Bitcoin Vocabulary: 15 Basic Terms Every Crypto Enthusiast Should Know

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Bitcoin has evolved from an unusual phenomenon to one of the leading technologies of our time. You have probably heard of Bitcoin, crypto money, and blockchain, but do you understand these terms? Here is the Bitcoin theory for beginners. 

ASIC

ASIC is an Application-Specific Integrated Circuit, an integrated electronic chip designed for one purpose. Due to their high performance, ASICs became the base of top-notch mining equipment. 

Block

Blockchain consists of blocks. A block stores information about transactions. 

Blockchain

Blockchain is a decentralized digital ledger. This ledger records transactions and works as a peer-to-peer network. Blockchain is one of the underlying concepts of Bitcoin. 

Cold Wallet

Cold wallet is one of the two types of digital crypto wallets. Unlike hot wallets, cold wallets don’t have an internet connection. This makes them more secure and immune from hardware failure. 

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Decentralization

Bitcoin belongs to decentralized digital currencies. That means that there is no central authority that regulates the minting of new Bitcoins. Moreover, each node has access to the whole Bitcoin blockchain.

FPGA

The process of mining demands high-performance equipment. FPGA (Field-Programmable Gate Array) is one of the hardware types most commonly used for mining. It has a lower hashrate than GPUs and ASICs but has a reprogrammable nature. Moreover, an FPGA device can mint several types of coins. 

Halving

The Bitcoin halving is a halving of the reward to miners for contributing a new block to the blockchain. This event occurs approximately every four years. Bitcoin halving has been conducted twice so far, on November 28, 2012, and July 9, 2016. Halving helps to solve the problem of controlling crypto issuance and curbing its inflation.

Hashing

A hashing function is a special cryptographic function. This function converts inputs like transaction information into hashes or fixed-length strings of characters. 

Hashrate

To solve a hash puzzle (find an output of the hash function), mining equipment performs computational operations. Several hashes performed in a second is a hashrate of mining equipment. So it is the speed of the miner. A good hashrate for mining Bitcoins can be up to 10Th/s. 

Hot Wallet

In terms of Bitcoin, a hot wallet is one of two types of digital wallets for storing Bitcoins. A hot wallet is a digital wallet for storing Bitcoins or other cryptocurrencies with an Internet connection. That means that the owner of a hot digital wallet has immediate access to all his cryptocurrency. funds.

Mining (Bitcoin Mining) 

Bitcoin mining is a process of minting new Bitcoins on the Bitcoin blockchain. However, this process involves several steps. Networked computers (nodes or miners) should first solve hash puzzles to verify the block’s transactions on a Blockchain. It leads to the emergence of new Bitcoins. Then nodes process the transaction, add a new block to the blockchain a get rewards in the form of Bitcoins. 

Node

Node is one of the core elements of the Bitcoin blockchain network. Simply put a node is a computer (miner) that communicates transaction information with other nodes and maintains the blockchain. Each node does its best to solve a crypto algorithm and verify the blockchain. If the node (miner) manages to do it, it can add a new block to the blockchain and is rewarded with new Bitcoins. 

Nonce, Or Cryptographic Nonce

To secure transactions in a block, add a block transaction, and get Bitcoins for it, miners solve the cryptographic (hash) puzzle in a block. Solving a puzzle needs finding a cryptographic nonce value. The nonce value is stored in the header of the blockchain block. The block header also contains information about the hash of the previous block, the timestamp, and the version number of the Bitcoin software. 

Value

Each currency has its value, and so does Bitcoin. However, its value often fluctuates. In December 2017 the value of one Bitcoin was equal to $19,000.