Bitcoin Glossary
The essential terms you need to understand Bitcoin, from basic concepts to technical details.
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A
Address
A unique identifier used to receive Bitcoin. Similar to an email address, a Bitcoin address is a string of 26-62 alphanumeric characters that represents a destination for a payment. Addresses can be generated for free by any wallet, and each address should ideally be used only once to preserve privacy. Modern address formats include bech32 addresses (starting with bc1) introduced by SegWit.
B
Bit
A sub-unit of bitcoin equal to one millionth of a BTC. 1,000,000 bits equals 1 bitcoin. Bits are a convenient unit for pricing smaller amounts, tips, and everyday goods. A bit is equivalent to 100 satoshis.
Bitcoin
The first decentralized digital currency and payment network. When capitalized ("Bitcoin"), it refers to the protocol, software, and network. When lowercase ("bitcoin" or "BTC"), it refers to the currency unit. Created by Satoshi Nakamoto in 2009, Bitcoin enables peer-to-peer value transfer without intermediaries using cryptography and a distributed blockchain.
Block
A bundle of confirmed transactions added to the blockchain. Approximately every 10 minutes, a new block is created through mining. Each block contains a set of validated transactions, a reference to the previous block, and a nonce that satisfies the current difficulty target. Each block can hold roughly 1-4 MB of transaction data.
Blockchain
The public, append-only ledger of all Bitcoin transactions. The blockchain is a chain of blocks in chronological order, shared across all nodes in the network. It provides an immutable record that prevents double spending and allows anyone to verify the full history of transactions without trusting a central authority.
Block Reward
The bitcoin awarded to a miner for successfully mining a block. The block reward started at 50 BTC in 2009 and is cut in half approximately every four years through halving events. As of 2024, the reward is 3.125 BTC per block. Block rewards are how new bitcoin enters circulation, and they will continue until the 21 million supply cap is reached around the year 2140.
BTC
The standard ticker symbol for bitcoin. BTC is used on exchanges, in price quotes, and in everyday conversation to refer to one bitcoin. The alternative ticker XBT is sometimes used in foreign exchange markets, following the ISO 4217 convention for non-national currencies.
C
Cold Storage
Keeping private keys on a device that is not connected to the internet. Cold storage significantly reduces the risk of theft from hackers and malware. Common forms include hardware wallets, paper wallets, and air-gapped computers. Cold storage is recommended for securing large amounts of bitcoin that do not need to be spent frequently. Also known as: cold wallet, offline storage.
Confirmation
An indication that a transaction has been processed by the network and is unlikely to be reversed. A transaction receives its first confirmation when it is included in a block, and one additional confirmation for each subsequent block. For small payments, one confirmation is typically sufficient. For larger amounts, waiting for six or more confirmations is standard practice, as each confirmation exponentially decreases the probability of a reversal.
Consensus
The process by which the network agrees on the current state of the blockchain. Bitcoin uses Proof of Work consensus, where miners compete to validate transactions and extend the blockchain. The longest valid chain with the most accumulated work is accepted as the true record by all nodes.
Cryptography
The mathematical foundation that secures Bitcoin. Cryptography enables the creation of private and public key pairs, digital signatures, and hash functions that make Bitcoin transactions secure. It ensures that only the holder of a private key can spend their bitcoin, and that no one can tamper with the blockchain record.
D
Decentralization
The distribution of control and decision-making away from any central authority. Bitcoin is decentralized because no single person, company, or government controls the network. Thousands of nodes independently verify every transaction and block, and the protocol rules can only change through broad consensus among participants.
Difficulty
A measure of how hard it is to mine a valid block. The Bitcoin network automatically adjusts the difficulty every 2,016 blocks (approximately two weeks) to maintain an average block time of 10 minutes. When more miners join the network and the hash rate increases, difficulty rises; when miners leave, it decreases.
Double Spend
The risk of spending the same bitcoin twice. In digital systems without a central authority, preventing someone from copying and reusing the same money is a fundamental challenge. Bitcoin solves this through mining and the blockchain, which create network-wide consensus about which transactions are valid, making double spending practically impossible.
DYOR
"Do Your Own Research." A common phrase in the Bitcoin community encouraging individuals to independently verify claims and understand what they are investing in, rather than relying solely on others' opinions or recommendations.
E
Exchange
A platform for buying, selling, and trading bitcoin. Exchanges connect buyers and sellers, and come in several forms: centralized exchanges (like Coinbase or Kraken) that hold user funds, decentralized exchanges that facilitate peer-to-peer trading, and peer-to-peer marketplaces that connect individuals directly. Most regulated exchanges require KYC verification. See our exchange comparison.
F
Fiat
Government-issued currency that is not backed by a physical commodity. Examples include the US dollar (USD), euro (EUR), and Japanese yen (JPY). The term "fiat" comes from Latin meaning "let it be done," reflecting that the currency's value derives from government decree rather than intrinsic worth. Bitcoin was created as an alternative to the fiat monetary system.
Fork
A change to the Bitcoin protocol rules. A soft fork is a backward-compatible upgrade that tightens the rules; old nodes still accept new blocks. SegWit (2017) and Taproot (2021) were soft forks. A hard fork loosens or changes the rules in a way that is not backward-compatible, potentially splitting the network into two chains. Bitcoin Cash (2017) resulted from a hard fork.
FUD
"Fear, Uncertainty, and Doubt." A term used to describe negative information, sentiment, or misinformation that may be spread to discourage people from buying or holding bitcoin. While some concerns are legitimate, the term is often used to dismiss baseless or exaggerated criticisms.
G
Genesis Block
The very first block in the Bitcoin blockchain, mined on January 3, 2009. Also known as Block 0, it was created by Satoshi Nakamoto and contains the embedded text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks," referencing a newspaper headline that highlighted the financial instability Bitcoin was designed to address.
H
Halving
The event that cuts the block reward in half, occurring approximately every four years. Halvings are hard-coded into Bitcoin's protocol and happen every 210,000 blocks. They reduce the rate at which new bitcoin enters circulation, enforcing Bitcoin's disinflationary monetary policy. Previous halvings occurred in 2012, 2016, 2020, and 2024; the next is expected around 2028.
Hardware Wallet
A dedicated physical device designed to store private keys offline. Hardware wallets sign transactions internally without ever exposing the private keys to a connected computer, making them one of the most secure ways to hold bitcoin. Popular hardware wallets include Coldcard, Trezor, and Ledger. See our wallet comparison.
Hash Rate
The total computational power being used to mine and secure the Bitcoin network. Hash rate is measured in hashes per second (H/s). A higher hash rate means more miners are competing to validate blocks, which increases the network's security against attacks. As of 2024, the Bitcoin network operates at hundreds of exahashes per second (EH/s), meaning hundreds of quintillions of calculations per second.
HODL
A strategy of holding bitcoin long-term rather than selling. The term originated from a misspelled "hold" in a 2013 Bitcointalk forum post and has become a widely used term in the community. HODLing reflects the conviction that bitcoin's long-term value will increase despite short-term volatility.
Hot Wallet
A wallet that is connected to the internet. Hot wallets include mobile apps, desktop software, and web-based wallets. They are convenient for frequent transactions but carry a higher security risk than cold storage, since they are potentially vulnerable to hacking and malware. Best practice is to keep only small, spending amounts in a hot wallet.
K
KYC
"Know Your Customer" — identity verification required by regulated financial services. Most centralized exchanges require users to submit government-issued ID, proof of address, and sometimes selfies before allowing trading. KYC regulations are intended to prevent money laundering and fraud, but they also reduce privacy. Peer-to-peer platforms and Bitcoin ATMs sometimes offer options with lighter or no KYC requirements.
L
Lightning Network
A layer-2 payment network built on top of Bitcoin for fast, low-cost transactions. The Lightning Network enables near-instant payments by creating payment channels between users. Transactions happen off-chain and are only settled on the Bitcoin blockchain when channels are opened or closed. It is particularly useful for small, everyday payments like buying coffee or tipping content creators.
M
Mainnet
The live, production Bitcoin network where real transactions occur. Mainnet is the primary blockchain where bitcoin has actual monetary value. It is distinct from testnet, which uses valueless coins for testing and development purposes.
Market Cap
The total value of all bitcoin in circulation. Calculated by multiplying the current price of one bitcoin by the total number of coins that have been mined. Market cap is a commonly used metric for comparing the relative size of different assets, though it does not account for lost or inaccessible coins.
Mempool
The waiting area for unconfirmed transactions. When you broadcast a transaction, it first enters the mempool (short for "memory pool") of each node. Miners select transactions from the mempool to include in the next block, generally prioritizing those with higher fees. During periods of high demand, the mempool grows and transactions with low fees may wait longer for confirmation.
Mining
The process of using computational power to validate transactions and create new blocks. Miners compete to solve a cryptographic puzzle (Proof of Work) that requires finding a nonce producing a hash below the current difficulty target. The winning miner adds a new block to the blockchain and receives the block reward plus transaction fees. Mining secures the network and is how new bitcoin enters circulation. See our mining guide.
Multisig
A security scheme that requires multiple private keys to authorize a transaction. Also known as multi-signature. A common setup is "2-of-3," meaning any two of three designated keys must sign a transaction for it to be valid. Multisig protects against the loss or theft of a single key and is used by businesses, shared accounts, and security-conscious individuals. Also known as: multi-signature.
N
Node
A computer running Bitcoin software that validates and relays transactions. Full nodes download and verify the entire blockchain, independently enforcing all protocol rules without trusting anyone else. The more nodes running on the network, the more decentralized and resilient it becomes. Anyone can run a node with a standard computer and an internet connection.
Nonce
A number that miners iterate to find a valid block hash. Short for "number used once," the nonce is a 32-bit field in a block header that miners change repeatedly until the resulting hash meets the network's difficulty target. Finding the right nonce is the core computational work in Proof of Work.
P
P2P
Peer-to-peer: a network where participants interact directly without intermediaries. In Bitcoin's P2P network, every node can send and receive transactions and blocks directly to and from other nodes. No central server coordinates the network, which makes it resistant to censorship and single points of failure. Also known as: peer-to-peer.
Passphrase
An optional extra word added to a seed phrase for additional security. Sometimes called the "13th" or "25th word," a passphrase creates an entirely different set of private keys and addresses from the same seed phrase. This provides a layer of protection: even if someone discovers your seed phrase, they cannot access your funds without the passphrase.
Private Key
A secret number that allows bitcoin to be spent. Every Bitcoin address has a corresponding private key, which is needed to create a valid signature authorizing a transaction. Private keys must be kept secret; anyone who knows a private key controls the bitcoin associated with it. Private keys are typically generated and managed by wallet software, and should be backed up securely using a seed phrase.
Proof of Work
The consensus mechanism Bitcoin uses to validate transactions and secure the network. Miners must expend real computational energy to find a valid nonce for each block, proving that work was done. This makes it extremely costly to attack the network or rewrite the blockchain, because an attacker would need to redo all the work. Proof of Work ties Bitcoin's security to physical energy expenditure. Also known as: PoW.
Public Key
A value derived from a private key that is used to generate Bitcoin addresses. While a private key must be kept secret, the public key (or an address derived from it) can be shared freely. Cryptography ensures that a public key can verify a signature without revealing the private key that created it.
S
Satoshi
The smallest unit of bitcoin, equal to 0.00000001 BTC. Named after Bitcoin's creator Satoshi Nakamoto, there are 100 million satoshis (often abbreviated "sats") in one bitcoin. As Bitcoin's price has grown, satoshis have become a practical unit for everyday pricing and small transactions, especially on the Lightning Network.
Satoshi Nakamoto
The pseudonymous creator of Bitcoin. Satoshi Nakamoto published the Bitcoin whitepaper in October 2008 and released the software in January 2009. Satoshi communicated only through online forums and email, and disappeared from public activity in 2011. Their true identity remains unknown. The smallest unit of bitcoin, the satoshi, is named in their honor.
Seed Phrase
A list of 12 or 24 words that serves as a master backup for a wallet. The seed phrase can regenerate all the private keys and addresses in a wallet, making it the single most important piece of information to protect. It should be written down on paper or stamped into metal and stored securely offline. Never store a seed phrase digitally or share it with anyone. Also known as: recovery phrase, mnemonic phrase, backup phrase.
SegWit
A 2017 protocol upgrade that increased Bitcoin's effective block capacity. Short for Segregated Witness, SegWit separates (segregates) signature data (the witness) from the transaction, allowing more transactions to fit in each block. It also fixed a long-standing bug called transaction malleability, which enabled the development of the Lightning Network. SegWit introduced bech32 addresses beginning with "bc1."
Signature
A cryptographic proof that the holder of a private key authorized a transaction. When your wallet signs a transaction, the network can verify that the signature matches the public key associated with the bitcoin being spent. This proves ownership without revealing the private key itself.
Stacking Sats
The practice of regularly accumulating small amounts of bitcoin. "Sats" refers to satoshis. Stacking sats is a popular strategy where individuals buy small amounts of bitcoin on a recurring schedule (daily, weekly, or monthly), regardless of price, to build a position over time. This approach is also known as dollar-cost averaging (DCA).
T
Taproot
A 2021 protocol upgrade that improved privacy, efficiency, and smart contract capabilities. Taproot introduced Schnorr signatures, which allow complex transactions (like multisig setups or Lightning Network channel operations) to look identical to simple single-signature transactions on the blockchain, improving privacy for all users.
Testnet
A separate Bitcoin network used for testing and development. Testnet coins have no monetary value, allowing developers to experiment with transactions, wallets, and protocol changes without risking real bitcoin. It mirrors the mainnet protocol but runs independently.
Transaction
A transfer of bitcoin value recorded on the blockchain. Each transaction specifies inputs (the source of funds, referencing previous UTXOs) and outputs (the destination addresses and amounts). Once broadcast to the network, a transaction enters the mempool and awaits confirmation by a miner.
Transaction Fee
The amount paid to miners for processing a transaction. Fees are denominated in satoshis per byte of transaction data (sat/vB). During periods of high demand, fees rise as users compete for limited block space. The Lightning Network offers a lower-fee alternative for smaller, everyday payments.
U
UTXO
An unspent transaction output; Bitcoin's fundamental unit of account. Rather than tracking account balances like a bank, Bitcoin tracks individual chunks of value called UTXOs. When you receive bitcoin, you receive a UTXO. When you spend, your wallet consumes one or more UTXOs as inputs and creates new UTXOs as outputs. Your wallet balance is the sum of all UTXOs your private keys can spend. Also known as: unspent transaction output.
V
Volatility
The degree to which Bitcoin's price fluctuates over time. Bitcoin is often described as a volatile asset because its price can swing significantly in short periods. Volatility tends to decrease over longer time horizons and as the market matures. Strategies like stacking sats (dollar-cost averaging) are often recommended to manage volatility risk.
W
Wallet
Software or hardware that stores your private keys and lets you send and receive bitcoin. A wallet does not literally contain bitcoin; rather, it holds the keys that prove ownership of bitcoin on the blockchain. Wallets come in several forms: hot wallets (mobile, desktop, or web-based) for convenience, and cold storage solutions like hardware wallets for maximum security. See our wallet comparison.
Whale
An individual or entity holding a very large amount of bitcoin. Whale movements (large transfers on the blockchain) are closely watched because they can sometimes influence market prices. The term is relative; a whale in Bitcoin typically refers to addresses holding thousands of BTC.
Whitepaper
The original document describing Bitcoin's design, published by Satoshi Nakamoto in October 2008. Titled "Bitcoin: A Peer-to-Peer Electronic Cash System," the whitepaper outlines how Proof of Work, the blockchain, and cryptographic signatures combine to create a trustless digital payment system. It remains the foundational reference for understanding Bitcoin's design principles.