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Glossary

GLOSSARY OF BITCOIN TERMS

This is a guide to theterms that are associated with Bitcoins, Litecoin and Dogecoin etc.

Address

Your receiving address is similar to your street address, an email or your PayPal address. This is the only item of information that you need to give to someone in order for them to send you Bitcoin.

It is important to understand that each address should only be used for one transaction.

Bitcoin

This is the term used when describing the network of Bitcoins. Use the work without a capital letter to describe bitcoins as a unit. It is often abbreviated as BTC or XBT.

Block

A block is the record in the block chain that contains and confirms all the waiting transactions. This block is updated approximately every 10 minutes.

Block Chain

The actual Block Chain is the public record of all Bitcoin transactions. This is kept in chronological order and contains all records of every transaction ever carried out. It is used to help verify transactions and to prevent double spending.

BTC

This is the common unit of the Bitcoin currency.

Confirmation

Each time a transaction is processed by the network a confirmation is sent. Each confirmation is considered secure and will not normally be reversed. It is recommended that you wait to receive 6 confirmations to know that the transactions has been completed.

Cryptography

This is the mathematical method that creates the security for the Bitcoin. This process is currently used by online commerce and banking institutions.

It helps with Bitcoin by making it impossible for anybody to spend funds from another person's wallet or to corrupt the block chain. It is also used to encrypt your wallet so that it cannot be accessed without a password.

Double Spend

This is a process where corrupt users try to send their bitcoins to two different wallets at the same time. This is referred to as Double Spending.

The Bitcoin mining and the block chain will determine which of the two transactions is valid.

Hash Rate

This is the measuring unit of the processing power of the Bitcoin network. This is used for security reasons and a hash rate of 10 Th/s equals 10 trillion calculations per second.

Mining

This is the process of making your computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and helps to improve security levels.

Bitcoin miners can collect transactions fees for any transactions that they have confirmed, as well as being rewarded for newly created bitcoins. This is not an easy way to make money and is only done by those who want to specialize in this area.

P2P

This refers to a Peer to Peer system and works in the same fashion as an organized collective. Each user is allowed to interact with the other users, with no third party being involved.

This means that all Bitcoin users can see each other's transactions. Nothing is hidden.

Private Key

This is your secret piece of data that proves you have the right to spend bitcoins from your wallet. These keys are stored in your computer if you are using a software wallet or they are stored on a remote server if you use a web wallet.

Signature

A signature is a mathematical method used to prove ownership. This means that your Bitcoin wallet and it's keys are linked together mathematically.

When you begin a transaction with the correct private key all Bitcoin users can see that your signature matches the bitcoin which is being spent. There is no way that your private key can be stolen.

Wallet

Your Bitcoin wallet is a wallet which contains your private keys, allowing you to spend bitcoins that are allocated to it in the block chain. View it as the same as your wallet that you keep your physical cash in.

Your Bitcoin wallet shows your total balance and it lets you pay amounts to specific people. There is no third party involved in the transactions.