Bitcoin Glossary

Bitcoin

A decentralized digital currency that operates without a central authority, secured by a network of nodes and miners.

Satoshi

The smallest unit of Bitcoin; 1 BTC = 100,000,000 satoshis. Named after Bitcoin's pseudonymous creator, Satoshi Nakamoto.

Also: sats, satoshi, satoshis

Wallet

Software or hardware that manages private keys and lets you send and receive Bitcoin. Your wallet doesn't store coins — it stores the keys that control them.

Address

A representation (e.g., bc1...) of a destination for Bitcoin payments, derived from public keys. Like an email address for receiving money.

Also: addresses

Blockchain

An append-only ledger of blocks that contain transactions, linked together by cryptographic hashes. Bitcoin's permanent, public record of every transaction ever made.

Block

A batch of transactions plus metadata (timestamp, previous hash, nonce, Merkle root) added to the blockchain roughly every 10 minutes.

Confirmation

Occurs when a transaction is included in a block; more confirmations mean stronger finality. Six confirmations is the gold standard for large amounts.

Fee

An amount paid to miners to include a transaction in a block; higher fees generally confirm faster during busy periods.

Also: fees

Seed Phrase

A 12-24 word mnemonic that encodes your wallet's master key for backup and recovery. If you lose this, you lose access to your Bitcoin permanently.

Also: recovery phrase, mnemonic

HODL

A misspelling of "hold" that became Bitcoin culture. It means buying Bitcoin and holding it long-term regardless of price swings, rather than trying to trade.

Also: hodling, hodler

DCA (Dollar-Cost Averaging)

An investment strategy where you buy a fixed dollar amount of Bitcoin on a regular schedule (e.g., $50 every week), regardless of price. This smooths out volatility over time.

Also: dollar cost averaging, dollar-cost averaging

FOMO

Fear Of Missing Out — the anxiety that drives people to buy Bitcoin impulsively during price rallies, often at local tops. A common emotional trap in volatile markets.

FUD

Fear, Uncertainty, and Doubt — negative information or narratives spread to discourage people from buying or holding Bitcoin. Can be genuine concern or deliberate manipulation.

Whale

An individual or entity that holds a very large amount of Bitcoin. Whale movements can influence market prices because of the size of their trades.

Also: whales

Market Cap

The total value of all existing Bitcoin, calculated by multiplying the current price by the number of coins in circulation. Used to compare Bitcoin's size relative to other assets.

Also: market capitalization

All-Time High (ATH)

The highest price Bitcoin has ever reached. Each new ATH generates media attention and often triggers both FOMO buying and profit-taking.

Also: all-time high, ath

Whitepaper

The original 9-page document published by Satoshi Nakamoto in 2008 titled "Bitcoin: A Peer-to-Peer Electronic Cash System." It describes how Bitcoin works and solves the double-spending problem.

Also: white paper

Genesis Block

The very first block in the Bitcoin blockchain, mined by Satoshi Nakamoto on January 3, 2009. It contains the embedded text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."

Also: block 0, block zero

KYC

Know Your Customer — identity verification requirements imposed by regulated exchanges. Users must provide ID, address, and sometimes selfies before trading. Required by law in most countries.

Also: know your customer

AML

Anti-Money Laundering — laws and regulations designed to prevent criminals from disguising illegally obtained funds as legitimate income. Bitcoin exchanges must comply with AML rules.

Also: anti-money laundering

Cold Storage

Keeping Bitcoin private keys on a device that is never connected to the internet, such as a hardware wallet or metal seed backup. The most secure way to store Bitcoin long-term.

Hot Wallet

A Bitcoin wallet connected to the internet, such as a mobile app or exchange account. Convenient for everyday use but more vulnerable to hacking than cold storage.

Also: hot wallets

Custodial

A service where a third party (like an exchange) holds your private keys on your behalf. Convenient but requires trusting the custodian. If they get hacked or go bankrupt, you may lose your Bitcoin.

Also: custodial wallet

Non-Custodial

A wallet or service where you control your own private keys. No third party can freeze, seize, or lose your funds. Hardware wallets and most mobile wallets are non-custodial.

Also: non-custodial wallet, self-custodial

ETF (Exchange-Traded Fund)

A regulated investment product that tracks Bitcoin's price and trades on traditional stock exchanges. Bitcoin ETFs allow investors to gain Bitcoin exposure through brokerage accounts without holding actual Bitcoin.

Also: bitcoin etf, exchange-traded fund

Futures

A financial contract to buy or sell Bitcoin at a predetermined price on a specific future date. Used for hedging and speculation. Futures can be settled in Bitcoin or cash.

Also: bitcoin futures, futures contract

Options

Financial contracts giving the buyer the right (but not obligation) to buy or sell Bitcoin at a set price before a certain date. Calls bet on price going up; puts bet on price going down.

Also: bitcoin options

Private Key

A secret number that controls spending of associated bitcoins; must be kept confidential. Anyone who knows your private key can spend your Bitcoin.

Also: private keys

Public Key

Derived from a private key; used to verify signatures and generate addresses. Safe to share — it cannot be used to spend your Bitcoin.

Also: public keys

Hash

A fixed-size output produced by a hash function; in Bitcoin, SHA-256 is used extensively to secure data. The same input always produces the same hash, but you cannot reverse-engineer the input from the hash.

SHA-256

A cryptographic hash function producing a 256-bit output, used for mining and block hashing. The backbone of Bitcoin's security.

Also: sha 256, sha256

Node

Software that validates and relays transactions/blocks and enforces Bitcoin's consensus rules. Running your own node is the most trustless way to use Bitcoin.

Miner

A participant that expends energy to find a valid block hash and add new blocks to the blockchain, earning the block reward and transaction fees.

Mempool

A node's pool of unconfirmed transactions waiting to be included in a block. When the mempool is full, transactions with higher fees get prioritized.

UTXO

Unspent Transaction Output — the fundamental unit of value in Bitcoin. Each UTXO is like a specific coin that must be spent entirely in a transaction, with change returned as a new UTXO.

Also: utxos

Halving

An event roughly every 210,000 blocks (~4 years) that reduces the block subsidy by half. This makes Bitcoin increasingly scarce over time, with the final Bitcoin mined around the year 2140.

Difficulty

A parameter that adjusts every 2,016 blocks to target ~10-minute block times regardless of total hashrate. Ensures blocks are found at a predictable rate.

Proof of Work

A consensus mechanism where miners compete to find a valid hash by expending real energy, making attacks economically expensive. Bitcoin's security model since day one.

Also: proof-of-work

Consensus

Network-wide agreement on valid transactions and blocks, following rules enforced independently by every node. No single party can override the consensus rules.

Double Spend

The attempt to spend the same Bitcoin twice. Bitcoin's proof-of-work consensus mechanism and blockchain prevent this — it was the core problem Satoshi solved.

Also: double spending, double-spending

Fork

A change or divergence in network rules; can be a soft fork (backward compatible) or hard fork (incompatible). Can also refer to the resulting split in the blockchain.

Also: forks

Hard Fork

A protocol change that is not backward-compatible — nodes running the old rules will reject blocks created under the new rules. This can split the network into two separate chains (e.g., Bitcoin Cash forked from Bitcoin in 2017).

Also: hard forks

Soft Fork

A backward-compatible protocol upgrade — old nodes still accept blocks created under the new rules. SegWit (2017) and Taproot (2021) were both activated as soft forks.

Also: soft forks

Full Node

Software that downloads and validates the entire Bitcoin blockchain, enforcing all consensus rules independently. Running a full node is the most trustless way to verify transactions.

Also: full nodes, bitcoin node

Mining Pool

A group of miners who combine their computing power and split block rewards proportionally. Pools provide more consistent income than solo mining, where rewards are rare but large.

Also: mining pools, pool mining

Difficulty Adjustment

An automatic recalibration of Bitcoin's mining difficulty every 2,016 blocks (~2 weeks). If blocks are being found too fast, difficulty increases; if too slow, it decreases. This keeps the average block time at ~10 minutes.

Nonce

A random number that miners change repeatedly when trying to find a valid block hash. The nonce is the variable in the mining puzzle — miners increment it until the resulting hash meets the difficulty target.

Merkle Tree

A data structure used in each Bitcoin block that efficiently summarizes all transactions into a single hash (the Merkle root). It allows quick verification that a specific transaction is included in a block without downloading the entire block.

Also: merkle root, hash tree

Block Height

The sequential number of a block in the blockchain, counting from the genesis block (block 0). Block height tells you how many blocks have been mined in Bitcoin's history.

Block Reward

The Bitcoin paid to the miner who successfully mines a new block. It consists of the block subsidy (newly created Bitcoin) plus all transaction fees in the block. The subsidy halves roughly every 4 years.

Also: mining reward

SegWit

Segregated Witness — a 2017 upgrade that separated signature data from transaction data, increasing capacity and fixing transaction malleability. Enabled the Lightning Network.

Taproot

A 2021 upgrade improving privacy, efficiency, and smart contract flexibility via Schnorr signatures and MAST. Makes complex transactions look identical to simple ones on-chain.

Schnorr Signatures

A signature scheme enabling key aggregation and improved efficiency, introduced with Taproot. Multiple signers can produce a single compact signature, improving privacy and reducing fees.

Also: schnorr

BIP

Bitcoin Improvement Proposal — a standardized process to propose and document protocol changes. Anyone can write a BIP, but adoption requires community consensus.

Also: bips

Multisig

A setup where M of N keys are required to spend, reducing single-key risk. For example, a 2-of-3 multisig requires any 2 of 3 keyholders to approve a transaction.

Also: multi-signature, multi sig

HD Wallet

Hierarchical Deterministic wallet — a wallet that generates all addresses from a single seed phrase using a mathematical tree structure. One backup (the seed phrase) protects all current and future addresses.

Also: hierarchical deterministic wallet

xpub (Extended Public Key)

A master public key that can generate all the public addresses in an HD wallet. Sharing an xpub lets someone view all your transactions and balances but NOT spend your funds. Never share it publicly.

Also: extended public key, xpubs

SPV (Simplified Payment Verification)

A lightweight method of verifying Bitcoin transactions without downloading the full blockchain. SPV nodes only download block headers and verify transactions using Merkle proofs. Most mobile wallets use SPV.

Also: spv node, light client

Lightning Network

A layer-2 network of payment channels enabling instant, low-fee Bitcoin transactions. Transactions happen off-chain and only settle to the main blockchain when channels are opened or closed.

Also: lightning

Layer 2

Protocols built on top of the Bitcoin base layer (Layer 1) that handle transactions off-chain for speed and low cost, then settle back to the main blockchain. The Lightning Network is the most prominent Layer 2.

Also: layer 2, l2

Payment Channel

A two-party arrangement on the Lightning Network where Bitcoin is locked in a multisig address on-chain, then unlimited transactions happen off-chain between the parties. Only the opening and closing transactions touch the blockchain.

Also: payment channels

HTLC

Hash Time-Locked Contract — enables atomic, trustless, time-bound payments across payment channels. Core to how Lightning Network routes payments through multiple hops.

Also: htlcs

Sidechain

A separate blockchain pegged to Bitcoin that can experiment with different rules and features while inheriting Bitcoin's security. Liquid Network is the most prominent Bitcoin sidechain.

Also: sidechains

Coinbase Transaction

The first transaction in every Bitcoin block, created by the miner. It has no inputs and creates new Bitcoin (the block subsidy) plus collects all transaction fees. Not related to the company Coinbase — the term predates the exchange by years.

Also: coinbase transaction, generation transaction

CoinJoin

A privacy technique where multiple users combine their Bitcoin transactions into one, making it difficult for blockchain analysts to determine which inputs paid which outputs. Used by wallets like Wasabi and JoinMarket.

Also: coin join

Dust Attack

A deanonymization technique where tiny amounts of Bitcoin ("dust") are sent to many addresses. If the recipient later spends the dust alongside their other coins, analysts can link addresses together and reduce privacy.

Also: dust attacks, dusting attack

RBF (Replace-By-Fee)

A feature that lets you increase the fee on an unconfirmed transaction by broadcasting a new version with a higher fee. Useful when your original transaction is stuck in the mempool due to low fees.

Also: replace by fee, replace-by-fee

CPFP (Child-Pays-For-Parent)

A technique to speed up a stuck unconfirmed transaction by creating a new "child" transaction that spends the stuck output and includes a high enough fee to incentivize miners to confirm both transactions together.

Also: child pays for parent, child-pays-for-parent

OP_RETURN

A Bitcoin script opcode that allows embedding up to 80 bytes of arbitrary data in a transaction. The output is provably unspendable. Used for timestamping documents, creating tokens, and anchoring data to the blockchain.

Also: op return

Timelock

A restriction that prevents Bitcoin from being spent until a certain block height or timestamp is reached. Used in Lightning Network channels, inheritance planning, and smart contracts. Implemented via CLTV and CSV opcodes.

Also: timelocks, time lock

P2PKH

Pay-to-Public-Key-Hash — the original Bitcoin address format, starting with "1". Transactions pay to the hash of a public key, and spending requires proving ownership with a signature. Still widely supported but less efficient than newer formats.

Also: pay to public key hash

P2SH

Pay-to-Script-Hash — an address format starting with "3" that allows complex spending conditions (like multisig). The actual script is only revealed when spending, reducing on-chain data until then.

Also: pay to script hash

Bech32

The native SegWit address format, starting with "bc1q". More efficient than legacy formats, with lower fees and built-in error detection. Bech32m (bc1p) is the newer version used for Taproot addresses.

Also: bech32m, native segwit

Ordinals

A protocol that assigns a unique serial number to each individual satoshi, allowing them to be tracked and "inscribed" with data. This enables NFT-like functionality directly on the Bitcoin blockchain without any additional token.

Inscriptions

Data (images, text, code) permanently embedded in Bitcoin transactions using the Ordinals protocol. Each inscription is attached to a specific satoshi and stored on-chain forever. Controversial because they increase block space demand and fees.