Ever get stuck on Bitcoin mining terms? Don't worry, we have a cheat sheet with all the popular terms below. Didn't find one you're looking for? Email us at [email protected]
ASIC (Application-Specific Integrated Circuit): A computer chip customized for a specific use. In the case of Bitcoin mining, ASICs calculate the SHA-256 algorithm as efficiently and quickly as possible in order to compete with other miners to solve blocks.
Block: An individual unit of the Bitcoin blockchain. Each block contains the hash of the previous block, transactions and a value called a nonce, among other features.
Block Header: The metadata included in a Bitcoin block that serves as a summary of that block, including its height, hash, timestamp, Merkle root, difficulty and nonce, as well as the previous block’s hash.
Block Height: The number of blocks a certain block is from the first block, also known as the genesis block.
Block Reward: The reward that miners receive for successfully mining a Bitcoin block.
Difficulty Adjustment: An automatic system that adjusts the Bitcoin block-solving difficulty every 2,016 blocks. Adjustment periods are typically two weeks long, depending on how many miners are competing to solve blocks at any given time. If the block solve time is above or below 10 minutes average for that two weeks, the algorithm adjusts the difficulty.
Epoch: The name for the four-year period between halving cycles where mining rewards are halved.
Hash: A submission to the cryptographic puzzle by the miner to win Bitcoin. Contains a mix of letters and numbers.
Hashrate: The measurement of total processing power across the Bitcoin network. The higher the hashrate of the network, the more difficult it is for bad actors to attack it with methods such as a 51% attack. As a benchmark, when the network reached a hashrate of 10 terahash per second (TH/s), it could make 10 trillion calculations per second.
The Halving (or “Halvening”): A pre-programmed halving of the Bitcoin block reward, which occurs every 210,000 blocks (roughly four years). It reduces the amount of Bitcoin in circulation while increasing demand for the currency.
Mempool: The “waiting zone” of unconfirmed transactions inside a Bitcoin node, queued to be picked up by a miner and inserted into a block after verification by other nodes.
Merkle Tree: A cryptographic tree that trims down the size of the blocks. Basically a zip drive that "prunes" the file just like the leaves on a tree so it's less bloated.
When Bitcoin users make a transaction, they get a numerical tag, which gets plugged into the bottom layer of the Merkle tree. The Merkle tree batches all of these together into a more condensed package, which is the top of the tree, called the root hash.
The root hash, containing all of the transactions underneath it, gets combined with the previous hash, then mixed with the nonce, to make the block header.
Mining: The process of using specialized computer hardware to validate Bitcoin transactions on the Bitcoin network. As a reward for this action, miners earn fees for the transactions they confirm, plus newly created Bitcoin from each block they solve.
Mining Pool: A group of miners working together and sharing the profit when any of them wins a block.
Nonce: A 32-bit field in a Bitcoin block, the value of which is adjusted by miners until they achieve a hash equal to or less than the current target hash value.
SHA-256: A set of cryptographic hash functions developed by the U.S. National Security Agency, which was later applied to the Bitcoin mining process to secure transactions on the network, i.e., the algorithmic puzzle miners must solve.
Miners are just spamming guesses (rolling the dice) until they successfully roll a number below the Bitcoin blockchain's chosen difficulty. (Higher difficulty implies a smaller number they must roll under in order to solve the block and win the reward.)
Terahash per second: The number of hashes a miner can complete per second, measured in trillions of hashes.