners are rewarded with newly created Bitcoin and transaction fees.

N

Node – Any computer that connects to the Bitcoin network and keeps a copy of the entire blockchain.

P

Proof of Work (PoW) – The algorithm used by Bitcoin to confirm transactions and produce new blocks for the blockchain. It requires miners to solve complex mathematical problems to add new blocks.

S

Satoshi –  The smallest unit of Bitcoin, equal to 0.00000001 BTC. Named after Bitcoin’s creator, Satoshi Nakamoto.

Smart Contract – Self-executing contracts with the terms of the agreement directly written into code. While more commonly associated with Ethereum, some limited forms of smart contracts are possible on Bitcoin through recent upgrades.

T

Transaction Fee –  A small amount of Bitcoin included in transactions as a reward for miners who process and verify the transaction.

W

Wallet – Software that stores your Bitcoin private keys and allows you to send and receive Bitcoin. Can be hardware-based, software-based, or even paper-based.