Glossary

#![allow(unused)]
fn main() {
Transaction::new_coinbase(
    miner_address,
    50,           // block reward
    timestamp,
    total_fees,   // sum of fees
)
}

Cold Wallet

A wallet that stores private keys offline, not connected to the internet.

Types:

Hardware wallets (Ledger, Trezor)
Paper wallets
Air-gapped computers

Advantage: Extremely high security Disadvantage: Inconvenient to use

Confirmation

The number of times a transaction has been included in a block and subsequently extended by additional blocks.

Confirmation counts:

0 confirmations: in the mempool, not yet mined
1 confirmation: included in a block
6 confirmations: very secure (Bitcoin standard)

Time: approximately 10 minutes per confirmation in Bitcoin

D

Difficulty

The computational difficulty of mining, which determines how hard it is to find a valid block hash.

SimpleBTC:

#![allow(unused)]
fn main() {
blockchain.difficulty = 3;  // 3 leading zeros
}

Bitcoin: dynamically adjusted every 2016 blocks (approximately 2 weeks), targeting a 10-minute block time.

Double Spending

An attack that attempts to spend the same bitcoin twice.

Defense mechanisms:

UTXO model (each UTXO can only be spent once)
Block confirmations (almost impossible after 6 confirmations)
Proof of Work (requires 51% hash power to rewrite history)

E

ECDSA (Elliptic Curve Digital Signature Algorithm)

The digital signature scheme used by Bitcoin.

Curve: secp256k1

Flow:

Private key → ECDSA → Public key → Hash → Address

SimpleBTC uses a simplified SHA256-based signature.

F

Fee

The amount paid to miners as an incentive to include transactions in a block.

Calculation:

Fee = total inputs − total outputs

Fee rate:

Fee rate = fee / transaction size (sat/byte)

Recommendations:

Low: 1–5 sat/byte
Medium: 10–20 sat/byte
High: 50+ sat/byte

Fork

A situation where the blockchain has multiple valid branches.

Types:

Temporary fork: two miners produce a block simultaneously; resolved by the longest-chain rule
Hard fork: protocol-incompatible upgrade (e.g., BCH)
Soft fork: backward-compatible upgrade (e.g., SegWit)

G

Genesis Block

The first block in the blockchain, with index 0.

Bitcoin genesis block:

Date: January 3, 2009
Reward: 50 BTC (unspendable)
Message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”

SimpleBTC:

#![allow(unused)]
fn main() {
fn create_genesis_block() {
    // Create the block at index 0
    // previous_hash = "0"
}
}

H

Hash

A function that converts arbitrary data into a fixed-length string.

Bitcoin uses:

SHA256 (transaction IDs, block hashes)
RIPEMD160 (address generation)

Properties:

Deterministic
One-way (preimage resistant)
Collision resistant
Avalanche effect

Example:

SHA256("hello") = 2cf24dba5fb0a30e...

Hash Rate

The number of hash computations performed per second.

Units:

H/s (hashes per second)
KH/s = 1,000 H/s
MH/s = 1,000,000 H/s
GH/s = 1,000,000,000 H/s
TH/s = 1,000,000,000,000 H/s
EH/s = 1,000,000,000,000,000,000 H/s

Bitcoin network: approximately 300+ EH/s

Hot Wallet

A wallet connected to the internet, convenient for everyday use.

Types:

Mobile wallets
Desktop wallets
Web wallets

Advantage: Convenient to use Disadvantage: Lower security

M

Merkle Tree

A binary hash tree of transactions; the root hash is stored in the block header.

Structure:

        Root
       /    \
     H12    H34
    /  \   /  \
   H1  H2 H3  H4

Uses:

SPV lightweight verification
Proving a transaction exists in a block
O(log n) verification complexity

Mining

The process of creating new blocks through proof of work.

Steps:

Collect pending transactions
Create the Coinbase transaction
Compute the Merkle root
Adjust the nonce to find a valid hash
Broadcast the block

Reward: block reward + transaction fees

Multisig (M-of-N)

An address that requires M signatures (out of N total keys) to spend funds.

Examples:

2-of-3: CEO + CFO + CTO, any two suffice
3-of-5: a board of 5, requiring 3 to agree

Address: starts with “3” (P2SH)

N

Node

A computer running Bitcoin client software.

Types:

Full node: stores the complete blockchain, validates all transactions
Light node: stores only block headers, uses SPV verification
Miner node: a full node that participates in mining

Nonce

A number adjusted during mining to change the block hash.

Purpose: proof of work

#![allow(unused)]
fn main() {
while hash(block_data + nonce) >= target {
    nonce++;  // keep trying
}
}

P

P2P (Peer-to-Peer)

A network where nodes communicate directly with each other, without a central server.

Bitcoin network:

Decentralized
Censorship-resistant
No single point of failure

P2PKH (Pay-to-Public-Key-Hash)

The traditional Bitcoin address type, starting with “1”.

Flow:

Public key → SHA256 → RIPEMD160 → Base58 → Address

P2SH (Pay-to-Script-Hash)

Pay-to-script-hash, used for advanced features like multisig; addresses start with “3”.

Advantages:

Supports complex scripts
Hides script details
Fee is borne by the recipient

Private Key

A secret number used to sign transactions.

Properties:

A 256-bit random number
Owning the private key = owning the bitcoin
Cannot be recovered if lost

Protection:

Never share it
Store it encrypted
Keep multiple backups

Proof of Work (PoW)

Bitcoin’s consensus mechanism.

Principle: Finding a hash that satisfies the difficulty target requires a large amount of computation.

Purpose:

Prevent spam attacks
Decentralized consensus
Extremely high cost for a 51% attack

Public Key

A publicly shareable number derived from a private key, used to generate addresses and verify signatures.

Derivation:

Private key → elliptic curve operation → Public key → Hash → Address

R

RBF (Replace-By-Fee)

A mechanism that allows replacing an unconfirmed transaction (BIP125).

Uses:

Speed up a transaction (by increasing the fee)
Cancel a transaction
Batch optimization

Marker: nSequence < 0xFFFFFFFE

S

Satoshi (sat)

The smallest unit of bitcoin.

1 BTC = 100,000,000 satoshi
1 sat = 0.00000001 BTC

Named after: Bitcoin’s creator, Satoshi Nakamoto

Script

Bitcoin’s scripting language, which defines spending conditions.

Opcodes:

OP_DUP
OP_HASH160
OP_EQUALVERIFY
OP_CHECKSIG
OP_CHECKMULTISIG

SimpleBTC uses a simplified version.

SPV (Simplified Payment Verification)

Lightweight verification that does not require downloading the full blockchain.

Principle: Uses Merkle proofs to verify transactions.

Advantages:

Only needs block headers (~80 bytes each)
Suitable for mobile wallets
O(log n) verification

T

Timelock (nLockTime)

Restricts a transaction from being confirmed before a specific time.

Types:

Timestamp-based (≥ 500,000,000)
Block height-based (< 500,000,000)

Applications:

Time deposits
Inheritance
Payroll disbursement

Transaction (TX)

The basic unit of value transfer.

Contains:

Inputs (which UTXOs to spend)
Outputs (which new UTXOs to create)
Timestamp
Fee

U

UTXO (Unspent Transaction Output)

An unspent transaction output, representing bitcoin that can be spent.

Lifecycle:

Created (as a transaction output)
Exists (in the UTXO set)
Spent (referenced by a transaction input)
Removed (deleted from the UTXO set)

Balance: the sum of all UTXOs

W

Wallet

Software that manages private keys, public keys, and addresses.

Types:

Hot wallet (online)
Cold wallet (offline)
Hardware wallet
Paper wallet

Functions:

Generate key pairs
Create addresses
Sign transactions
Query balances

Numbers

51% Attack

An attack in which an attacker controls more than 50% of the network’s hash power, enabling rewriting of blockchain history.

Consequences:

Double-spend attacks
Blocking transaction confirmations

Defense: Bitcoin’s hash rate is so large that the cost of such an attack is prohibitively high.

6 Confirmations

The standard number of confirmations for a Bitcoin transaction to be considered secure.

Time: approximately 60 minutes (6 blocks × 10 minutes)

Reason: After 6 blocks, rewriting history is virtually impossible.

Reference Resources

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