Home Mining Glossary

Algorithm—The computational process that makes cryptocurrency mining possible. Each cryptocurrency requires a consensus mechanism. Cryptocurrencies that use a Proof-of-Work mechanism will require a hashing algorithm to verify transactions. This process is done through mathematical functions that must be solved by participants (miners) of the network. For example, Bitcoin is powered by the SHA-256 algorithm and Scrypt is the algorithm used for mining Litecoin.

Altcoins—All digital assets other than Bitcoin, including tokens and other cryptocurrencies.

Application-specific integrated circuit (ASIC)—A high-powered computing device that uses microprocessors for the sole purpose of mining digital currency. The focused application means these devices can mine much faster than CPUs or GPUs. Typically, an ASIC miner can only mine one algorithm. An ASIC is also know as an ASIC miner, ASIC machine, ASIC mining rig.

Bitcoin—The first mainstream cryptocurrency ever created. Described as a “peer-to-peer electronic cash system”, it was designed to be a decentralized digital currency with no central authority controlling it. 

Block—The basic unit of a blockchain. A block is a secure way to store a set of digital financial records. The records are encrypted through a process called hashing. Blocks cannot be changed without changing the entire sequence of blocks that come before and after them, making them extremely difficult to modify.  

Blockchain—A digital public ledger, similar to a database, of all the transactions involving a particular cryptocurrency. “A blockchain is made up of a compilation of records, called blocks, that are linked together using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. As blocks each contain information about the block previous to it, they form a chain, with each additional block reinforcing the ones before it. Therefore, blockchains are resistant to modification of their data because once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.” (Source: abcactionnews.com) 

Block reward—The currency that is rewarded to a cryptocurrency miner, or a group of miners working together in a mining pool, when their machine is the first to solve the problem required to find a block on the blockchain.

Central Processing Unit (CPU)—A chip commonly referred to as the “brain” of a home computer. Can be used to mine cryptocurrency, but at extremely low rates.

Coin—A cryptocurrency which is its own blockchain. Bitcoin is the most common example. It is sometimes referred to as the “native asset” of a given network, and is also used as a blanket term to refer to all cryptocurrencies and tokens.

Coin address—The corresponding address you establish where you will have your mining rewards deposited. You will need to input this address when you checkout with an online mining plan. 

Colocation (Co-lo)—The practice of renting space in a third-party data center to mine for cryptocurrency rather than running mining machines at home. Colocation facilities are essentially data centers that house and maintain hundreds to thousands of machines. 

Cold storage—A type of cryptocurrency storage in which the device that stores the currency is not connected to the internet. This option is available with some hardware wallets, and is considered the most secure because there is no way for hackers to access your funds without the device.

Consensus mechanism—The method that a network uses to verify legitimate transactions. In the context of crypto, this can be done through various cryptographic methods, but generally more than 51% of the users on a network must agree that a transaction is valid for it to be posted to the blockchain. 

Cryptocurrency (crypto, coin)—A digital currency that can be used to store value and exchanged for goods and services. Transactions are secured and verified through cryptography. Cryptocurrencies such as Bitcoin are not regulated by any central authority and are designed so that the owner of any asset can transact securely without the need for a third party, such as a bank.  

Cryptocurrency mining—In cryptocurrency mining, individuals or groups use high-powered devices to solve complex computational math problems. The process is powered by the Proof of Work consensus mechanism, which is the backbone of Bitcoin’s blockchain. Miners validate and verify transactions and receive fees in cryptocurrency for doing so. The validation guarantees there is no double-spend or fake transactions. They also package these transactions into blocks and add them to the network. (Source: Crypto Potato)

Cryptography—The process of encrypting information for the purpose of confidentiality, integrity, and authentication. 

Decentralized—Used to describe software, programs, and networks that are not controlled by any one entity. Anyone can participate and access the information contained on this kind of network.

Desktop wallet—Apps for storing cryptocurrency that can be run on a home computer. Desktop wallets are just as secure as mobile wallets, but are less likely to be lost or stolen.

Digital asset— A non-tangible asset that is created, traded, and stored in a digital format. In the context of blockchain, digital assets include cryptocurrency and crypto tokens. (Source: Gemini.com)

Exchange—An online platform where users can buy, sell, or trade cryptocurrencies. A home miner will likely want to exchange what they mine (Bitcoin or other cryptocurrency) into a Fiat currency (such as US Dollars) for settlement. The conversion process is done through an online exchange. 

Fiat currency—Government-issued currency that is not backed by a physical commodity, such as gold or silver, and can be used as a form of payment for goods and services.

Fractional share—A portion of ownership in a piece of mining equipment (ASIC) that is used to mine cryptocurrency. Mining rewards are distributed to the owners based on the number of fractional shares they own. 

Graphics Processing Unit (GPU)—A specialized electronic component (a graphics card) designed to quickly and efficiently process computer graphics. Powerful GPUs can be used to mine for cryptocurrency, although at low rates compared to ASICs.

Halving—The event referring to when a block reward is cut in half. For Bitcoin, there will only ever be 21 million blocks mined. The current reward for adding a block to the Bitcoin blockchain is 6.25 Bitcoin (each halving occurs after every 210,000 blocks). The next Bitcoin halving will likely occur in 2024 when the reward will be cut in half to 3.125 Bitcoin. 

Hardware wallet—A hardware device dedicated to storing cryptocurrency. Hardware wallets look like small USB devices or small phones with screens and are generally considered the most secure option for cryptocurrency storage. Some of these devices are designed to never connect to the internet. Also see “cold storage”.

Hash—A string of random letters or numbers generated by processing transactional data through a cryptographic algorithm. Blockchains use hashes to secure information and make the digital ledger immutable.  

Hashing—The process of taking a certain input and processing it through a particular algorithm in a type of guess-and-check lottery system; the hashing algorithm encrypts transaction information by generating strings of unintelligible text. 

Hashrate—Hashrate is a measure of how quickly a piece of hardware can perform the calculations needed to mine a specific cryptocurrency, measured in number of hashes generated per second. This is based on your computer’s processing power and how difficult it is to mine a given coin. Usually expressed in millions of hashes per second (MH/s) or trillions of hashes per second (TH/s). 1 TH/s (one tera hash) is 1,000,000,000,000 (one trillion) hashes per second. 1 PH/s (one peta hash) is 1,000,000,000,000,000 (one quadrillion) hashes per second. 1 EH/s (one exa hash) is 1,000,000,000,000,000,000 (one quintillion) hashes per second.

Hashing power (hash power)—The amount of computing power a mining machine is able to contribute to the overall cryptocurrency network. 

Joule—A measure of energy. 1 joule = 1 watt second, so a machine that uses 30Joules per TH and has 100 TH  would use 30*100 = 3000 watts/hour. Joules per terahash—A measure of electrical efficiency of a crypto mining machine. The more joules used, the more electricity used.

Know Your Customer (KYC)—A protocol endorsed by many regulatory agencies to ensure banks and cryptocurrency exchanges know the identities of their customers. To follow this protocol, regulated exchanges must gather the personal information of their customers. A home miner will need to verify their identity as part of the Know Your Customer protocol when setting up an account with a cryptocurrency exchange to make transactions.

Ledger (blockchain)—A collection of accounts in which transactions are recorded. In the classic sense, this would be a physical book or document, but cryptocurrencies are based on digital ledgers which record transactions in code. 

Managed Mining Plan—A home mining service package offered by a professional cryptocurrency mining company. MinerBeast was the first to  package home mining offers as “plans” to make them more easy to understand by consumers who are new to mining, similar to electricity plans offered in de-regulated energy states. These plans require no expertise and no equipment at the user’s home. The mining company usually provides the mining machine (or you can ship them your own), data center, electricity, maintenance, monitoring, and repairs. Mining plans generally include the same components as what crypto miners call “colocation” offerings.

Mine (data center)—The location of the equipment used for cryptocurrency mining. 

Miner reward (mining fee, network fee)—Fees paid to miners for processing digital transactions. 

Mining difficulty—The mining difficulty of a given cryptocurrency is a measurement used to describe how likely it is that a given machine will be able to verify a transaction on the blockchain. The mining difficulty will depend on the cryptocurrency itself as well as the quantity of miners in the network.

Mining pool—When miners from all over the world combine their computing power to mine for crypto. Each participating miner in the mining pool receives a reward in cryptocurrency if the pool successfully adds a block to the blockchain. Each miner receives a portion of the reward depending on how much hash power their mining hardware has contributed to the pool. For example, if you provide 1% of the hash power for a pool with 100 other miners, you will receive 1% of the payout, minus any fees from the mining pool. Also see “Pool Fee”.

Mining rig (or rig)—A computing device made solely for the purpose of mining cryptocurrency (usually an ASIC). Mining rigs are also known as mining machines, ASIC computers, and miners. Also see “Application-specific integrated circuit”.

Mining software—The software that controls the way hardware such as a CPUs, GPUs, or ASICs run, interface with mining pools, and interact with cryptocurrency networks. Some software companies charge a small fee in transactions that occur during the operation of mining machines.

Mobile wallet (software wallet, browser wallet, digital wallet)—A cryptocurrency wallet that comes in the form of an app for a mobile device. This option is the most convenient way to store cryptocurrency, but it may not be the most secure if you travel with your mobile device. It is generally recommended to hold only small amounts of cryptocurrency on your phone.

Mnemonic phrase—A private key. Usually a string of words that do not make sense, but are used to generate a private key and can give anyone access to a crypto wallet. CAUTION: anyone who has access to this phrase can access your funds.

Network—The entire system associated with a particular blockchain, including cryptocurrencies and tokens as well as users, nodes, and miners.

Network fee (mining fee)—A small fee, usually $0.25 to $5.00 paid by the owner of a cryptocurrency to move their crypto off of the network and onto their own cryptocurrency wallet. 

Peer-to-peer—A computing system in which a network of connected devices or users share a task or workload. Each peer shares a portion of its resources to do the task, and none controls any of the others. Importantly, there is no need for a central governing agency, or a central connection (such as a server) where files must be uploaded to or downloaded from. Everything is shared directly between the peer devices or users. 

Pool fee—A fee that miners participating in a mining pool (to increase the likelihood of receiving a mining reward) must pay periodically to support the pool’s developers. This fee is deducted every time the miner is paid. 

Private key—The recovery password for a specific cryptocurrency wallet. Users need the private key to access their cryptocurrency or recover it if they change or lose the device the wallet software is downloaded on. Created using a Mnemonic phrase which is a string of keywords in a unique combination. The seed phrase (mnemonic phrase) is used to generate the private key, but they are not the same – if someone has your mnemonic phrase, they can obtain your private key in minutes. CAUTION: anyone who has access to this information can access your funds. Also known as mnemonic code, seed phrase, and recovery phrase.

Proof of Stake—A consensus mechanism powering many cryptocurrencies, including Ethereum. It is less computationally intensive than Proof of Work. Whoever controls 51% of the coin can control the network. In order to verify transactions, “The owners offer their coins as collateral (e.g., staking) for the chance to validate blocks and then become validators. Validators are selected randomly to confirm transactions and validate block information. To become a validator, a coin owner must “stake” a specific amount of coins. For instance, Ethereum requires 32 ETH to be staked before a user can become a validator. Blocks are validated by more than one validator, and when a specific number of the validators verify that the block is accurate, it is finalized and closed.” (Source: Investopedia)

Proof of Work (PoW)—The consensus mechanism on which Bitcoin and many other cryptocurrencies are built. According to Investopedia, Proof of Work (PoW) describes a system that requires a significant but feasible amount of effort in order to deter frivolous or malicious uses of computing power, such as sending spam emails or launching denial of service attacks. The concept was subsequently adapted to securing digital money in 2004.

Public key (wallet address, coin address)—A code or key phrase that is used to identify a user’s cryptocurrency wallet so that other users can send to or receive from their wallet. Different from a private key, this is shared between peers and is the only way to receive crypto currency. Also known as a wallet address or coin address.

Seed phrase (mnemonic code)—A private key used to keep one’s information secure. 

Self-custody—The practice of storing one’s own digital assets on one’s own devices without involving a third party such as a bank or cryptocurrency exchange. Generally considered the safest way to store crypto funds long-term.

Stablecoin—A cryptocurrency whose value is pegged to a traditional currency, such as USD.

Token—A digital asset which is built on top of an existing blockchain—such as the Bitcoin or Ethereum blockchain—but is separate from it. Like coins, tokens can be a way to store value.

Two-factor Authentication (2FA)—A form of security in which, in order to log in, the user is required to input both their password and an authentication code sent to a secondary device they also own, such as a mobile phone. This decreases the likelihood that a bad actor can hack into your account, even if they have both your username and password.

Wallet—A device, physical medium, program, or service which stores the public keys and private keys that enable users to send and receive digital currency. Also known as a mobile wallet, cryptocurrency wallet, digital wallet, hardware wallet, and browser wallet.