Bitcoin glossary

Plain-language definitions of 557 terms, from the basics to the protocol, markets, mining, privacy and tax. Hover a linked term anywhere on the site to see its definition.

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#A B C D E F G H I J K L M N O P Q R S T U V W Y Z

21 million#: The maximum number of bitcoin that will ever exist, enforced by every node. Issuance halves every 210,000 blocks and ends around the year 2140, slightly below 21,000,000.

See also: Halving, Hard cap
51% attack#: An attack where one party controls most of the hash rate and can reorder recent blocks or double-spend its own coins. It cannot create coins, steal from others' addresses or change the rules, and it is extremely expensive on Bitcoin.

See also: Hash rate, Double spend
401k account#: A US employer retirement plan. A few providers allow bitcoin exposure inside one, usually through an ETF or a self-directed structure.
1040 Schedule D form#: The US tax form where capital gains and losses are summarised, including those from selling or spending bitcoin. Details come from Form 8949.

See also: 8949 form, Capital gains
1099-B form#: A US broker statement reporting sales of assets, with proceeds and, from 2026, cost basis. Bitcoin brokerages issue it for sales on their platform.
1099-K form#: A US payment-card and third-party network statement. Rarely relevant to bitcoin holders today; most platforms moved to other forms.
1099-MISC form#: A US form for miscellaneous income above a threshold, such as bitcoin rewards or interest paid by a platform.
1099-R form#: A US form reporting distributions from retirement accounts, including any bitcoin held in a self-directed IRA.
8949 form#: The US form listing every sale or disposal of a capital asset, including bitcoin, with dates, cost basis and gain or loss. Totals flow to Schedule D.
Abenomics#: Japan's 2010s policy mix of massive money creation, government spending and reforms under Prime Minister Shinzo Abe. Often cited as a case study in what sustained monetary expansion does and does not achieve.
Account beneficiary#: The person named to receive an account's assets when the holder dies. Custodial bitcoin accounts may support beneficiaries; self-custody needs its own inheritance plan.

See also: Multisig
Adaptor signature#: A signature that is deliberately incomplete until a secret is revealed. Used in advanced Lightning and swap protocols so that one payment reveals the key that completes another.
Address#: A string you share to receive bitcoin, derived from a public key or script. Modern addresses start with bc1q (SegWit) or bc1p (Taproot). Use a fresh one for each payment.

See also: Public key, Bech32
Agency model#: A brokerage arrangement where the firm executes your order against the market on your behalf and charges a fee, rather than taking the other side itself.

See also: Principal model
Air gap#: Keeping a signing device fully disconnected from networks. Transactions move in and out by QR code or SD card so the private keys never touch an online machine.
Algorithmic trading#: Trading driven by programmed rules rather than human decisions. Common on bitcoin exchanges, where it shapes short-term price movements.
All-time high (ATH)#: The highest price an asset has ever traded at. Bitcoin has set many; each one is followed, so far, by a drawdown and later a new high.
Allocation#: The share of a portfolio placed in one asset. A "5% allocation" means five percent of the portfolio's value is in bitcoin.
Alpha#: Return above what a benchmark would have delivered for the same risk. Used by fund managers to describe skill rather than luck.
Altcoin#: Any cryptocurrency other than bitcoin. Most have founders, pre-mines, changeable supply and a company behind them, which is why bitcoiners treat them as a different category rather than as competitors.
Annual percentage rate (APR)#: The yearly interest rate on a loan or deposit without compounding. Compare APY, which includes compounding.
Annual percentage yield (APY)#: The yearly return including the effect of compounding. A product quoting APY will show a slightly higher number than the same product quoted as APR.
Annuity#: A contract that pays a fixed stream of income over time, usually sold by insurers. Its value is eroded by inflation unless indexed.
Anonymity#: Acting with no link to your identity at all. Bitcoin offers pseudonymity, not anonymity: addresses are not names, but every transaction is public and can sometimes be linked to a person.

See also: Pseudonym
Anti-money laundering (AML)#: Laws and procedures meant to stop criminal money moving through financial firms. They are why regulated exchanges collect identity documents and monitor transactions.

See also: Know Your Customer (KYC)
Application-specific integrated circuit (ASIC)#: A chip built to do one job. Bitcoin ASICs compute SHA-256 hashes billions of times faster per watt than general computers, which is why all serious mining uses them.
Arbitrage#: Buying in one market and selling in another to profit from a price difference. Arbitrage keeps bitcoin prices close across exchanges.
Ask#: The lowest price a seller is currently willing to accept on an order book.

See also: Bid, Bid-ask spread
Assets under management (AUM)#: The total market value of assets a fund or firm manages for clients. Used to size bitcoin ETFs and custodians.
Assume valid#: A Bitcoin Core setting that skips signature checks for blocks before a known, hard-coded block hash during initial sync, speeding it up. Everything is still checked for structure and the chain of hashes.
AssumeUTXO#: A Bitcoin Core feature that lets a new node load a snapshot of the UTXO set and start validating recent blocks at once, while verifying the full history in the background.
Asynchronous payments#: Lightning payments that can complete even if the recipient is offline at the moment of sending, with the payment held until they reconnect.
Atomic multi-path payments (AMP)#: A Lightning technique that splits one payment into several routes that either all succeed or all fail, allowing larger payments across small channels.

See also: Multipath payment (MPP)
Austrian Economics#: A school of economics (Menger, Mises, Hayek, Rothbard) that stresses individual action, market prices as information, sound money and scepticism of central planning. Much Bitcoin thinking draws on it.

See also: Time preference, Sound money
Automated Clearing House (ACH)#: The US bank-to-bank transfer network used for direct deposits and bill payments. Slow, batch-based and reversible, in contrast with a bitcoin transaction.
Average cost basis#: Working out cost basis by averaging the price of all units bought. Not the usual method for bitcoin in the US, where specific lot methods such as FIFO or HIFO apply.

See also: Cost basis
Backwardation#: When futures prices sit below the spot price. The opposite of contango; it tends to appear in fearful markets.
Backwards compatibility#: The property that new rules still accept behaviour old software produces. Soft forks keep it; hard forks break it.

See also: Soft fork
Balance sheet#: A statement of what an entity owns and owes. Companies that "put bitcoin on the balance sheet" hold it as a treasury asset.
Bank of Canada#: Canada's central bank, which sets interest rates and manages the Canadian dollar.
Bank of England#: The United Kingdom's central bank, founded in 1694 and one of the oldest. It issues the pound and sets UK monetary policy.
Bank of Japan (BOJ)#: Japan's central bank, known for decades of near-zero and negative rates and for yield curve control.
Bank run#: When many depositors try to withdraw at once and a bank, which lends out most deposits, cannot pay them all. Bitcoin held in self-custody cannot be subject to one.

See also: Fractional reserve banking
Bank Secrecy Act (BSA)#: The 1970 US law that requires financial firms to keep records and report suspicious activity, the foundation of US AML rules.
Bank wire#: A direct transfer between banks, usually same-day and hard to reverse. Common for funding larger bitcoin purchases.
Banking desert#: An area with no nearby bank branches. Bitcoin and Lightning are sometimes used where banks are absent or too expensive.
Bankruptcy#: A legal process when a person or company cannot pay its debts. Customers of a bankrupt custodian may become unsecured creditors, a core reason to self-custody.
Base58#: An encoding of numbers as letters and digits that leaves out look-alike characters (0, O, I, l). Used in legacy addresses and WIF private keys.
Base64#: A common encoding of binary data into text characters, used for PSBTs and some signed messages.
Basic earnings per share (EPS)#: A company's profit divided by its shares. Relevant to bitcoin treasury companies, whose earnings now swing with the bitcoin price.
Basis of Lightning Technology (BOLT)#: The numbered specifications that define how Lightning implementations talk to each other, from channel opening to invoices.
Basis points#: Hundredths of a percent. A 25 basis point rate cut is 0.25%.
Batching#: Paying many recipients in one transaction. Exchanges batch withdrawals to cut fees and block space use.
Bear market#: A long period of falling prices and pessimism. Bitcoin has had several, each with drawdowns over 70%.
Bear trap#: A sharp drop that lures traders into selling or shorting before the price turns back up.
Bearer-asset#: An asset that belongs to whoever physically holds it, like cash or gold. Bitcoin is a digital bearer asset: whoever holds the keys controls the coins.
Bech32#: The address encoding for native SegWit, giving lowercase bc1q... addresses with strong error detection.
Bech32m#: A small update to Bech32 used for Taproot bc1p... addresses.
Beneficial owner#: The person who ultimately owns or controls an asset or account, even if it is held in another name. A key concept in AML rules.
Beta#: How much an asset moves relative to a benchmark. A beta of 2 means it tends to move twice as much.
Bid#: The highest price a buyer is currently willing to pay on an order book.
Bid-ask spread#: The gap between the best bid and the best ask. Tight spreads signal a liquid market; the spread is a hidden cost of trading.
Binary#: Base-2 numbers, written in 0s and 1s. A private key is 256 bits, that is 256 binary digits.
BIP 8 (Soft Fork activation)#: An activation method where a soft fork activates after a signalling period, with an option to lock in at the end whether or not miners signal.
BIP 9 (soft fork activation)#: An activation method where miners signal readiness in block version bits and the change locks in once a threshold (95% for SegWit) is reached.
BIP 16 (P2SH)#: The 2012 upgrade that introduced pay-to-script-hash, letting a sender pay to the hash of a script (such as a multisig) rather than the full script.
BIP 32 (Hierarchical deterministic wallets)#: The standard that derives an unlimited tree of keys from one seed, so a single backup covers every address a wallet will ever make.
BIP 39 (mnemonic phrases)#: The standard for turning random bits into 12 or 24 words from a 2,048-word list, and back into a seed. The reason seed phrases work across wallets.
BIP 44 (derivation paths for P2PKH)#: The derivation path layout m/44'/0'/0'/... used for legacy 1... addresses.
BIP 49 (derivation paths for wrapped SegWit)#: The derivation path m/49'/0'/0'/... for wrapped SegWit 3... addresses.
BIP 84 (derivation paths for native SegWit)#: The derivation path m/84'/0'/0'/... for native SegWit bc1q addresses; the common default today.
BIP 125 (Replace-by-Fee)#: The proposal that lets a sender replace an unconfirmed transaction with a new version paying a higher fee.

See also: Replace-By-Fee (RBF)
BIP 174 (PSBT)#: The standard format for partially signed transactions, so hardware wallets, multisig co-signers and software can pass a transaction around safely.
BIP 340 (Schnorr signatures)#: The Schnorr signature scheme adopted with Taproot in 2021. Smaller signatures and the ability to combine keys.
BIP 341 (Taproot)#: The Taproot output type (bc1p addresses) which lets a payment be spent by a key or by one of several hidden scripts, all looking the same on-chain.
BIP 342 (Tapscript)#: The updated scripting rules used inside Taproot outputs.
Bit#: A single binary digit, 0 or 1. Also an old proposed unit equal to 100 satoshis.
Bitcoin#: A decentralised digital money with a fixed supply of 21 million, launched in January 2009 from a 2008 whitepaper by Satoshi Nakamoto. Capital-B Bitcoin is the network and protocol; lower-case bitcoin is the unit.
Bitcoin Core#: The original and most widely used Bitcoin node software, maintained by many open-source contributors. Running it lets you verify the rules yourself.
Bitcoin implementations#: Different programs that follow the Bitcoin rules, such as Bitcoin Core, Bitcoin Knots, btcd and libbitcoin. All must agree on consensus rules to stay on the same chain.
Bitcoin Improvement Proposal (BIP)#: A numbered design document proposing a change or standard for Bitcoin. BIPs are discussed publicly; adoption depends on the community, not the author.
Bitcoin Knots#: A fork of Bitcoin Core with extra features and different default policies, maintained by Luke Dashjr. Consensus rules are the same.
Bitcoin node#: A computer running Bitcoin software that checks every block and transaction against the rules and relays them. Nodes, not miners, enforce the rules.
Bitcoin script#: Bitcoin's small, deliberately limited programming language for spending conditions. Not Turing-complete, by design.
Bitcoin transaction fee#: The difference between a transaction's inputs and outputs, paid to the miner. Set per virtual byte; it rises when block space is in demand.
Bitcoin-Qt#: The graphical interface of Bitcoin Core, named after the Qt toolkit it uses.
Bitcoind#: The command-line "daemon" version of Bitcoin Core that runs in the background without a window.
BitLicense#: New York State's 2015 licence for virtual-currency businesses. Its cost and complexity led several companies to leave the state.
Blind signatures#: A cryptographic method (David Chaum, 1982) where a signer validates a message without seeing it. The basis of Chaumian e-cash systems such as Cashu.
Block#: A batch of transactions plus a header that links to the previous block. Miners add about one every ten minutes.
Block explorer#: A website or app for browsing blocks, transactions and addresses. Running your own node and explorer avoids leaking which addresses you look up.
Block header#: The 80-byte summary at the top of a block: version, previous block hash, Merkle root, timestamp, difficulty target and nonce. Mining hashes this header.
Block height#: A block's position in the chain, counting from the genesis block at height 0.
Block reward#: What a miner earns for a block: the block subsidy of new coins plus all the fees in the block.

See also: Block subsidy
Block size#: The amount of data in a block. Since SegWit the limit is expressed in weight units, 4 million per block, which allows blocks of roughly 1 to 4 MB depending on transaction types.
Block subsidy#: The newly created bitcoin a miner may claim in a block's coinbase transaction. Currently 3.125 BTC; it halves every 210,000 blocks.
Block weight#: The SegWit measure of block size. Non-witness bytes count 4 weight units, witness bytes count 1, up to 4,000,000 per block.
Blockchain#: The chain of blocks, each committing to the previous one, that forms Bitcoin's shared transaction history. Changing an old block would require redoing every block after it.
Blocksize War#: The 2015 to 2017 dispute over raising the block size. Big-block proposals backed by most miners and businesses failed; users enforced SegWit through BIP 148, and Bitcoin Cash split off. It established that nodes and users, not miners, decide the rules.
Bloom filter#: A compact, probabilistic way for light clients to ask full nodes for relevant transactions. Now largely replaced by compact block filters because it leaked privacy.
Bond#: A loan to a government or company that pays interest and returns principal at maturity. Its real return depends on inflation.
Brokerage#: A business that sells you bitcoin at a quoted price and takes care of execution. Simpler than an exchange, with a spread or fee as the cost.

See also: Exchange
Brute force attack#: Trying every possible key or password until one works. Infeasible against a properly random 256-bit private key.
BTC#: The ticker symbol for bitcoin. XBT is sometimes used in traditional finance.
Bubble#: A price rise driven by expectations of further rises rather than by fundamentals, ending in a crash. Critics have called bitcoin a bubble many times; each cycle has set a higher floor so far.
Bull market#: A long period of rising prices and optimism.
Bull trap#: A short rally that draws in buyers before the price falls again.
Business Continuity and Disaster Recovery (BCDR) plan#: A documented plan for keeping access to funds and operations through fires, deaths, hacks or outages. Serious custody setups have one.
Byte#: Eight bits. Transaction and block sizes are measured in bytes and virtual bytes.
Byzantine Fault Tolerance (BFT)#: The ability of a distributed system to keep working even if some participants are faulty or lying. Proof of work gives Bitcoin a practical form of it.
Byzantine Generals Problem#: A 1982 thought experiment about generals who must agree on a plan while some may be traitors and messages may be lost. Bitcoin solved a version of it for money without a trusted leader.
Call option#: A contract giving the right, not the obligation, to buy at a set price before a date.
Cantillon Effect#: New money benefits whoever receives it first (banks, governments, asset owners) because they spend it before prices rise. Named after the 18th-century economist Richard Cantillon.
Cantillon effect (see Cantillon Effect)#: See Cantillon Effect: new money benefits whoever gets it first.

See also: Cantillon Effect
Capital Asset Pricing Model (CAPM)#: A model relating expected return to an asset's risk relative to the market. Bitcoin's high volatility and low correlation make it an awkward fit.
Capital controls#: Government limits on moving money across borders. Bitcoin is hard to stop at a border, which is why it matters in countries with controls.
Capital expenditure#: Spending on long-lived assets such as mining machines or buildings, as opposed to day-to-day operating costs.
Capital gains#: Profit from selling or spending an asset for more than its cost basis. In the US, bitcoin gains are taxed at short- or long-term rates depending on holding period.
Capital losses#: The loss when an asset is sold for less than its cost basis. Losses can offset gains and, within limits, ordinary income.
Capital markets#: The markets where companies and governments raise money by selling stocks and bonds.
Cash#: Physical notes and coins, the most anonymous form of fiat. Most money today exists only as bank database entries.
Cashu#: An open-source Chaumian e-cash protocol built on Lightning. Users hold bearer tokens issued by a mint; private, fast, but you trust the mint.
Censorship resistance#: The property that no one can stop a valid transaction from being included forever. Any miner can include it, and nodes accept it regardless of who sent it.
Central Bank Digital Currency (CBDC)#: Digital money issued directly by a central bank. Programmable and surveillable by design, which is why many see it as the opposite of bitcoin.
Chain analysis#: Studying the public ledger to link addresses and infer who owns what. Used by law enforcement and compliance firms; defeated partly by good privacy habits.
Change output#: The output that returns leftover value to the sender when inputs exceed the amount being paid. Wallets create it automatically.
Chaumian principles#: Ideas from David Chaum's work on untraceable payments: blind signatures, bearer tokens and privacy by design.
Checksum#: Extra characters added to an address or seed phrase so typos are detected. Bech32 can detect several errors at once.
Child-Pays-for-Parent (CPFP)#: Speeding up a stuck transaction by spending its output with a new, high-fee transaction. Miners take both to collect the child's fee.
Clearinghouse#: An intermediary that settles trades between parties and guarantees them. Bitcoin's chain settles directly, with no clearinghouse.
Clipboard hijacking#: Malware that swaps a copied bitcoin address for the attacker's. Always compare the pasted address with the original.
Coase Theorem#: The idea that when bargaining is costless, parties will reach efficient outcomes regardless of initial rights. Cited in debates about transaction costs and blockspace.
Coin clipping#: Shaving metal from the edges of coins to steal value while passing them at face value. An early form of debasement; the milled edges on coins exist to stop it.
Coin selection#: How a wallet chooses which UTXOs to spend. It affects fees, privacy and the size of change.
Coinbase transaction#: The first transaction in every block, created by the miner, with no inputs. It pays the block subsidy and fees. Unrelated to the exchange of the same name.
CoinJoin#: A transaction built by several people together, with inputs from each and outputs of equal size, so observers cannot tell who paid whom.
CoinSwap#: A privacy technique where two parties swap coins through separate transactions that look like ordinary payments.
Cold storage#: Keeping private keys on a device that never connects to the internet, such as a hardware wallet. The standard for savings.

See also: Hot wallet
Collaborative custody#: A multisig setup where you hold most keys and a company holds one, so you keep control but have help with recovery.
Collateral#: An asset pledged to secure a loan. Bitcoin-backed loans use bitcoin as collateral; a price drop can trigger liquidation.
Commodity Trading Futures Commission (CFTC)#: The US regulator of futures and commodities markets. It treats bitcoin as a commodity.
Common Input Ownership Heuristic#: The assumption that all inputs of a transaction belong to the same person. Usually true, which is why CoinJoin deliberately breaks it.
Confirmation#: A transaction has one confirmation when it is in a block, and one more for every block built on top. Six confirmations is a common standard for large amounts.
Consensus#: Agreement among nodes about which blocks and transactions are valid, reached by every node independently applying the same rules.
Consensus mechanism#: The method a network uses to agree on its state. Bitcoin uses proof of work; many altcoins use proof of stake.
Consumer Price Index (CPI)#: A government measure of the average price of a basket of consumer goods and services. The most quoted inflation number, and often criticised for understating lived costs.
Contango#: When futures prices sit above the spot price. Common for bitcoin in bullish periods.
Core inflation#: CPI excluding food and energy, meant to show the underlying trend. Critics note those are the things people must buy.
Correlation#: How closely two assets move together, from -1 to +1. Bitcoin's correlation with stocks rises and falls across cycles.
Cost basis#: What you paid for an asset including fees. Gain or loss is sale value minus cost basis.
Cost basis accounting#: The method for choosing which units you sold, such as FIFO, LIFO or HIFO. It changes the reported gain.
Cost of capital#: The return a business must earn to justify an investment, set by what its funders expect.
Cost-push inflation#: Price rises driven by higher costs of inputs such as energy or wages.
Counterparty#: The other party in a deal. Self-custodied bitcoin has no counterparty.
Counterparty risk#: The risk that the other party fails to deliver, such as an exchange going bankrupt with your coins. Self-custody removes it.
Coupon#: The fixed interest payment on a bond.
Covenants#: Proposed script features that would let a coin restrict how it can be spent in the future, enabling vaults and other constructions. Still under discussion.
Credit#: Money lent, to be repaid later with interest. Most fiat money is created when banks extend credit.
Credit expansion#: Growth in the amount of lending in an economy, which grows the money supply under fractional reserve banking.
Cryptography#: The mathematics of secrets and proofs. Bitcoin uses hashes and digital signatures; despite the name, it does not encrypt transactions.
Cumulative inflation#: The total rise in prices over a period. A "small" 3% a year is a 34% rise over ten years.
Currency peg#: A government promise to keep its currency at a fixed rate against another, such as the dollar. Pegs break when reserves run out.
Custodial#: A service that holds the private keys for you. Convenient, but you own a claim on the company rather than the coins.

See also: Non-custodial
Cyclical stock#: A company whose earnings rise and fall with the economy, such as miners whose revenue follows the bitcoin price.
Cypherpunk#: The 1990s movement of programmers and activists who built privacy tools and argued for cryptography as a route to freedom. Bitcoin grew out of it.
Dandelion#: A proposed way of relaying transactions that hides which node first broadcast them.
Debasement#: Reducing the value of money by increasing its supply or lowering its metal content. Rome did it to coins; modern states do it by expanding the money supply.
Debt#: Money owed. Government debt is funded by taxes, borrowing or money creation; the last route is inflation.
Decentralization#: Control spread across many independent parties with no one in charge. Bitcoin is decentralised in mining, nodes, development and ownership, which is what makes its rules hard to change.
Decentralized exchange (DEX)#: A marketplace where trades happen without a central company holding funds. For bitcoin this mostly means peer-to-peer platforms like Bisq or RoboSats.
Decentralized Ledger#: A record of transactions kept by many independent computers rather than one authority. The blockchain is one kind.
Default#: Failing to pay a debt when due. Governments that borrow in their own currency usually inflate rather than openly default.
Deflation#: A general fall in prices, so money buys more over time. Feared by central banks; welcomed by savers. Technology is naturally deflationary.
Delta#: How much an option's price changes for a one-dollar move in the underlying asset.
Demand-pull inflation#: Price rises driven by more spending chasing the same goods.
Denial of Service (DoS) attack#: Flooding a system with requests so it cannot serve real users. Bitcoin nodes have many protections against it.
Depth chart#: A chart showing the cumulative size of bids and asks at each price. Deep books mean large orders move the price less.
DER format#: The encoding used for ECDSA signatures in Bitcoin transactions before Taproot.
Derivation path#: The route through an HD wallet's key tree to a specific key, written like m/84'/0'/0'/0/0. Needed to recover funds with a different wallet.
Derivatives#: Contracts whose value comes from an underlying asset: futures, options and swaps on bitcoin. They carry counterparty and leverage risk.
Devaluation#: A deliberate reduction in a currency's exchange rate by its government.
Diamond hands#: Slang for holding through volatility without selling.
Difficulty#: A number expressing how hard it is to find a valid block. Every 2,016 blocks it is adjusted so blocks keep arriving about every ten minutes.
Discounting#: Valuing future money less than present money because of time and risk.
Discreet Log Contract (DLC)#: A way to build bitcoin contracts that settle based on an oracle's signed statement, without the oracle seeing or controlling the contract.
Discrete Log Problem (DLP)#: The hard math problem behind Bitcoin's keys: it is easy to multiply a point on the curve, but infeasible to reverse the operation.
Diversification#: Spreading investments so one loss does not sink the whole. Bitcoiners and traditional advisers disagree about how much is enough.
Dividend#: A cash payment a company makes to shareholders. Bitcoin pays none; its return is price appreciation.
Divisibility#: The ease of splitting money into small units. Bitcoin divides into 100 million satoshis and smaller on Lightning.
Dodd-Frank Act#: The 2010 US financial reform law passed after the 2008 crisis.
Dollar-cost averaging (DCA)#: Buying a fixed amount on a schedule regardless of price. It removes timing decisions and averages the purchase price over time.
Double spend#: Spending the same coin twice. Bitcoin's chain of blocks makes it the first digital system to prevent it without a central authority.
Durability#: Money's ability to last. Gold does not rust; bitcoin's ledger is replicated on thousands of computers.
Dust#: A UTXO so small that spending it would cost more in fees than it is worth.
Dust attack#: Sending tiny amounts to many addresses in the hope that owners will later spend them together and reveal links between their addresses.
Early adopter#: Someone who uses a technology before the mainstream. Bitcoin's early adopters took the most risk and, in hindsight, the largest gains.
eCash#: Digital bearer tokens, originally David Chaum's 1990s DigiCash. Today used for Lightning-based systems such as Cashu and Fedimint.
ECDSA#: The Elliptic Curve Digital Signature Algorithm, Bitcoin's original signature scheme, still used for non-Taproot outputs.
Eclipse attack#: Isolating a node by controlling all of its peer connections so it sees a false view of the network.
Economic expansion#: A period of rising output, employment and spending.
Elasticity#: How much supply or demand responds to price. Bitcoin's supply is perfectly inelastic: higher prices create no extra coins.
Eltoo#: A proposed simpler Lightning channel design that replaces penalty transactions with the ability to update to the latest state, requiring a new signature flag.
Embezzlement#: Theft of funds by someone trusted to manage them. The failure mode of custodians, as with FTX.
Encoding#: Representing data in a chosen format, such as hex, Base58 or Bech32. Encoding is not encryption; it hides nothing.
Encryption#: Scrambling data so only holders of a key can read it. Wallets encrypt their key files; the Bitcoin ledger itself is public.
End-to-End (E2E) encryption#: Encryption where only the two endpoints can read the messages. Lightning's onion routing gives payments a similar property.
Equilibrium#: The price at which supply and demand balance.
Equity#: Ownership in a company, or the owner's stake after debts. Treasury-company shares are equity exposure to bitcoin.
Erlay#: A bandwidth-saving method for relaying transactions between nodes, implemented in recent Bitcoin Core versions.
Escrow#: A third party or script that holds funds until conditions are met. Peer-to-peer bitcoin markets use multisig escrow.
European Central Bank (ECB)#: The central bank for the euro area.
Exchange#: A marketplace that matches buyers and sellers on an order book. You can trade at market prices but you trust the exchange with custody while funds are there.
Exchange traded fund (ETF)#: A fund traded on a stock exchange. Spot bitcoin ETFs, approved in the US in January 2024, hold real bitcoin with a custodian; holders own shares, not coins.
Executive Order 6102#: The 1933 US order requiring citizens to hand in most gold coin and bullion at $20.67 an ounce. The dollar was then devalued to $35 an ounce. A reminder that assets held by third parties can be seized.
Expected return#: The average return an investor anticipates, weighing possible outcomes.
Extended private key (Xprv)#: A master private key plus chain code that can derive a whole tree of keys. As sensitive as a seed phrase.
Extended public key (Xpub)#: A master public key that can derive all of a wallet's receiving addresses without any private keys. Lets a watch-only wallet track balances; sharing it reveals your whole transaction history.
Face value#: The value printed on a note or coin, as opposed to what it will actually buy.
Fake wallets#: Malicious apps that imitate real wallets to steal seed phrases. Download wallets only from the developer's verified site or store listing.
Faucet#: A site that gives away tiny amounts of bitcoin, used early on to spread coins and today for testnet coins.
Federal Deposit Insurance Corporation (FDIC)#: The US agency that insures bank deposits up to $250,000 per depositor. Bitcoin is not covered; cash at some brokerages may be.
Federal Open Market Committee (FOMC)#: The Federal Reserve committee that sets US interest rates. Its meetings move markets, including bitcoin.
Federal Reserve System#: The US central bank, created in 1913. It sets interest rates, creates bank reserves and acts as lender of last resort.
Fedimint#: A protocol for community-run federated e-cash mints connected to Lightning, trading some trust in a group of guardians for privacy and ease of use.
Fiat currency#: Government-issued money backed by law rather than by a commodity. Its supply can be expanded without limit, which is why it loses purchasing power over time.
Fiduciary duty#: A legal obligation to act in a client's best interest, as with trustees and some advisers.
FIFO#: First in, first out: assuming the earliest-bought coins are sold first. The default cost basis method in US tax rules.
Financial Action Task Force (FATF)#: An international body that sets AML standards, including the "travel rule" for crypto transfers between regulated firms.
Financial Crimes Enforcement Network (FinCEN)#: The US Treasury bureau that enforces the Bank Secrecy Act and regulates money transmitters, including many bitcoin businesses.
Fiscal policy#: Government taxing and spending. Deficits are often financed by money creation, linking fiscal and monetary policy.
Fisher Effect#: The relationship that the nominal interest rate equals the real rate plus expected inflation.
Fixed cost#: A cost that does not change with output, such as a miner's rent.
Float#: The shares or coins actually available to trade. Lost and long-dormant bitcoin reduce the effective float.
Foreign exchange risk#: The risk that currency movements change the value of an asset or debt priced in another currency.
Fork#: A change to the rules, or a split in the chain. Soft forks tighten rules and stay compatible; hard forks loosen them and can create a new coin.
Forward contract#: A private agreement to buy or sell at a set price on a future date.
Fractional reserve banking#: The practice of banks lending out most deposits and keeping only a fraction on hand. It creates money and makes bank runs possible.
FTX#: A large exchange that collapsed in November 2022 after it was found to have lent customer deposits to its sister trading firm. Its founder was convicted of fraud.
Fungibility#: Every unit being interchangeable with every other. Bitcoin is fungible at the protocol level, but chain analysis and "tainted coin" lists threaten it in practice.
Futures contract#: A standardised agreement to buy or sell at a set price on a future date, traded on an exchange. CME launched bitcoin futures in December 2017.
Game theory#: The study of strategic decisions. Bitcoin's design aligns incentives so that honest behaviour pays better than cheating.
Gamma#: How fast an option's delta changes as the price moves.
Generator point#: The fixed starting point on the secp256k1 curve. A public key is the generator point multiplied by the private key.
Genesis block#: Block 0, mined by Satoshi on 3 January 2009. It contains the headline "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". Its 50 BTC cannot be spent.
Glass-Steagall Act#: The 1933 US law separating commercial and investment banking, largely repealed in 1999.
Gossip network#: A network where each node passes information to its peers until everyone has it. Bitcoin and Lightning both spread data this way.
Graphical User Interface (GUI)#: A program's windows and buttons, as opposed to a command line.
Graphics Processing Unit (GPU)#: A graphics card. Used for bitcoin mining around 2010 to 2012, before ASICs made it pointless.
Gresham's Law#: "Bad money drives out good": when two monies circulate at a fixed rate, people spend the weaker one and hoard the stronger. Explains why people save bitcoin and spend fiat.

See also: Thiers' Law
Gross domestic product (GDP)#: The total value of goods and services produced in a country in a year.
Hal Finney#: Cryptographer and early Bitcoin contributor who received the first bitcoin transaction from Satoshi on 12 January 2009. He had built RPOW, an earlier proof-of-work money. He died in 2014.
Halving#: The scheduled halving of the block subsidy every 210,000 blocks, about every four years. The subsidy fell to 3.125 BTC in April 2024 and will fall to 1.5625 at block 1,050,000.
Hard cap#: A supply limit that cannot be raised. Bitcoin's is 21 million, enforced by every node refusing blocks that create more.
Hard commodity#: A mined or extracted raw material such as gold, oil or copper.
Hard fork#: A rule change that makes previously invalid blocks valid, so old nodes reject the new chain. It needs everyone to upgrade or it splits the network, as Bitcoin Cash did in 2017.
Hard money#: Money whose supply is difficult to increase. Gold was the hardest money for centuries; bitcoin's supply schedule is fixed.
Hardware wallet#: A small device that stores keys and signs transactions internally, so the keys never touch an internet-connected computer.
Hash function#: A function that turns any input into a fixed-size fingerprint that cannot be reversed. Bitcoin uses SHA-256 for mining and block links.
Hash rate#: The total computing power miners devote to Bitcoin, measured in hashes per second (now hundreds of exahashes). Higher hash rate means a more expensive attack.
Hashed Time Locked Contract (HTLC)#: A conditional payment that can be claimed by revealing a secret before a deadline, or refunded after it. The building block that makes multi-hop Lightning payments safe.
Hedge position#: A trade taken to offset risk elsewhere, such as shorting futures against spot holdings.
Hexadecimal#: Base-16 notation using 0-9 and a-f. Private keys, hashes and transaction IDs are usually shown in hex.
Hierarchical channel#: A Lightning channel whose funds are controlled by a multisig of several parties rather than two, enabling shared or custodial channel designs.
Hierarchical Deterministic (HD) wallet#: A wallet that derives all its keys from one seed in a tree structure, so one backup covers everything. Defined in BIP 32.
HIFO#: Highest in, first out: assuming the most expensive coins are sold first, which minimises reported gains. Allowed in the US with specific identification.
HODL#: Holding bitcoin long-term regardless of price swings. From a 2013 forum post titled "I AM HODLING".
Hot wallet#: A wallet on an internet-connected device such as a phone. Convenient for spending, exposed to malware; keep only what you would carry in a physical wallet.
Howey test#: The US Supreme Court test for whether something is a security: an investment of money in a common enterprise with an expectation of profit from others' efforts. Bitcoin is generally held not to be one; many altcoins fail the test.
Hyperbitcoinization#: The hypothetical point where bitcoin becomes the dominant money and fiat currencies lose relevance.
Hyperinflation#: Inflation out of control, often defined as over 50% a month. Weimar Germany, Zimbabwe and Venezuela are examples; it ends with the currency being abandoned.
Hypothecation#: Pledging an asset as collateral while keeping ownership. Rehypothecation is when the lender pledges it again.
Immaculate conception#: The argument that bitcoin's launch can never be repeated: an anonymous founder, no pre-mine, no company, no investors, and a price of zero for its first year. Every later coin had insiders.
Immutability#: The practical impossibility of changing confirmed history, because it would require redoing the proof of work for every later block.
Inbound liquidity#: The capacity on a Lightning channel that others can pay to you. You need inbound liquidity to receive.
Index price#: A reference price built from several exchanges, used to settle derivatives.
Individual retirement account (IRA)#: A US tax-advantaged retirement account. Self-directed IRAs can hold bitcoin through an approved custodian.
Inflation#: A general rise in prices, or in the older sense an increase in the money supply that causes it. It means each unit of money buys less.
Inflation hedge#: An asset expected to hold value when money loses it. Gold is the traditional one; bitcoin's fixed supply is the case for it, its volatility the case against.
Initial Block Download (IBD)#: A new node's process of downloading and verifying every block from the genesis block. It can take hours to days.
Input Sequence (nSequence)#: A field on each transaction input used for relative timelocks and to signal replace-by-fee.
Insolvency#: Having debts greater than assets. An insolvent custodian cannot return all customer coins.
Interest rate#: The price of borrowing money, set partly by central banks and partly by markets.
Issue price#: The price at which a new security is first sold.
Junk bond#: A bond with a low credit rating and high yield to compensate for default risk.
Just-a-Bunch-of-Keys (JBOK)#: An old wallet design that generated independent random keys, each needing its own backup. Replaced by HD wallets.
Key Send#: A Lightning payment made to a node's public key without an invoice, used for tips and streaming payments.
Know Your Customer (KYC)#: Identity verification required by regulated exchanges. It ties purchases to your name, which matters for privacy and for seizure risk.
Layer#: A level of the system. The base layer is the blockchain; layer 2 systems such as Lightning run on top and settle to it.
Lender of last resort#: A central bank's role of lending to banks in a crisis so they do not fail. It socialises the losses of risky lending.
LevelDB#: The key-value database Bitcoin Core uses to store the UTXO set and block index.
Leverage#: Borrowing to increase exposure. It multiplies gains and losses, and forced liquidations of leveraged traders amplify bitcoin's crashes.
LIFO#: Last in, first out: assuming the most recently bought coins are sold first.
Light client#: Software that checks transactions against block headers without storing the whole chain. Most mobile wallets are light clients that rely on servers.
Lightning channel#: A 2-of-2 multisig output shared by two parties who can update their balances off-chain as often as they like. Only opening and closing touch the blockchain.
Lightning implementations#: The software that runs Lightning nodes: LND, Core Lightning, Eclair and LDK, all following the BOLT specs.
Lightning invoice#: A one-time payment request encoded as a lnbc... string or QR code, containing amount, destination and the payment hash.
Lightning Network#: A network of payment channels built on Bitcoin for instant, low-fee payments that settle to the chain only when channels open or close. Proposed by Poon and Dryja in 2015.
Lightning Network Penalty#: The mechanism that lets a channel partner take all the funds if the other party broadcasts an old channel state. It is what keeps both sides honest.
Lightning node#: Software that opens channels, routes payments and talks to other Lightning nodes. It needs a Bitcoin node for chain data.
Limit order#: An order to buy or sell at a specified price or better. It waits on the order book until matched.
Lindy effect#: The idea that the longer something has survived, the longer it is likely to keep surviving. Bitcoin's seventeen years without a successful attack are its Lindy argument.
Liquid Network#: A federated sidechain by Blockstream with faster, confidential transactions and issued assets. Users trust a federation of companies, not just the Bitcoin network.
Liquidity#: How easily an asset can be bought or sold without moving the price. Bitcoin is among the most liquid assets in the world, trading 24/7.
Liquidity trap#: A situation where lower interest rates no longer stimulate spending, because people hoard cash or rates are already near zero.
LNURL#: A set of standards that make Lightning easier to use, such as static QR codes and Lightning addresses that look like email addresses.
Long position#: Owning an asset, or a contract that profits when its price rises.
M-of-N#: A multisig rule where M signatures out of N keys are required, such as 2-of-3.
Mainnet#: The real Bitcoin network, as opposed to testnet, signet or regtest.
Maker#: A trader who places an order that waits on the book, providing liquidity. Usually charged lower fees than takers.
Malleability#: The old ability to change a transaction's ID by altering its signature without invalidating it. SegWit fixed it, which made Lightning safe.
Malware#: Malicious software. Clipboard hijackers and keyloggers target bitcoin users; hardware wallets protect keys from them.
Margin trading#: Trading with borrowed money. A margin call forces you to add funds or be liquidated.
Market capitalization#: Price multiplied by circulating supply. Bitcoin's is in the trillions of dollars; gold's is many times larger.
Market depth#: The volume of orders near the current price. Shallow depth means large trades move the price a lot.
Market impact#: The amount a trade moves the price against the trader.
Market maker#: A firm that constantly quotes buy and sell prices, earning the spread and providing liquidity.
Market order#: An order to buy or sell immediately at the best available price. Fast, but you accept slippage.
Maturity date#: The date a bond or contract pays out and ends.
Medium of exchange#: One of money's three functions: being accepted in trade for goods and services.
Mempool#: Each node's pool of valid transactions waiting to be mined. There is no single mempool; every node has its own.
Mempool explorer#: A tool such as mempool.space that visualises waiting transactions and fee rates.
Merged mining#: Mining two chains at once with the same work, as Namecoin does alongside Bitcoin.
Merkelized Alternative Script Tree (MAST)#: A way to commit to several spending scripts in a tree, revealing only the one used. Part of Taproot.
Merkle root#: The single hash in a block header that commits to every transaction in the block, computed by hashing pairs up a tree.
Merkle tree#: A tree of hashes where each parent is the hash of its children. It lets you prove one transaction is in a block with only a few hashes.
Merkle-sum tree#: A Merkle tree that also sums values at each level, used in proof-of-reserves schemes and Taproot Assets.
Metcalfe's Law#: The idea that a network's value grows with the square of its users. Often applied to bitcoin adoption.
Miner-Activated Soft Fork (MASF)#: A soft fork activated by miner signalling, as with BIP 9.
Mining#: The competition to find a block header hash below the target by trying countless nonces. The winner adds the next block and earns the reward. It is how new coins are issued and how history is made expensive to change.
Mining pool#: A group of miners who combine hash power and share rewards in proportion to work, smoothing income. Pools build the blocks; this concentration is a known concern that Stratum V2 addresses.
Miniscript#: A structured language for writing Bitcoin scripts that tools can analyse and compose safely.
Mixing#: Combining coins from many users to obscure their history. CoinJoin is non-custodial mixing; custodial "tumblers" are risky and often illegal.
Mnemonic#: The 12 or 24 words that encode a wallet's seed (BIP 39). Anyone with the words can take the funds; no legitimate service will ever ask for them.
Monetary base#: Physical currency plus bank reserves at the central bank, the narrowest measure of money.
Monetary policy#: A central bank's management of interest rates and money supply. Bitcoin's "monetary policy" is fixed in code.
Money multiplier#: How much the money supply grows from a given amount of bank reserves under fractional reserve lending.
Money supply#: The total amount of money in an economy, measured as M0, M1, M2 and so on. US M2 has more than quadrupled since 2000.
Moore's Law#: The observation that computing power per dollar doubles roughly every two years. It drives ASIC efficiency and technological deflation.
Moral hazard#: Taking more risk because someone else bears the loss, as banks do when they expect bailouts.
Mt. Gox#: The Tokyo exchange that handled most bitcoin trading until it collapsed in 2014 after losing about 850,000 BTC. The original lesson in not your keys, not your coins.
Multipath payment (MPP)#: Splitting a Lightning payment over several routes so it can exceed any single channel's capacity.
Multisig#: An output that needs several signatures to spend, such as 2-of-3. Removes single points of failure for savings and businesses.
MuSig#: A scheme for combining several Schnorr keys into one, so a multisig looks like a single-key spend on-chain.
Negative interest rates#: When lenders pay borrowers, as some central banks engineered in the 2010s. Savers were charged to hold cash.
Neutrino#: A light-client protocol using compact block filters, letting mobile wallets verify without trusting a server.
Nominal interest rate#: The stated rate before inflation. The real rate subtracts inflation.
Non-custodial#: A wallet or service where you hold the keys. The provider cannot freeze, lose or lend your coins.
Nonce#: A number in the block header that miners change on each attempt to find a hash below the target.
Nostr#: An open protocol for censorship-resistant social media, built on keys and relays, with Lightning tipping ("zaps") built in.
Not your keys, not your coins#: The reminder that bitcoin held by a custodian is a claim on that custodian, not bitcoin you control.
Number go up (NgU)#: Tongue-in-cheek shorthand for bitcoin's long-term price trend, and the observation that a rising price draws in new users who then learn why.
Off-chain#: Transactions that happen outside the blockchain, such as Lightning payments or balances inside an exchange.
Off-ramp#: A service for converting bitcoin back into local currency.
Office of Foreign Assets Control (OFAC)#: The US Treasury office that administers sanctions. It has placed bitcoin addresses on sanctions lists.
On-chain#: Recorded directly on the blockchain, as opposed to off-chain.
On-ramp#: A service for converting local currency into bitcoin, such as a brokerage.
Onion messages#: Encrypted messages sent over Lightning's onion-routed network, used by BOLT 12 offers.
OP_CAT#: A script operator that concatenates two values, disabled in 2010 and proposed for re-enabling to allow covenants.
OP_RETURN#: A script operator that marks an output as unspendable and lets it carry a small amount of arbitrary data.
Opcode#: An instruction in Bitcoin Script, such as OP_CHECKSIG.
Open source#: Software whose code anyone can read, run, modify and share. Bitcoin is fully open source, which is how its rules can be verified.
Operating expenditure#: Ongoing costs of running a business, such as a miner's electricity bill.
Opportunity cost#: The value of the best alternative you give up. The opportunity cost of holding cash is what it could have earned elsewhere.
Options contract#: A contract giving the right to buy (call) or sell (put) at a set price before a date.
Oracle Problem#: The difficulty of getting trustworthy real-world data into a contract. Any contract that depends on outside facts must trust something.
Orange pill#: Slang for the moment someone understands why bitcoin matters, and for helping someone else get there.
Order book#: The list of all open buy and sell orders on an exchange.
Order execution#: The process of filling an order, including how much of it fills and at what prices.
Ordinals and inscriptions#: A 2023 convention for numbering individual sats and attaching data to them in witness space, used for images and tokens. Controversial because it competes for block space with payments.
Orphan block#: A valid block that lost the race and is not part of the main chain. Its miner earns nothing.
OTC desk#: An "over the counter" trading desk that handles large trades privately so they do not move public exchange prices.
Outbound liquidity#: The capacity on your side of a Lightning channel, which is what you can spend.
Partially Signed Bitcoin Transactions (PSBT)#: A standard file format for a transaction that is not fully signed yet, passed between wallets and hardware devices.
Pay-to-Public-Key (P2PK)#: The earliest output type, locking coins directly to a public key. Satoshi's coins use it.
Pay-to-Public-Key-Hash (P2PKH)#: The legacy output type behind 1... addresses, locking coins to the hash of a public key.
Pay-to-Script-Hash (P2SH)#: The output type behind 3... addresses, locking coins to the hash of a script revealed at spend time.
Pay-to-Taproot (P2TR)#: The Taproot output type behind bc1p... addresses.
Pay-to-Witness-Public-Key-Hash (P2WPKH)#: The native SegWit single-key output type behind bc1q... addresses.
Pay-to-Witness-Script-Hash (P2WSH)#: The native SegWit script output type, used for multisig and Lightning channels.
PayJoin (P2EP)#: A payment where the receiver also contributes an input, breaking the common-input heuristic while looking like a normal transaction.
Payment rail#: The infrastructure a payment travels on, such as card networks, ACH, or Lightning.
Peer-to-peer (P2P)#: Direct between participants with no intermediary. Bitcoin's network and its original design goal.
Pegged-to-market order#: An order whose price automatically tracks the best bid or ask.
Perpetual swap#: A futures-like contract with no expiry, kept near spot by funding payments between longs and shorts. The main venue for leveraged bitcoin trading.
Personal Consumption Expenditures (PCE) Index#: The inflation measure the Federal Reserve prefers, which tends to run below CPI.
Phillips Curve#: The claimed trade-off between inflation and unemployment, which broke down in the 1970s stagflation.
Phishing attack#: Fake emails, sites or messages that trick you into entering keys or passwords. Type addresses yourself; never follow links to sign in.
Physical settlement#: A derivative that delivers the actual asset at expiry rather than cash.
Pizza Day#: 22 May 2010, when Laszlo Hanyecz paid 10,000 BTC for two pizzas, one of the first real-world bitcoin purchases.
Point Time Locked Contract (PTLC)#: An upgrade to HTLCs using adaptor signatures and points instead of hashes, improving Lightning privacy.
Portability#: How easily money can be carried or sent. Bitcoin can cross a border in a seed phrase.
Preimage#: The secret whose hash is used in an HTLC. Revealing it proves a Lightning payment was received.
Present value#: What a future amount is worth today after discounting.
Price discovery#: The process by which trading finds the market price.
Prime broker#: A firm offering institutions trading, custody, lending and settlement in one place.
Principal#: The original amount of a loan or investment, before interest or gains.
Principal model#: A brokerage arrangement where the firm sells from its own inventory and earns a spread, taking the other side of your trade.
Private key#: A random 256-bit number that can sign transactions spending the coins at its addresses. Whoever holds it controls the coins.
Private sector#: Businesses and individuals, as opposed to government.
Probate#: The court process of settling an estate. Bitcoin without a plan can get stuck in it, or be lost entirely.
Proof of Reserves#: A custodian publishing cryptographic evidence that it holds the coins it owes customers. Useful, but it does not prove the absence of liabilities.
Proof-of-Stake (PoS)#: A consensus method where holders of the token choose blocks in proportion to their stake. Cheaper than proof of work, but it makes the rich richer by design and gives insiders control. Bitcoin does not use it.
Proof-of-Work (PoW)#: Requiring real computational work to add a block. It makes history expensive to rewrite and ties Bitcoin's security to energy.
Protocol#: The set of rules that software must follow to participate. Bitcoin's protocol is defined by the consensus rules nodes enforce.
Pseudonym#: An identity not tied to a real name. Addresses are pseudonyms; they can still be linked to people through spending patterns or KYC.
Public key#: A point on the curve derived from the private key. It verifies signatures and is hashed into addresses. Safe to share.
Public sector#: Government and its agencies.
Purchasing power#: What a unit of money actually buys. The US dollar has lost most of its purchasing power since 1913.
Put option#: A contract giving the right to sell at a set price before a date.
QR code#: A square barcode. Addresses and Lightning invoices are usually shared as QR codes to avoid typing errors.
Quantitative easing (QE)#: A central bank buying bonds with newly created reserves to push down interest rates. Used at scale since 2008.
Quantitative tightening#: The reverse of QE: letting bonds roll off the central bank's balance sheet to shrink reserves.
Real GDP#: GDP adjusted for inflation.
Real interest rate#: The nominal rate minus inflation. Negative real rates mean savers lose purchasing power.
Recession#: A period of falling economic output, commonly two consecutive quarters of shrinking GDP.
Redeem script#: The script revealed when spending a P2SH output, which must hash to the committed value.
Regtest#: A private local Bitcoin network for development, where you mine blocks instantly.
Rehypothecation#: A custodian re-pledging customer collateral for its own borrowing. It creates "paper bitcoin" and blew up several lenders in 2022.
Reorganization#: When a node switches to a different chain tip with more work, discarding one or more recent blocks. Small reorgs happen occasionally; this is why confirmations matter.
Replace-By-Fee (RBF)#: Replacing an unconfirmed transaction with one that pays a higher fee. Most wallets support it for speeding up stuck payments.
Request-for-quote (RFQ)#: Asking a dealer for a price on a specific trade, common at OTC desks.
Reserve ratio#: The fraction of deposits a bank must hold in reserve. The US set it to zero in 2020.
Resistance#: A price level where selling has repeatedly stopped a rise, in technical analysis.
Risk free rate#: The return on an asset considered free of default risk, usually government bills.
Round amounts heuristic#: Guessing that a round-number output is the payment and the odd one is change.
Saleability#: Carl Menger's term for how easily a good can be sold at close to its value. The most saleable good becomes money.
Satoshi#: The smallest on-chain unit: 0.00000001 BTC. There are 100,000,000 sats in a bitcoin and 2.1 quadrillion in total.
Satoshi Nakamoto#: The pseudonymous creator of Bitcoin, who published the whitepaper in October 2008, mined the genesis block in January 2009 and disappeared in 2011. Identity unknown; estimated holdings around a million bitcoin, never moved.
Savings account#: A bank account paying interest, usually below inflation.
Scarcity#: Limited supply relative to demand. Bitcoin is the first asset with absolute, verifiable scarcity.
Schnorr signature#: A signature scheme adopted in Taproot that is smaller, faster to verify and allows keys and signatures to be combined.
Script type heuristic#: Guessing which output is change by matching its address type to the inputs'.
Script witness#: The signatures and scripts that satisfy a SegWit output's conditions, stored in the witness section.
ScriptPubKey#: The locking script on an output that sets the conditions for spending it.
ScriptSig#: The unlocking data on a legacy input, usually a signature and public key.
SEC format#: The Standards for Efficient Cryptography encoding of public keys, compressed (33 bytes) or uncompressed (65 bytes).
Secp256k1#: The specific elliptic curve Bitcoin uses for its keys and signatures.
Securities and Exchange Commission (SEC)#: The US regulator of securities markets. It approved spot bitcoin ETFs in January 2024 after years of rejections.
Security#: A tradable financial instrument such as a stock or bond, subject to securities law. Bitcoin is treated as a commodity, not a security.
Seed#: The random value from which an HD wallet derives all keys, usually represented as a mnemonic phrase.
SegWit#: The 2017 soft fork that moved signatures into a separate witness section, fixing malleability and raising capacity through block weight.
Seigniorage#: The profit a government makes by creating money for less than its face value.
Self-custody#: Holding your own private keys rather than trusting a company with them. The core practice that makes bitcoin a bearer asset for you.
Settlement#: The final transfer of an asset after a trade. On-chain bitcoin settles in about an hour with six confirmations; bank wires settle in days.
SHA-256#: The hash function Bitcoin uses for mining and to link blocks. It produces a 256-bit output from any input.
Shamir Backup#: Splitting a seed into several shares where any M of N can rebuild it. Useful, but adds complexity and is not interoperable with plain BIP 39.
Sharpe Ratio#: Return above the risk-free rate divided by volatility, a measure of risk-adjusted return.
Short selling#: Selling a borrowed asset hoping to buy it back cheaper.
Short squeeze#: A sharp rise forced by short sellers buying to cover their positions.
Sidechain#: A separate blockchain pegged to bitcoin, such as Liquid, with its own rules and trust assumptions.
Sighash flag#: A flag on a signature that says which parts of the transaction it commits to. SIGHASH_ALL is standard.
Signature#: Proof, made with a private key, that the holder authorised a specific transaction, verifiable by anyone with the public key.
Signet#: A test network where blocks are signed by a known key, giving developers a stable testing environment.
Silent payments#: A proposal (BIP 352) letting a receiver publish one static address while every payment goes to a unique, unlinkable on-chain address.
SIM swap#: An attack where a criminal takes over your phone number to defeat SMS verification. Use an authenticator app, never SMS, for exchange logins.
Simplified Payment Verification (SPV)#: Verifying a payment using block headers and a Merkle proof rather than the full chain, described in the whitepaper.
Slippage#: The difference between the price you expected and the price you got, caused by market depth.
Smart contract#: Code that enforces an agreement. Bitcoin has deliberately simple smart contracts (multisig, timelocks, HTLCs) rather than a general-purpose virtual machine.
Social engineering#: Manipulating people rather than hacking systems: impersonation, urgency, fake support. The cause of most bitcoin losses.
Soft commodity#: A grown commodity such as coffee or wheat.
Soft fork#: A rule change that only tightens what is valid, so old nodes still accept new blocks. SegWit and Taproot were soft forks.
Solvency#: Having assets greater than liabilities.
Sound money#: Money that holds its value because its supply cannot be manipulated. The historical examples are gold and silver; bitcoin aims to be the digital version.
Sovereignty#: Being your own final authority. In Bitcoin, running a node and holding keys so that no one else can act for you.
Sparse Merkle Tree#: A Merkle tree over a huge key space where most leaves are empty, used in Taproot Assets.
Splicing#: Adding or removing funds from an open Lightning channel without closing it.
Spot price#: The current price for immediate delivery.
Spread#: The difference between buy and sell prices, or the markup a brokerage charges over the market.
Stablecoin#: A token pegged to a fiat currency, issued by a company holding reserves. Useful plumbing, but it is a dollar IOU with an issuer, not bitcoin.
Stacking sats#: Accumulating bitcoin steadily in small amounts, usually by regular buys.
Stagflation#: Stagnant growth combined with high inflation, as in the 1970s.
Stagnation#: A long period of little or no growth.
Statechains#: A proposed layer where a UTXO's ownership is transferred off-chain by handing over a key with help from a statechain entity.
Stock-to-flow (S2F)#: The ratio of existing supply to annual new supply. High for gold and bitcoin. A price model based on it became popular and then badly missed; treat it as a measure of scarcity, not a price oracle.
Stop-loss order#: An order that sells automatically if the price falls to a set level.
Store of value (SOV)#: One of money's functions: keeping purchasing power over time. The function bitcoin is most used for today.
Strategic Bitcoin Reserve#: A government holding of bitcoin kept as a national reserve asset. Proposed in the US in 2024; El Salvador has held one since 2021.
Stratum V2#: A newer mining protocol that encrypts pool traffic and can let individual miners choose which transactions go in a block, reducing pool power.
Stuckless payments#: A proposed Lightning improvement so payments cannot get stuck in transit.
Submarine swaps#: Trustless swaps between on-chain bitcoin and Lightning balances, used to top up channels.
Supply-chain attack#: Tampering with hardware or software before it reaches you. Buy hardware wallets direct from the maker and verify software signatures.
Support#: A price level where buying has repeatedly stopped a fall, in technical analysis.
Surety bond#: A guarantee that a company will meet its obligations, often required of licensed money transmitters.
SWIFT system#: The messaging network banks use for international transfers. Slow, expensive and subject to sanctions control.
Swiss National Bank#: Switzerland's central bank.
Sybil attack#: Creating many fake identities to gain influence in a network. Proof of work resists it because identities are free but hash power is not.
Taint#: The idea that coins carry a history that makes some "dirty". A threat to fungibility; protocol-wise all coins are equal.
Taker#: A trader who fills an existing order, removing liquidity. Usually pays higher fees than makers.
Taproot#: The 2021 soft fork adding Schnorr signatures and a new output type where complex spending conditions stay hidden unless used.
Taproot Assets#: A protocol by Lightning Labs for issuing tokens, including stablecoins, that are committed to in Taproot outputs and can move over Lightning.
Tapscript#: The script version used in Taproot script paths.
Taro Asset Universe#: The original name for the Taproot Assets indexing layer that tracks asset issuance and transfers.
Tax lot#: A specific batch of coins bought at one time and price, tracked for cost basis.
tBTC#: Testnet bitcoin, which has no value. Also the name of a wrapped-bitcoin token on another chain, which is not bitcoin.
Technical analysis#: Trying to predict price from chart patterns and indicators. Popular, and of debatable value.
Testnet#: A public Bitcoin test network with worthless coins, used by developers.
Thiers' Law#: The reverse of Gresham's Law: when people are free to choose, good money drives out bad.
Tick size#: The smallest price increment an exchange allows.
Time preference#: How much someone values the present over the future. Hard money is said to lower time preference, encouraging saving and long-term thinking.
Time-weighted average price (TWAP)#: The average price over a period, used to execute large orders gradually.
Timechain#: Satoshi's original word for the blockchain in early code, emphasising its role as an ordering of events in time.
Timelock#: A condition that a coin cannot be spent until a certain block height or time. Used in Lightning, inheritance plans and vaults.
Too Big to Fail#: Institutions so large that governments bail them out rather than let them collapse, a source of moral hazard.
Tor Network#: A network that hides your IP address by routing traffic through volunteer relays. Bitcoin and Lightning nodes can run over Tor.
Toxicity#: The accusation that bitcoiners are harsh toward altcoins and bad ideas. Bitcoiners often reply that scepticism is what protects newcomers.
Transaction#: A signed message that spends existing outputs and creates new ones. Once confirmed it cannot be reversed.
Transaction ID (txid)#: The hash that identifies a transaction. Since SegWit it excludes witness data.
Treasury bill (t-bill)#: Short-term US government debt, the usual "risk-free" asset.
Treasury company#: A public company whose main business is holding bitcoin, funded by selling shares and debt. Strategy (formerly MicroStrategy) is the model. Its stock is leveraged exposure to bitcoin, with corporate risk added.
Trust#: Relying on someone else to behave. Bitcoin's design goal, per the whitepaper, was a payment system that does not require it.
Trustee#: A person or company that manages assets in a trust for beneficiaries.
Trustless#: Not requiring trust in any particular party, because the rules are enforced by verification. "Don't trust, verify."
Turing completeness#: The ability of a language to compute anything, including infinite loops. Bitcoin Script is deliberately not Turing-complete, which keeps it predictable.
U.S. Treasury#: The US government department that issues debt and manages federal finances.
Unbanked#: People with no bank account, over a billion worldwide. Bitcoin and Lightning need only a phone.
Underbanked#: People with an account but poor access to credit, savings or cheap payments.
Uniform Commercial Code (UCC)#: The US framework of commercial law, updated in 2022 with rules for "controllable electronic records" including bitcoin.
Unit of account#: One of money's functions: the unit in which prices are quoted. Most of the world still prices in fiat; some bitcoiners price in sats.
Unix timestamp#: Seconds since 1 January 1970, the format of block timestamps.
Unspent Transaction Output (UTXO)#: A chunk of bitcoin received and not yet spent. Bitcoin has no accounts; a wallet's balance is the sum of its UTXOs.
Uptime#: The share of time a system is running. Bitcoin has had no downtime since 2013.
User-Activated Soft Fork (UASF)#: A soft fork enforced by nodes on a set date regardless of miner signalling. BIP 148 in 2017 forced SegWit activation and showed that users, not miners, hold final say.
UTC#: Coordinated Universal Time, the time standard used for block timestamps.
Utreexo#: A research project to shrink the UTXO set to a tiny cryptographic accumulator so nodes need far less storage.
UTXO set#: The full list of all unspent outputs, which is what a node needs to validate new transactions.
Vanity address#: An address generated to contain chosen characters, by brute force. A privacy and security anti-pattern.
Variable cost#: A cost that changes with output, such as electricity per hash.
Vaults#: Proposed covenant designs where withdrawals have a delay during which they can be cancelled, limiting theft damage.
vByte#: A virtual byte, equal to 4 weight units. Fee rates are quoted in sats per vByte.
Verifiability#: The ease of checking money is genuine. Anyone with a node can verify every bitcoin ever issued.
Virtual currency#: The regulatory term many agencies use for bitcoin and similar assets.
Volatility#: How much a price swings. Bitcoin's is high because its market is young and its supply does not respond to demand.
Volume#: The amount traded over a period.
Volume-weighted average price (VWAP)#: The average price over a period weighted by volume.
vSize#: A transaction's size in virtual bytes, which determines its fee.
Wage-price spiral#: When rising prices lead to wage demands which raise prices further.
Wallet#: Software or hardware that manages keys, builds transactions and shows balances. It holds keys, not coins; the coins are on the ledger.
Wallet Import Format (WIF)#: A Base58 encoding of a single private key with a checksum, used to import keys into wallets.
Watch-only wallet#: A wallet with public keys only. It can show balances and create unsigned transactions but cannot spend.
Watchtower#: A service that watches the chain for a Lightning partner cheating and broadcasts the penalty on your behalf while you are offline.
Wealth#: Accumulated savings and assets. Money is how wealth is stored and measured; if the money leaks, so does the wealth.
Weekly moving average (WMA)#: An average of prices over a number of weeks, smoothing noise. The 200-week average is a popular long-term bitcoin indicator.
Weight unit#: The SegWit measure of transaction size. Four weight units equal one virtual byte.
Whale#: A holder large enough to move the market.
Whitepaper#: "Bitcoin: A Peer-to-Peer Electronic Cash System", the nine-page paper Satoshi published on 31 October 2008.
Window guidance#: A central bank informally directing banks how much to lend, used notably in Japan.
Witness#: The part of a SegWit transaction that holds signatures and scripts, kept separate from the data that forms the txid.
Witness script#: The script revealed when spending a P2WSH output.
Wrapped SegWit#: SegWit outputs wrapped in P2SH so old wallets could pay them; the 3... addresses used during the transition.
wtxid#: A transaction hash that includes the witness data, used for relaying.
Yield#: Income from an asset as a share of its price. Bitcoin itself has no native yield; anything offering "bitcoin yield" is lending your coins to someone.
Yield curve#: Interest rates plotted against bond maturities. An inverted curve has often preceded recessions.
Yield curve control#: A central bank buying whatever is needed to cap long-term rates, as Japan did.
Ypub (extended public key)#: An xpub variant signalling BIP 49 wrapped-SegWit addresses.
Zero confirmation channels#: Lightning channels usable before the opening transaction confirms, trusting the channel partner for a short time.
Zero knowledge proof (ZKP)#: A proof that a statement is true without revealing why. Used in some privacy systems; not part of Bitcoin's base layer.
Zpub (extended public key)#: An xpub variant signalling BIP 84 native-SegWit addresses.