October 28, 2020

Bitcoin Vocabulary

Bitcoin Vocabulary

BTC is obviously very relevant, although just a fraction of users involved with it know what it is. To know more about it, a lot of crypto traders use a sort of wordbook with essential terms and coin phenomena described inside. Although the words listed in these articles are only the tip of an iceberg, they’ll open you doors to more advanced crypto topics.

Block

A block is a set of transactions and a basic element of Blockchain. Usually, the time of creating a new block in the network is about 10 minutes. Every next block consists of previous blocks. That’s why Bitcoin is such a safe cryptocurrency. The process of creating the new block is called ‘mining’.

BIP

This stands for Bitcoin Improvement Proposal. This is a document consisting of information about new Bitcoin features. All changes are submitted as a BIT. Its author maintains the consensus between members of the network.

Blockchain

This is a set of blocks distributed between a lot of nodes placed in the world. This is a public recording of all crypto-related transactions. That’s why blockchain is very often called ‘public ledger’ because it consists of many transactions made by people and no one can hide some of them or make the same transaction again or act dishonestly.

Every person can read the information about transactions, which wallets are the counteragents, and when these payments were made. This is an open information. Everyone can download the blockchain to a computer and read it in free time. If people want to read it online, they can do it using the blockchain explorer.

Block height

Block height is a number of blocks connected to one line in the blockchain. For example, if block height is 0, it means that there is only one block in the small chain of big the blockchain.

Block reward

This term has a very tight association with the word ‘mining’. When a trader makes one block in this process, he gets the reward. However, for Bitcoin, the reward decreases two times every four years. This process is called ‘halving’. In general, the reward is a method of motivating people to maintain the safety of the network using mining.

Change

Imagine that you are in a supermarket. You paid 2 dollars, but the goods cost only $1,90. You get $0,1 as a change. The same logic is applied in cryptocurrency payments. Bitcoin transactions have input and output payments. Changes are carried out only on output payments but returns to the input.

Cold and Hot Storage

This is a type of wallets that aren’t connected to the internet. This is the safest type of cryptocurrency wallet. The opposite term is hot wallets, which are the place for storing cryptocurrency with an internet connection. In the first case, you need to download the blockchain to your computer if you want to check transactions.

Confirmation

Confirmation is a process when transactions are confirmed by the network. It is carried out in the process of mining. This verification makes reversing or double sending the money impossible.

Some other terms

Naturally, there are a lot of other terms. See this:

  1. Mining. A block-making activity.
  2. Difficulty. This word characterizes how hard mining is.
  3. Private key. The secret key to which money is connected.
  4. Public key. The address of a Bitcoin wallet to which people can send money.
  5. Wallet. This is a private and public key saved in one place.

The list naturally goes on, but understanding these can bring you closer to becoming a professional.