Mining glossary

Each term is defined in a single sentence that stands on its own, then linked to the guides that use it. Inside a guide, the first mention of any term here links back to its definition.

76 terms

A

Algorithmic stablecoinalgo stablecoin, seigniorage stablecoin: An algorithmic stablecoin is a token that attempts to hold its peg by minting and burning a companion token rather than by holding reserves, a design whose largest example, TerraUSD, collapsed in May 2022.
Allocatorallocators: An allocator is the role appointed by a vault's curator to move deposits between the markets the curator has approved, executing day-to-day rebalancing without the power to widen the vault's risk limits.
ASICASIC miner, application-specific integrated circuit: An ASIC (application-specific integrated circuit) is a chip designed to compute one hash function and nothing else, and ASIC miners built around such chips are the only hardware that mines SHA-256 coins like Bitcoin competitively.
Attestationreserve attestation, attestations: An attestation is an accountant's report confirming that a stablecoin issuer held stated reserves at a stated moment, a narrower assurance than a full audit because it verifies a snapshot rather than the issuer's controls over time.
Automated market makerAMM, automated market makers: An automated market maker is a decentralized exchange design that prices trades from a formula applied to pooled reserves rather than from an order book, so a trade can always execute against the pool at some price.

B

Bad debtinsolvency, protocol insolvency: Bad debt is debt left outstanding after a position's collateral has become worth less than what it owes, a shortfall that falls on the protocol's lenders or its treasury rather than on the borrower.
Basis tradecash and carry, cash-and-carry: A basis trade is the combination of a long spot position and a short derivatives position in the same asset, earning the spread between the two prices while carrying little direct exposure to the price itself.
Block header: The block header is the 80-byte summary of a block that miners actually hash, containing the previous block's hash, a Merkle root committing to the block's transactions, a timestamp, the difficulty target and the nonce.
Block rewardcoinbase reward: The block reward is the total bitcoin a miner collects for a block, made up of the fixed block subsidy of newly issued coins plus the transaction fees paid by every transaction included in that block.
Block subsidysubsidy: The block subsidy is the newly created bitcoin issued to the miner of each block, set at 3.125 BTC since the April 2024 halving and due to fall to 1.5625 BTC at the next halving around 2028.
Block timeblock interval: Block time is the interval between consecutive Bitcoin blocks, which the difficulty adjustment targets at ten minutes on average, or about 144 blocks a day, although individual intervals vary widely.
Break-even electricity pricebreakeven electricity price, break-even power price: The break-even electricity price is the highest cost per kilowatt-hour at which a specific machine's daily mining revenue still covers its daily power cost, so a miner paying more than that figure loses money on every kilowatt-hour.

C

CDP stablecoincollateralized debt position, overcollateralized stablecoin: A CDP stablecoin is a token minted as a loan against crypto collateral worth more than the amount issued, with the surplus collateral and a liquidation mechanism standing in for an issuer's cash reserves.
Collateralcollateralization, collateralisation: Collateral is the asset a borrower locks in a lending protocol to secure a loan, seizable by liquidators at a discount if the loan's value rises too far against it.
Curatorcurators, risk curator: A curator is the party that configures a lending vault, choosing which markets it may lend into, setting exposure caps and oracles, and appointing the allocator that moves capital within those limits.

D

DeFidecentralized finance, decentralised finance: DeFi, short for decentralized finance, is the set of financial services built as public smart contracts on a blockchain, so that lending, trading and issuance run as code anyone can inspect and use without an account at an intermediary.
Delta neutraldelta-neutral, market neutral: A delta neutral position is one constructed so that its net sensitivity to the underlying asset's price is approximately zero, leaving its return to come from funding, fees or basis rather than from price direction.
Depegdepegging, de-peg: A depeg is a sustained deviation of a stablecoin's market price from its target value, usually triggered by doubt about the reserves behind it or by redemption becoming slow, restricted or impossible.
Difficulty adjustmentretarget, difficulty retarget, epoch: The difficulty adjustment is Bitcoin's recalculation of network difficulty every 2,016 blocks, about two weeks, raising it when the previous blocks arrived faster than ten minutes apart and lowering it when they arrived slower, capped at a factor of four in either direction.

E

E-Modeefficiency mode, correlated asset mode: E-Mode is a lending protocol setting that raises the maximum loan-to-value when a borrower's collateral and debt are closely correlated assets, such as two forms of staked ether, at the cost of concentrating the position in one price relationship.
Empty block: An empty block is a block containing only the coinbase transaction, typically mined in the seconds after a previous block when a pool has learned the new block's hash but not yet assembled a fresh set of transactions.
ERC-4626ERC4626, tokenized vault standard: ERC-4626 is the Ethereum token standard that defines a common interface for yield-bearing vaults, so that any wallet, aggregator or protocol can deposit into and redeem from a compliant vault without custom integration code.

F

Fiat-backed stablecoinfiat-collateralized stablecoin, reserve-backed stablecoin: A fiat-backed stablecoin is a token whose issuer holds cash and short-dated government debt in reserve against every unit in circulation, redeeming units at par for qualified customers.
FPPSfull pay per share, full pay-per-share: FPPS (full pay per share) is a payout scheme that pays the PPS rate for the block subsidy plus a proportional share of the average transaction fees earned per block, so miners receive fee revenue without bearing block-finding variance.
Funding ratefunding, funding payments: The funding rate is the periodic payment exchanged between holders of long and short perpetual futures positions, paid by longs to shorts when the perpetual trades above spot and in the opposite direction when it trades below.

H

Halvinghalvening: The halving is the scheduled event every 210,000 blocks, roughly four years, at which Bitcoin's block subsidy is cut in half, most recently from 6.25 BTC to 3.125 BTC in April 2024.
Hashpricehash price: Hashprice is the expected daily mining revenue per unit of hashrate, usually quoted in dollars per terahash per second per day, and it rises with the bitcoin price and transaction fees and falls as network difficulty grows.
Hashratehash rate, TH/s, PH/s, EH/s: Hashrate is the number of hash attempts a miner or the whole network performs per second, quoted in terahashes (TH/s), petahashes (PH/s) or exahashes (EH/s), and it determines a miner's expected share of block rewards.
Health factorhealth score: Health factor is a lending protocol's single summary of how close a position is to liquidation, computed as risk-adjusted collateral value divided by debt value, with liquidation triggered when it falls below one.
Hostingcolocation, hosted mining: Hosting is an arrangement in which a facility operator houses, powers and maintains machines the miner owns in exchange for an all-in electricity rate or monthly fee, in place of the miner running them at home.

I

Immutabilityimmutable: Immutability is the property of a deployed contract whose code and parameters can never be changed, which removes the risk of an administrator altering the rules but also removes any way to fix a flaw after launch.
Impermanent lossdivergence loss, IL: Impermanent loss is the shortfall a liquidity provider incurs relative to simply holding the two tokens, caused by the pool rebalancing toward the falling asset as relative prices move apart.
Interest rate curveinterest rate model, IRM, kink: An interest rate curve is the formula mapping a lending pool's utilization to its borrow rate, typically rising gently up to an optimal utilization point and steeply above it so that rates pull in new deposits.
Isolated marketisolated markets, isolated lending market: An isolated market is a lending market defined by a single collateral asset, loan asset, oracle and liquidation threshold, so that bad debt arising in it cannot spread to lenders in other markets.

J

Joules per terahashJ/TH, efficiency, W/TH: Joules per terahash (J/TH) is the efficiency measure for a mining machine, equal to its power draw in watts divided by its hashrate in TH/s, so a lower figure means less electricity for the same expected revenue.

K

Kilowatt-hourkWh: A kilowatt-hour (kWh) is the unit electricity is billed in, equal to one kilowatt drawn for one hour, so a machine rated at 3,500 watts uses 3.5 kWh every hour and 84 kWh a day.

L

Liquid staking tokenLST, liquid staking tokens, stETH: A liquid staking token is a transferable claim on staked cryptocurrency and its accruing rewards, letting the holder use the position as collateral elsewhere while the underlying coins remain staked.
Liquidationliquidated, liquidator: Liquidation is the process in which a third party repays part of an undercollateralized borrower's debt and receives their collateral at a discount, closing the shortfall before the protocol takes a loss.
Liquidity poolliquidity pools, AMM pool: A liquidity pool is a smart contract holding reserves of two or more tokens that traders swap against at a price set by a formula, with the depositors earning a share of trading fees.
Liquidity riskwithdrawal queue: Liquidity risk in DeFi is the risk that a depositor cannot withdraw on demand because the underlying capital is lent out or locked, a distinct problem from insolvency since the position can be fully backed and still illiquid.
Loan-to-valueLTV, LLTV, liquidation loan-to-value: Loan-to-value, abbreviated LTV, is the ratio of borrowed value to collateral value, with each asset assigned a maximum LTV for new borrowing and a higher liquidation threshold at which the position becomes seizable.
Loopingrecursive borrowing, leveraged loop, loop: Looping is the practice of depositing collateral, borrowing against it, converting the borrowed asset back into the collateral asset and redepositing, repeating the cycle to build leveraged exposure to a yield spread.

M

Mempoolmemory pool: The mempool is each node's holding area for valid transactions that have been broadcast but not yet included in a block, from which miners select the transactions that pay the highest fee per byte.
Mining poolpool: A mining pool is a service that combines the hashrate of many miners, submits blocks on their behalf and splits the resulting block rewards according to the work each miner contributed, turning rare large payouts into small frequent ones.

N

Network difficultydifficulty, mining difficulty: Network difficulty is the number that sets how hard it is to find a valid Bitcoin block, adjusted every 2,016 blocks so that blocks keep arriving roughly every ten minutes as total hashrate changes.
Nonce: The nonce is a 32-bit field in the block header that a miner changes between hash attempts so that each attempt produces a different hash, with the extra nonce in the coinbase transaction providing more room once the 4.3 billion values run out.

O

Oracleprice oracle, oracles: An oracle is the contract that reports an asset's price to a protocol, and because liquidations fire on the oracle's number rather than on any exchange screen, its design and update cadence are a first-order risk.
Orphan blockorphaned block, stale block: An orphan block, more precisely a stale block, is a valid block that loses out to a competing block found at nearly the same time, so its reward is never spendable and a pool that mined it earns nothing for that round.

P

Payback periodROI period: The payback period is the time it takes a machine's cumulative operating profit to repay its purchase and setup cost under stated assumptions about price, difficulty and electricity, and it has no meaning when the machine runs at a loss.
Payout thresholdminimum payout: A payout threshold is the minimum balance a miner must accumulate before a pool sends a payment, set by the pool to keep on-chain transaction costs small relative to the amounts paid.
Pegpegged: A peg is the fixed exchange rate a stablecoin aims to hold against its reference asset, maintained in practice by arbitrageurs who mint or redeem whenever the market price drifts from it.
Perpetual futureperp, perps, perpetual futures, perpetual swap: A perpetual future is a derivative that tracks an asset's price with no expiry date, kept in line with spot by periodic funding payments between long and short holders.
Pool feepool fees, mining fee: A pool fee is the percentage of mining rewards a pool keeps for running the service, commonly between 0% and 4% where operators publish it, with PPS and FPPS pools tending to charge more than PPLNS pools because they carry the variance.
PPLNSpay per last N shares, pay-per-last-N-shares: PPLNS (pay per last N shares) is a payout scheme that distributes each block the pool actually finds among the shares submitted in a window before that block, so miners bear the pool's luck and a miner who leaves shortly before a block forfeits some of the reward.
PPSpay per share, pay-per-share: PPS (pay per share) is a pool payout scheme that pays a fixed amount for every accepted share, calculated from the expected value of that share at the current difficulty, so the pool absorbs all the variance and usually charges a higher fee for doing so.
Proof of workPoW: Proof of work is the consensus mechanism in which miners repeatedly hash candidate block headers until one produces a value below the network's current target, making each new block expensive to produce and cheap to verify.

R

Real yieldorganic yield: Real yield is return paid out of revenue a protocol actually earns, such as trading fees, borrowing interest, staking rewards or funding payments, as distinct from return paid in newly issued governance tokens.
Redemptionredeem, redemption right: Redemption is the right to exchange a stablecoin with its issuer for the underlying asset at par, and the practical accessibility of that right is what separates a peg that holds under stress from one that does not.

S

SHA-256SHA256: SHA-256 is the cryptographic hash function Bitcoin uses for proof of work, producing a fixed 256-bit output from any input so that the only way to find a valid block is to try inputs one after another.
Shareshares, accepted share: A share is a hash a miner submits to a pool that meets the pool's own easier target rather than the network's, serving as verifiable proof of the work the miner has done so the pool can measure each miner's contribution.
Share priceexchange rate, price per share: Share price in a vault is total assets divided by total shares outstanding, the figure that rises as yield accrues and that determines how many underlying tokens each share redeems for.
Slippageprice impact: Slippage is the difference between the price a trader expects and the price actually received, widening with trade size relative to available liquidity and with delay between quote and execution.
Smart contractsmart contracts: A smart contract is a program deployed to a blockchain that holds assets and executes its rules automatically when called, so the terms of an agreement are enforced by the network rather than by a counterparty.
Solo miningsolo: Solo mining is mining without a pool, or through a solo pool that passes the whole block reward to whichever miner finds the block, so the miner keeps everything but may wait months or years between payouts.
Stablecoinstablecoins: A stablecoin is a token designed to hold a constant value against a reference asset, almost always the US dollar, using reserves, overcollateralization or a hedged trading position to defend the peg.
Stale sharestale, rejected share: A stale share is a share submitted after the pool has already moved on to a new block, usually because of network latency, and it earns nothing because it no longer contributes to a block the pool can still find.
StratumStratum V1, Stratum V2: Stratum is the protocol miners use to receive work from a pool and submit shares back, with Stratum V2 adding encryption and an optional mode in which miners rather than the pool choose which transactions go into a block.
Synthetic dollarsynthetic stablecoin, delta-neutral stablecoin: A synthetic dollar is a stablecoin backed by a hedged trading position rather than by cash reserves, typically pairing spot holdings with an equal short in perpetual futures so the combined value stays near a dollar.

T

Tokenized treasurytokenised treasury, tokenized money market fund, RWA: A tokenized treasury is a blockchain token representing a share in a fund holding short-dated government debt, passing the underlying interest to holders instead of keeping it as issuer revenue.
Total value lockedTVL: Total value locked, usually abbreviated TVL, is the dollar value of assets deposited in a protocol's contracts, used as a rough size measure that rises and falls with token prices as well as with deposits.
Transaction feesfee revenue, fees: Transaction fees are the amounts users attach to Bitcoin transactions to have them included in a block, collected by the miner of that block on top of the subsidy and forming a growing share of mining revenue as the subsidy shrinks.

U

Uptime: Uptime is the percentage of time a mining machine is actually hashing, and because mining revenue accrues only while a machine is working, every hour offline is revenue that cannot be recovered later.
Utilization rateutilisation rate, utilization: Utilization rate is the share of a lending pool's deposits currently borrowed, the input to the interest rate curve and the reason withdrawals can queue when it approaches 100 percent.

V

Varianceluck, pool luck: Variance in mining is the gap between the blocks a miner or pool statistically expects to find and the blocks it actually finds over a period, which pools report as luck and which shrinks as a proportion of income as hashrate and time increase.
Vaultvaults, tokenized vault: A vault is a smart contract that pools depositor funds, deploys them into a strategy, and issues shares whose redemption value rises as the strategy earns, so depositors hold a proportional claim rather than a fixed balance.

Y

Yield farmingliquidity mining, farming: Yield farming is the practice of moving capital between protocols to capture the highest combined return from fees, interest and token incentives, and it originated with Compound's COMP distribution in June 2020.