Bitcoin terminology

Address

A bitcoin address is like a physical address or an email address. This is the only information you need to provide when someone pays you bitcoin.

Block Chain

A block chain is a public time-ordered record of bitcoin transactions. The block chain is shared among all bitcoin users. It is used to verify the validity of bitcoin addresses and to prevent double spending.

Block

Block is a record on the block chain and it identifies a number of transactions to be confirmed. On average, approximately every 10 minutes, a new block recording transaction is added to the block chain by mining.

BTC

BTC, or Blis the general unit of bitcoin currency. It can be used like USD(dollar sigh), or $(short for dollar sign).

Confirmation

Confirmation means that the transaction has been verified and will not be rolled back. A confirmation is already quite safe. But for large transfers (for example $1000 or more), users can wait for a transaction to get more confirmations-generally 6 confirmations. Each confirmation reduces the risk of a transaction rollback.

Cryptography

Cryptography is a series of mathematical algorithms that allow us to generate mathematical proofs to provide a higher level of security. E-commerce and banking are already using cryptography. In bitcoin, the cryptography makes it impossible for anyone to spend money on someone else’s account or break the block chain. The cryptography can also be used to encrypt a wallet so that no one can use the money in it without a password.

Double Spend

Double spending means that the same bitcoin is spent twice to different payees by a malicious user. Bitcoin mining and block chain are working together on the network to determine which transaction will be confirmed.

Hash Rate

Hash Rate is a measure of the processing ability of the bitcoin network. For security, bitcoin network must perform high-intensity mathematical operations. When the network’s hash rate reaches 10TH/s, it means that the network can process 1 billion operations per second.

Mining

Bitcoin mining is the process of using computer hardware to perform mathematical operations on the bitcoin network in order to confirm transactions and improve safety levels. As a reward for the miners, bitcoin miners can get the transaction fees of the orders they confirmed and get the newly mined bitcoin. Mining is a specialized and competitive market where rewards are distributed based on the miner’s completion of the operations. Not all users are mining bitcoin, which is not a easy way to make money.

P2P

A peer-to-peer (P2P) service is a decentralized platform whereby two individuals interact directly with each other. In bitcoin systems, the network is established in accordance with the mechanism by which each user broadcasts transactions to all users. Therefore, it’s importance to mention that in the P2P service, banks are not needed as a third-party intermediation.

Private Key
The private key is a set of passwords which prove that you are entitled to pay using a specific bitcoin address. Each bitcoin address has its own private key. If you are using a software wallet, your private key will be stored on your computer; If you are using a web wallet, your private key will be stored on some remote servers. The private keys can never be lost because they are the only credentials for paying bitcoin to a bitcoin address.

Signature

A digital signature uses a mathematical mechanism to prove a person’s ownership. In the bitcoin system, a bitcoin address and its private key are connected by something like magic. When your bitcoin software signs a bitcoin transaction with the private key, the entire network can see that the signature matches the bitcoin address. However, no one can figure out your private key to steal your hard-earned bitcoin.

Wallet

A wallet is roughly equivalent to a physical wallet on the bitcoin network. It actually includes your private key, so you can use it to pay for the bitcoin that has been transferred to your bitcoin address in the block chain. Every bitcoin wallet can show the balance of all the bitcoin accounts it contains, and allows you to pay a specific amount of money to a specific person, just like a real wallet. However this is different from the credit card by which you pay to the merchants.