Bitcoin Terms – Short Guide, Part One

ASIC

Application Specific Integrated Circuit is an integrated circuit customized for a specific use. In the present moment they can be used for bitcoin mining.

Address

Unique address between 27 and 34 characters which represents the destination of Bitcoin Payment

BTC

Generic representation of Bitcoin unit. Similar to EUR with euros.

Bitcoin

Bitcoin is a payment network as well as the currency unit related to that network. This digital currency uses peer-to-peer technology to facilitate immediate payments. Bitcoin is a cryptocurrency - an alternative currency, which uses cryptography for security purposes, making it difficult to counterfeit. Bitcoin is not a centralized currency – issuance and transactions are carried out by the network, without any head authorities. The number of bitcoins that will be issued is limited to 21 million to ensure they are not devalued. Bitcoin users store their bitcoins in a digital wallets, while transactions are verified with the help of digital signature.

Block

Transaction data is permanently recorded into the Bitcoin network through files called blocks. A block is a record of the most recent ( or all ) Bitcoin transactions that have not yet been recorded in any prior blocks. Blocks are sort of links in a chain of transaction verifications/confirmations. Outstanding transactions get bundled into a block and are verified every 8-15 minutes. Each subsequent block strengthens the verification of previous blocks. Each block may contain one or more transactions.

Blockchain

Bitcoin transactions public record set in a chronological order. The block chain is delivered between all Bitcoin users. It is used to verify the permanence of Bitcoin transactions, as well as to prevent double spending.

Cold Storage

A practice which can be described as keeping bitcoins safely offline ( USB/hdd drive, paper wallet or even a physical coin ).

Cryptography

The branch of mathematics that creates mathematical proofs to provide high levels of security. In Bitcoin niche cryptography is used to make it impossible for someone to spend funds from another bitcoin holder's wallet or to corrupt the blockchain.

Difficulty

Every 2016 blocks, Bitcoin adjusts the difficulty of blocks verification based on the time it took to verify the previous 2016 blocks. The difficulty is adjusted so that given the average estimated computing power of the whole Bitcoin network, only one block will be verified every 8-15 minutes for the next 2016 blocks.

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