Glossary
Important technical terms and concepts about Bitcoin.
A
Address
Alphanumeric string that works as an "account" to receive Bitcoin. Example: bc1q...
ASIC
Application-Specific Integrated Circuit - Specialized hardware for Bitcoin mining, much more efficient than GPUs or CPUs.
B
Bitcoin (BTC)
Decentralized digital currency created in 2009 by Satoshi Nakamoto. Uses cryptography and blockchain to work without intermediaries.
Block
Set of validated transactions added to the blockchain. Each block contains ~2000 transactions and is mined every ~10 minutes.
Blockchain
Chain of chronologically connected blocks. Public and immutable record of all Bitcoin transactions.
Block Reward
Bitcoin reward that miners receive for validating a block. Currently 3.125 BTC (after 2024 halving).
C
Cold Storage
Keeping Bitcoin offline (hardware wallet, paper wallet) for maximum security.
Confirmation
When a transaction is included in a block. More confirmations = more security.
Custody
Who holds your private keys. Self-custody = you hold them. Custodial = third party holds them (exchange).
D
Decentralization
Absence of central control. In Bitcoin, thousands of nodes verify rules independently.
Difficulty
Automatic adjustment every 2016 blocks (~2 weeks) to keep blocks being mined every ~10 minutes.
Double Spend
Attempt to spend the same Bitcoin twice. The blockchain solves this problem.
F
Fiat
Government currency without backing (Dollar, Euro, Pound). Value based on trust in the government.
Full Node
Computer running complete Bitcoin software, validating all transactions and rules.
FUD
Fear, Uncertainty, Doubt - False or exaggerated news to create fear about Bitcoin.
H
Halving
Event that cuts mining reward in half. Occurs every 210,000 blocks (~4 years). Next: 2028.
Hash
Result of cryptographic function. In Bitcoin, SHA-256 transforms data into unique 64-character code.
Hash Rate
Total computational power of Bitcoin network. Measured in EH/s (exahashes per second).
HODL
Slang for "holding" Bitcoin long-term. Origin: typo of "hold" in a forum.
Hot Wallet
Wallet connected to the internet. Convenient but less secure than cold storage.
K
KYC
Know Your Customer - Identity verification required by regulated exchanges.
L
Lightning Network
Second layer network for instant and cheap Bitcoin payments. Ideal for small transactions.
Liquidity
Ease of buying/selling Bitcoin without affecting the price much.
M
Mempool
"Waiting room" where transactions await confirmation. Higher fee transactions have priority.
Mining
Process of validating transactions and creating new blocks using computational power.
Multisig
Wallet requiring multiple signatures to move funds. Ex: 2-of-3 needs 2 keys out of 3 total.
N
Node
Computer connected to Bitcoin network that validates and propagates transactions.
Not Your Keys, Not Your Coins
Principle: if you don't control the private keys, you don't really control your Bitcoin.
P
P2P (Peer-to-Peer)
Decentralized network where participants connect directly, without central server.
Private Key
Secret code that allows spending Bitcoin. Never share! Whoever has the key, controls the funds.
Proof of Work (PoW)
Bitcoin's consensus mechanism. Miners spend energy to prove computational work.
Public Key
Derived from private key, used to generate addresses. Can be shared publicly.
S
Satoshi (sat)
Smallest unit of Bitcoin. 1 BTC = 100,000,000 satoshis (sats).
Satoshi Nakamoto
Anonymous creator of Bitcoin. Published the whitepaper in 2008 and disappeared in 2011.
Seed Phrase
12 or 24 words that generate all keys for a wallet. Store offline securely!
SegWit
Segregated Witness - 2017 upgrade that improved scalability and enabled Lightning Network.
Self-Custody
Holding your own Bitcoin, controlling the private keys.
T
Taproot
2021 upgrade that improved privacy, efficiency, and smart contracts on Bitcoin.
TXID
Transaction ID - Unique identifier for each Bitcoin transaction.
U
UTXO
Unspent Transaction Output - Individual "coins" in your wallet. Bitcoin works with UTXOs, not balances.
W
Wallet
Software or hardware that manages keys and allows sending/receiving Bitcoin.
Whitepaper
9-page technical document published by Satoshi in 2008 describing Bitcoin.
Numbers
21 Million
Maximum amount of Bitcoin that will ever exist. Limit programmed in the code.
10 Minutes
Average time between blocks. Automatically adjusted by difficulty.
2009
Year Bitcoin network started running (January 3rd).
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