block (s.v. "Block"): Transaction data is permanently recorded in files called blocks. They can be thought of as the individual pages of a city recorder's recordbook (where changes to title to real estate are recorded) or a stock transaction ledger. Blocks are organized into a linear sequence over time (also known as the block chain). New transactions are constantly being processes by miners into new blocks which are added to the end of the chain and can never be changed or removed once accepted by the network (although some software will remove orphaned blocks). · Each block contains, among other things, a record of some or all recent transactions, and a reference to the block that came immediately before it. It also contains an answer to a difficult-to-solve mathematical puzzle - the answer to which is unique to each block. New blocks cannot be submitted to the network without the correct answer - the process of "mining" is essentially the process of competing to be the next to find the answer that "solves" the current block. The mathematical problem in each block is extremely difficult to solve, but once a valid solution is found, it is very easy for the rest of the network to confirm that the solution is correct. There are multiple valid solutions for any given block - only one of the solutions needs to be found for the block to be solved. (†2300)
block header (s.v. "Merkle root"): Every transaction has a hash associated with it. In a block, all of the transaction hashes in the block are themselves hashed (sometimes several times -- the exact process is complex), and the result is the Merkle root. In other words, the Merkle root is the hash of all the hashes of all the transactions in the block. The Merkle root is included in the block header. With this scheme, it is possible to securely verify that a transaction has been accepted by the network (and get the number of confirmations) by downloading just the tiny block headers and Merkle tree -- downloading the entire block chain is unnecessary. This feature is currently not used in Bitcoin, but it will be in the future. (†2303)
blockchain (s.v. "Blockchain"): Each block includes the difficult-to-produce verification hash of the previous block. This allows each subsequent block to be linked to all previous blocks. These blocks which are linked together for the purpose of verifying transactions within blocks is called the block chain. (†2301)
double spending (s.v. "Double-spending"): Double-spending is the result of successfully spending some money more than once. Bitcoin protects against double spending by verifying each transaction added to the block chain to ensure that the inputs for the transaction had not previously already been spent. (†2209)
full node (s.v. "Full node"): nodes that fully enforce all of the rules of Bitcoin. Most nodes on the network are lightweight nodes instead of full nodes, but full nodes form the backbone of the network. (†2034)
hash function (s.v. "Hash function"): A computer algorithm which takes an arbitrary amount of input data and deterministically produces fixed length output, known as the data's "hash", that can be used to easily verify that data has not been altered. If you change any single bit of the original data and run the hash algorithm, the hash will completely change. Because the hash is seemingly random, it is prohibitively difficult to try to produce a specific hash by changing the data which is being hashed. (†2302)
mining (s.v. "Mining"): Mining is the process of adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere. · Mining is intentionally designed to be resource-intensive and difficult so that the number of blocks found each day by miners remains steady. Individual blocks must contain a proof of work to be considered valid. This proof of work is verified by other Bitcoin nodes each time they receive a block. Bitcoin uses the hashcash proof-of-work function. · The primary purpose of mining is to allow Bitcoin nodes to reach a secure, tamper-resistant consensus. Mining is also the mechanism used to introduce Bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created coins. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system. · Bitcoin mining is so called because it resembles the mining of other commodities: it requires exertion and it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground. (†2095)
node (s.v. "Full node"): any computer that connects to the Bitcoin network. (†2033)
nonce (s.v. "Nonce"): The "nonce" in a bitcoin block is a 32-bit (4-byte) field whose value is set so that the hash of the block will contain a run of leading zeros. The rest of the fields may not be changed, as they have a defined meaning.
· Any change to the block data (such as the nonce) will make the block hash completely different. Since it is believed infeasible to predict which combination of bits will result in the right hash, many different nonce values are tried, and the hash is recomputed for each value until a hash containing the required number of zero bits is found. The number of zero bits required is set by the difficulty. The resulting hash has to be a value less than the current difficulty and so will have to have a certain number of leading zero bits to be less than that. As this iterative calculation requires time and resources, the presentation of the block with the correct nonce value constitutes proof of work. (†2096)
proof of publication (s.v. "Proof of Publication"): A method that uses Bitcoin or Bitcoin-like technologies to authenticate that a certain information was published at a certain date, or was known at a certain date.The technique entails encoding the secure hash of a certain publication (plaintext) inside the Bitcoin blockchain. It was probably first described in the paper from 2012 titled "CommitCoin: Carbon Dating Commitments with Bitcoin." (†2037)
proof of work (s.v. "Proof of work"): A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work system. (†2094)
transaction (s.v. "Transaction"): A transaction is a transfer of Bitcoin value that is broadcast to the network and collected into blocks. A transaction typically references previous transaction outputs as new transaction inputs and dedicates all input Bitcoin values to new outputs. Transactions are not encrypted, so it is possible to browse and view every transaction ever collected into a block. · Standard transaction outputs nominate addresses, and the redemption of any future inputs requires a relevant signature.
· All transactions are visible in the block chain, and can be viewed with a hex editor. A block chain browser is a site where every transaction included within the block chain can be viewed in human-readable terms. This is useful for seeing the technical details of transactions in action and for verifying payments. (†2304)
transaction input (s.v. "Transaction" ; "input"): An input is a reference to an output from a previous transaction. Multiple inputs are often listed in a transaction. All of the new transaction's input values (that is, the total coin value of the previous outputs referenced by the new transaction's inputs) are added up, and the total (less any transaction fee) is completely used by the outputs of the new transaction (†2210)
transaction output (s.v. "Transaction" ; "output"): An output contains instructions for sending bitcoins. Value is the number of Satoshi (1 BTC = 100,000,000 Satoshi) that this output will be worth when claimed. ScriptPubKey is the second half of a script (discussed later). There can be more than one output, and they share the combined value of the inputs. Because each output from one transaction can only ever be referenced once by an input of a subsequent transaction, the entire combined input value needs to be sent in an output if you don't want to lose it. (†2211)
