Bitcoin Mining: In simple words is the process of creating new bitcoins. This is done with special equipment that verifies transactions on the network. As a result for the resources used (time, energy and capital) these miners get Bitcoin as a reward. For beginners who are looking into the bitcoin mining industry, it might be difficult to understand some terms used. Here are some common terms associated with “bitcoin mining”.
- Address: An address or bitcoin address is a unique identifier that serves as a virtual location where the cryptocurrency can be sent. People can send the cryptocurrency to the bitcoin wallet address the same way fiat currencies are often sent to a bank account.
- Airdrop: This is a process whereby a blockchain project distributes free tokens to a community.
- ALT Coin: This is simply any cryptocurrency that is an alternative to bitcoin.
- ASIC: An application-specific Integrated Circuit (ASIC) is a special device built to mine one specific cryptocurrency. We at Epic Mining help our customers to source the best Bitcoin mining ASIC’s. These are the most important components of an ASIC:
- PCB: The PCB is the brain behind the ASIC miner. It connects to the hash boards via data cables and also features the Ethernet port, power buttons, and a small speaker for emitting warning sounds. All operational changes you make are translated on the PCB and sent to the hashing boards to carry out.
- Hashing Boards: The hashing boards are two big circuit boards that carry out the grunt work of solving the computations needed to keep the Bitcoin blockchain chugging along. They are connected to the PCB and also receive power directly from the power supply. The hashing boards are where the ASIC chips are housed.
- Heat Sinks: A hardworking miner generates colossal heat, and so it requires a great deal of cooling. Just like regular computers, the majority utilize air cooling, which means employing heat sinks and fans. Heat sinks take up the majority of the real estate of your average ASIC miner.
- Fans: Fans are located at either end of the miner to ensure a consistent airflow direction; one fan sucks cool air in from outside, and the other draws out the warm air from inside the miner.
- Blockchain: Any type of decentralized public ledger which contains records or transactions and forms the basis for how many cryptocurrencies work, using cryptography to link together blocks in a chain so that each block is linked with the previous one chronologically preventing any tampering from occurring since it would already be recognized immediately by other users on the networks.
- Block rewards: A block reward refers to the number of bitcoin you get if you successfully mine a block of transactions.
- Coin base: The first transaction in each Bitcoin block, which distributes the subsidy earned when a miner successfully validates it as well as the cumulative fees for all transactions included in the block. The coin base transaction effectively creates a new bitcoin.
- CPU: stands for Central Processing Unit. This is a piece of hardware that generally acts like the central brain of a larger processing unit.
- Cloud Mining: This is a mechanism to mine a cryptocurrency, such as bitcoin using rented cloud computing power and without having to install and directly run the hardware and related software.
- Cryptography: The study of secure communications techniques that allow only the sender and intended recipient of a message to view its contents. It is a mathematical and computational practice of encoding and decoding data.
- Cryptocurrency: This is any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.
- Double spending: This is a scenario in which a single unit of a crypto is spent twice. In proper accounting this should not happen, similar to the fact that one unit of a dollar or other currency, only has one sender and one receiver. If you would be able to send one dollar and two people receive that one dollar. Then you would have in fact created 1 extra dollar out of thin air. The blockchain governance protocols should at any time avoid double spending.
- Encryption Algorithms: A traditional encryption algorithm is a function that transforms a message into an unreadable random-seeming string using an encrypted key and can be turned back to plain text using the description key.
- Exchange volume: Exchange volume in bitcoin shows how many bitcoins are being bought and sold on specific exchanges.
- Fork: A bitcoin hard fork refers to a radical change to the protocol of bitcoin’s Blockchain that effectively results in two branches, one that follows the previous protocol and one that follows the new version.
- Full nodes: A full node is a program that fully validates transactions and blocks. Almost all full nodes also help the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes.
- GPU: stands for ‘Graphics Processing Unit’ which been used in mining for years, simply because they were more efficient than their immediate counterparts. Today, GPUs have been rendered obsolete in crypto mining by highly efficient ASICs. GPU is a specialised processor originally designed to accelerate graphics rendering.
- Hash rate: This refers to the computing power of a cryptocurrency miner. The Bitcoin hash rate is the measurement of how many times the Bitcoin network attempts to complete those calculations each second.
- Inflation: In economic terms, inflation is a general increase in prices and a decline in the purchasing power of money. In the cryptocurrency space, it is often also used to simply refer to an increase in the supply of a cryptocurrency.
- Initial Block Download (IBD): The process of downloading the full Bitcoin blockchain, conducted by nodes that join the network so that they can get in sync with the rest of the network to date.
- Light Client: A Bitcoin application that interacts with the Bitcoin network by querying nodes for specific transactions and blocking information, but does not download and store the entire blockchain. Typically used by wallets as a way to access balance and transaction information without requiring the significant RAM needed to maintain a full node.
- Lightning Network: The Lightning Network is a Layer 2 protocol for Bitcoin, specifically designed for cheap, fast, and private payments.
- Miner: A Bitcoin miner can simultaneously refer to a specialized machine or person that owns that machine. In general, Bitcoin miners verify transactions on the Bitcoin network. As a result for the resources used in this process (time, energy, capital) they get rewarded new Bitcoin.
- Mining: Bitcoin mining is the process by which transactions are verified and added to a proof of work blockchain. This process of solving cryptographic problems using high-powered specialized computing hardware also triggers the generation of cryptocurrency.
- Mining pool: A mining pool is a group of cryptocurrency miners who join their computational resources over a network to strengthen their probability of finding a block or otherwise successfully mining for cryptocurrency.
- Mixer: This is a service that mixes different streams of potentially identifiable cryptocurrency. This improves the anonymity of transactions as it makes bitcoin harder to trace.
- Nodes: A node is a computer connected to other computers which follow rules and share information.
- NFT(Non-Fungible Token): An NFT is a unique cryptographic token that exists on a blockchain and cannot be replicated. Tokenizing these tangible assets makes trading them more efficient and reduces the risks of fraud.
- Peer-to-peer: Peer-to-peer commonly known as P2P is a popular avenue for crypto users. Unlike conventional crypto exchanges, the P2P marketplace allows you to buy cryptocurrency directly with other users using your preferred payment method and local currencies.
- Protocol: This is a crucial component of blockchain technology that enables information to be shared automatically across cryptocurrency networks securely and reliably.
- Private key: A private key is an extremely large number that is used in cryptography, it is similar to a password. Private keys are used to create digital signatures that can easily be verified, without revealing the private key. Private keys are also used in cryptocurrency transactions to show ownership of a blockchain address.
- Shitcoin: The term shitcoin refers to a cryptocurrency with little or no value or a digital currency that has no immediate, discernible purpose.
- Signature: When a transactional request occurs, the private key is used to sign the transaction which delivers mathematical proof that the Bitcoins have come from the owner. This is known as a signature, and it is the signature that also prevents the transaction from being altered by anyone else.
- Ticker symbol: This is the short combination of letters that is used to represent an asset, stock, or cryptocurrency token.
- Token: Crypto tokens are a type of cryptocurrency that represents an asset or specific use and reside on their blockchain. Tokens can be used for investment purposes, to store value, or to take advantage of certain utility.
- Wallet: A wallet in bitcoin mining is a device or program for holding and sending bitcoins. Bitcoin wallets contain the private keys needed to sign bitcoin transactions.