Cryptocurrency Mining Glossary
If you are new to cryptocurrencies, you might find the topic a bit confusing due to the terminology involved. Just refer to this page when you see an unfamiliar word or phrase.
- ADDRESS – a cryptocurrency address is a string, containing numbers and letters, from which you can send and receive crypto payments.
- ALGORITHM – kit of rules, which are solving a problem via calculations, using a computer. It’s encrypting and transferring data, which makes it mining’s base when it comes to extracting cryptocurrencies.
- ASIC – (Application Specific Integrated Circuit) a dedicated mining device, which is able to extract coins, working with on one particular algorithm.
- ASIC-RESISTANCE – memory hard algorithms that are hardly cooperating with ASICs, because they are built to be resistance to this kind of devices.
- ATTACK 51% – a miner possess 51% of the pool’s hash rate, so he’s able to manipulate the network.
- BANDWIDTH – the maximum capacity of the network to transmit data.
- BLOCK – a piece of the blockchain, containing transactions.
- BLOCKCHAIN – a public ledger, which contains lots of data, encrypted in separate block in the form of hashes (messages). Considered immutable and unable to manipulate.
- BLOCK HEADER – a string long 80 bytes, which miners hash with the nonce to find the solution of the block.
- BLOCK REWARD – this is what a miner gets for successfully calculating a valid hash in the block when performing a mining process.
- BLOCK SIZE – this is a limit of bytes that the block might contain (also limits of transactions in one piece).
- BLOCK TIME – the average time needed to find a block’s solutions. It’s different for each coin.
- BLOCK SYNCHRONIZATION – the time requested for the blockchain to sync with your device (for full nodes usually).
- CENTRALIZATION – an organization or system, which is controlled by a central authority.
- CLOUD MINING – performing a mining process via rented hashing power from a third-party provider.
- COIN – a term used to describe units of blockchain value.
- CONFIRMATION – the process of validating if a transaction is including on the blockchain.
- CONSENSUS – a rule all participant agrees on when operating on the same network.
- CONTRIBUTION SHARE – the hash rate a miner puts into the pool to contribute.
- CPU – (Central Processing Unit) a processor, which coordinates the work of all the other part of a computer.
- DAO (Decentralized Anonymous Organization) – organization running smart contracts.
- DIFFICULTY – a measure of how difficult might be to mine a new block.
- DIFFICULTY BOMB – malicious attack, increasing difficulty that much, that the reward doesn’t cover the expenses to mine.
- DISTRIBUTION – percentage of each pool from all the ones available in the network for this coin.
- DOUBLE SPENDING – general issue of the decentralized conception or spending a same amount twice.
- DOWNTIME – a period when a machine isn’t working.
- EXCHANGE – a platform to buy, trade and sell cryptocurrencies.
- FIAT MONEY – national currency of a central government.
- FORK – changing in the rules of the consensus, which might be able to exist with the old established rules (soft fork) or not (hard fork).
- FPGA – a modern mining device, improving the ASIC, which can mine coins from one particular algorithm. The interesting here is that you can modify it to mine a different algorithm if you decide to change the coin you mine.
- FULL NODE – storing the blockchain data locally on your PC.
- GAINS – increasing profits (reward).
- GENESIS BLOCK – the first block, computationally created in the blockchain. It contains the initial transaction.
- GPU (Graphic Processing Unit) – a graphic card, also known as a video card (part of a computer), which is successfully used for mining purposes.
- HASH FUNCTION – encrypted message with fixes size and unique value.
- HASH RATE – a unit to measure the computational power by which a miner contributes in the mining process.
- HASH RENTAL – a rented computing power for mining purposes by a cloud mining provider.
- HARD FORK – this is a protocol change, which results in splitting into two different chains and the longer one continuous existing. If both of them do – we have a chain split. These changes cannot cooperate with the old rules and require an update.
- HARD DISK SPACE – the storage a user needs to locally store the blockchain data on a desktop PC.
- Halving – decreasing the reward of gained coins per block using a particular formula.
- ICO (Initial Coin Offering) – crowdfunding via crypto coins for the purpose of gaining capital for a particular project.
- IMMUTABLE – unable to change in time.
- KYC (Know Your Customer) – an identification process for the users in the network.
- LEDGER – a piece of record of data, which is immutable.
- LIGHT CLIENT – not storing the entire blockchain data but using just parts of it (a block’s header). To have some more information, they trust a full node.
- LIGHTNING NETWORK – an additional layer of the blockchain to perform faster transactions between the nodes participating in the network.
- LIQUIDITY – the ease to buying and selling, without bothering the market’s price.
- MARKET CAPITALIZATION – a cryptocurrency’s price, according the total supply.
- MARKET SHARE – the hash share of the market with which the pool operates.
- MINEABLE – a coin which can be mined in return of reward.
- MINER – either the device or the person who’s performing the mining process.
- MINER’s FEE – this is the reward a miner receives for its contribution to the network by validating transactions. Normally, miners choose transactions with higher fees to add in the next block to profit more and faster.
- MINING – a process of extracting a cryptocurrency by adding and verifying transactions to the blockchain, respectively gaining a reward for it.
- MINING POOL – group of miners, combining their power to find a block faster and sharing the reward from it too.
- MINING RIG – this is a set of multiple mining hardware, combined to mine with higher hash rate and find a block faster.
- NODE – a computer that keeps a copy of the blockchain.
- NONCE – an arbitrary number in a cryptographic communication. It is generated during the hashing process and can be used only once.
- ORPHAN BLOCK – a valid block, which isn’t part of the blockchain and occurs when two miners find the same block in the same time. The one which is late becomes orphan.
- PAYOUT LIMIT – the minimum amount of coins which you can withdraw from your account.
- POOL DISTRIBUTION – a percentage of each pool, possessed for this particular coin.
- POOL FEES – the fees requested from the pool for maintenance.
- POW (Proof-of-Work) – when it comes to mining this is a consensus mechanism where miners are using a nonce to search the block’s solutions and get rewarded proportionally of their contribution (work). There’s no need of trust, since everybody’s “work” (share) is visible in the network.
- PPS – (Pay Per Share) a type of rewarding system, based on contribution.
- PPLNS – (Pay Per Last N Shares) a type of rewarding system, based on time a contribution.
- PRIVATE KEY – this is the “password” which helps you to access your public address. It’s the one and only, which let you read the hashes (messages) sent to your public key.
- PROP – (Proportional) a type of rewarding system, based on a proportional relation between contribution and luck.
- PUBLIC KEY – this is a recipient’s address to receive any crypto assets in the form of a hash, which might be read with only one specific private key.
- QR-CODE – a graphic sign, which can be scanned via smartphone camera to read a wallet’s public address and send some coins within it.
- REWARDING SYSTEM – a method of rewarding the miners, depending on their contribution to the network.
- REPOSITORY – a software where you keep all your information, which might be retrieved at some point.
- STALE SHARE – when two miners send a share to the network to affirm, they found a block, the one which is late is a stale one.
- SPV (Simple Payment Verification) – a client which checks on transactions, using only the headers of the blocks, which is considered a proof of inclusion.
- TRAFFIC (incoming & outcoming) – the traffic from one point to another (movement of data and actions). It’s important when it’s up to cryptocurrencies because it can define your speed when broadcasting a transaction.
- TRANSACTION FEE – a payment to broadcast your transaction on the network.
- UPTIME – the time during which a mining machine is properly working.
- UTXO (Unspent Transaction Output) – a value, calculating the balance of unspent coins, based on all the previously spent outputs and inputs, based on the public ledger’s history of transactions.
- VALID BLOCK – there’s a signal that the block is mined and the user’s waiting for confirmation from other nodes to gain the reward.
- VARDIFF (Variable Difficulty) – the share’s difficulty might rise or fall, depending on the hash rate.
- VPS (Virtual Private Server) – a PC with static IP, supporting the network.
- WALLET – a digital wallet to store, send and receive crypto assets.
- WORKER – either a mining device, either an account in the mining pool configuration.
- Bitcoin WhitePaper Daybitcoin, white paper
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