Definitions to understand


A bitcoin address is used to receive and send transactions on the bitcoin network. It contains a string of alphanumeric characters, but can also be represented as a scannable QR code. A bitcoin address is also the public key in the pair of keys used by bitcoin holders to digitally sign transactions (see Public key).


An Application Specific Integrated Circuit is a silicon chip specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.

ASIC miner

A piece of equipment containing an ASIC chip, configured to mine for bitcoins. They can come in the form of boards that plug into a backplane, devices with a USB connector, or standalone devices including all of the necessary software, that connect to a network via a wireless link or ethernet cable.

Bitcoin Sentiment Index (BSI)

The Bitcoin Sentiment Index is a measure of whether individuals feel the digital currency's prospects are increasing or decreasing on any given day, and is powered by data collected by Qriously.

Bitcoin Market Potential Index (BMPI)

The Bitcoin Market Potential Index (BMPI) uses a data set to rank the potential utility of bitcoin across 177 countries. It attempts to show which markets have the greatest potential for bitcoin adoption.

Bitcoin Price Index (BPI)

The CoinDesk Bitcoin Price Index represents an average of bitcoin prices across leading global exchanges that meet criteria specified by the BPI. There is also an API for developers to use.


The full list of blocks that have been mined since the beginning of the bitcoin cryptocurrency. The blockchain is designed so that each block contains a hash drawing on the blocks that came before it. This is designed to make it more tamperproof.

To add further confusion, there is a company called Blockchain, which has a very popular blockchain explorer and bitcoin wallet.


The act of hashing a bitcoin transaction successfully into a transaction block, and cementing its validity. A single confirmation will take around 10 minutes, which is the average length of time for a transaction block to be hashed. However, some more sensitive or larger transactions may require multiple confirmations, meaning that more blocks must be hashed and added to the blockchain after the transaction’s block has been hashed. Each time another block is added to the blockchain after the transaction’s block, the transaction is confirmed again.


Central Processing Unit – the 'brain' of a computer. In the early days, these were used to hash bitcoin transactions, but are now no longer powerful enough. They are still sometimes used to hash transactions for altcoins.


Another name for the input used in a bitcoin’s generation transaction. When a bitcoin is mined, it doesn't come from another bitcoin user, but is generated as a reward for the miner. That reward is recorded as a transaction, but instead of another user's bitcoin address, some arbitrary data is used as the input. Coinbase is also the name of a bitcoin wallet service that also offers payment processing services for merchants and acts as an intermediary for purchasing bitcoins from exchanges.


The use of mathematics to create codes and ciphers that can be used to conceal information. Used as the basis for the mathematical problems used to verify and secure bitcoin transactions.


The reduction of prices in an economy over time. It happens when the supply of a good or service increases faster than the supply of money, or when the supply of money is finite, and decreases. This leads to more goods or services per unit of currency, meaning that less currency is needed to purchase them. This carries some downsides. When people expect prices to fall, it causes them to stop spending and hoard money, in the hope that their money will go further later. This can depress an economy.

Double spending

The act of spending bitcoins twice. It happens when someone makes a transaction using bitcoins, and then makes a second purchase from someone else, using the same bitcoins. They then convince the rest of the network to confirm only one of the transactions by hashing it in a block. Double spending is not easy to do, thanks to the way that the bitcoin network operates, but it is nevertheless a risk run by those accepting zero-confirmation transactions.


A central resource for exchanging different forms of money and other assets. Bitcoin exchanges are typically used to exchange the cryptocurrency for other, typically fiat, currencies.

Fiat currency

A currency, conjured out of thin air, which only has value because people say it does. Constantly under close scrutiny by regulators due to its known application in money laundering and terrorist activities. Not to be confused with bitcoin.


The number of hashing attempts possible in a given second, measured in billions of hashes (thousands of Megahashes).


Graphical Processing Unit. A silicon chip specifically designed for the complex mathematical calculations needed to render millions of polygons in modern computer game graphics. They are also well suited to the cryptographic calculations needed in cryptocurrency mining.


A mathematical process that takes a variable amount of data and produces a shorter, fixed-length output. A hashing function has two important characteristics. Firstly, it is mathematically difficult to work out what the original input was by looking at the output. Secondly, changing even the tiniest part of the input will produce an entirely different output.

Hash rate

The number of hashes that can be performed by a bitcoin miner in a given period of time (usually a second).


When the value of money drops over time, causing prices for goods to increase. The result is a drop in purchasing power. Effects include less motivation to hoard money, and more motivation to spend it quickly while the prices of goods are still low.


The part of a bitcoin transaction denoting where the bitcoin payment has come from. Typically, this will be a bitcoin address, unless the transaction is a generation transaction, meaning that the bitcoin has been freshly mined (see Coinbase).


The number of hashing attempts possible in a given second, measured in thousands of hashes.


Know Your Client/Customer rules force financial institutions to vet the people they are doing business with, ensuring that they are legitimate.


The number of hashing attempts possible in a given second, measured in millions of hashes (thousands of Kilohashes).


The act of generating new bitcoins by solving cryptographic problems using computing hardware.


A computer connected to the bitcoin network using a client that relays transactions to others (see client). If you'd like to run a bitcoin node, then offers a comprehensive guide.


A random string of data used as an input when hashing a transaction block. A nonce is used to try and produce a digest that fits the numerical parameters set by the bitcoin difficulty. A different nonce will be used with each hashing attempt, meaning that billions of nonces are generated when attempting to hash each transaction block.


Peer-to- peer. Decentralized interactions that happen between at least two parties in a highly interconnected network. An alternative system to a 'hub-and- spoke' arrangement, in which all participants in a transaction deal with each other through a single mediation point.


A collection of mining clients which collectively mine a block, and then split the reward between them. Mining pools are a useful way to increase your probability of successfully mining a block as the difficulty rises.

Private key

An alphanumeric string kept secret by the user, and designed to sign a digital communication when hashed with a public key. In the case of bitcoin, this string is a private key designed to work with a public key. The public key is a bitcoin address (see Bitcoin address).

Process node

The size of a transistor in nanometers, produced during a chip fabrication process. Smaller process nodes are more efficient.

Proof of stake

An alternative to proof of work, in which your existing stake in a currency (the amount of that currency that you hold) is used to calculate the amount of that currency that you can mine.

Proof of work

A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.

Public key

An alphanumeric string which is publicly known, and which is hashed with another, privately held string to sign a digital communication. In the case of bitcoin, the public key is a bitcoin address.


An alternative proof of work system to SHA-256, designed to be particularly friendly to CPU and GPU miners, while offering little advantage to ASIC miners.


A digital digest produced by hashing private and public keys together to prove that a bitcoin transaction came from a particular address.


The cryptographic function used as the basis for bitcoin’s proof of work system.


The number of hashing attempts possible in a given second, measured in trillions of hashes (thousands of Gigahashes).

Transaction block

A collection of transactions on the bitcoin network, gathered into a block that can then be hashed and added to the blockchain.

Transaction fee

A small fee imposed on some transactions sent across the bitcoin network. The transaction fee is awarded to the miner that successfully hashes the block containing the relevant transaction.

Internal Wallet

A method of storing bitcoins for later use. A wallet holds the private keys associated with bitcoin addresses. The blockchain is the record of the bitcoin amounts associated with those addresses.

Hash rate denominations

  • 1 kH/s is 1,000 (one thousand) hashes per second
  • 1 MH/s is 1,000,000 (one million) hashes per second.
  • 1 GH/s is 1,000,000,000 (one billion) hashes per second.
  • 1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.
  • 1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.
  • 1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second.