Bitcoin Glossary: 100 Terms Explained

Bitcoin's vocabulary is dense. This glossary defines 100 terms you'll encounter reading about Bitcoin — from beginner basics to technical concepts.

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A

Address — A Bitcoin address is a string of letters and numbers (like bc1q...) that represents a destination for Bitcoin. Sending Bitcoin to an address is like sending a letter to a PO box. Anyone can send to an address; only the holder of the corresponding private key can spend from it.

ASIC (Application-Specific Integrated Circuit) — Specialized hardware designed exclusively to mine Bitcoin. ASICs are far more efficient than general-purpose computers for mining. Most modern Bitcoin mining uses ASICs from manufacturers like Bitmain (Antminer), MicroBT (Whatsminer), and Canaan.

ATH (All-Time High) — The highest price Bitcoin has ever reached. Bitcoin's current ATH is approximately $108,000, reached in January 2025.

Average Cost (Dollar-Cost Average / DCA) — Investing a fixed amount at regular intervals regardless of price. DCA removes the pressure of timing the market and tends to produce a lower average cost basis over time during volatile markets.

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B

Bear Market — A sustained period of declining Bitcoin prices, typically defined as a 20%+ decline from a recent high. Bitcoin bear markets have historically lasted 12-18 months and seen declines of 70-86% from ATH.

Bitcoin (capital B) — The Bitcoin network and protocol. The rules, consensus mechanism, and open-source software that define what "Bitcoin" is.

bitcoin (lowercase b) — A unit of the Bitcoin currency. "I hold 0.05 bitcoin."

Bitcoin Core — The primary open-source software implementation of the Bitcoin protocol, maintained by hundreds of volunteer developers globally. Running Bitcoin Core makes you a full node.

Block — A batch of Bitcoin transactions grouped together and added to the blockchain. New blocks are produced approximately every 10 minutes by miners. Each block contains a reference to the previous block, forming the chain.

Block Height — The number of blocks that have been added to the Bitcoin blockchain since the genesis block (block 0). Bitcoin's block height increases by 1 approximately every 10 minutes and is currently over 850,000 blocks.

Block Reward — The total reward miners receive for producing a valid block. It consists of the block subsidy (newly created Bitcoin) plus transaction fees from all transactions in the block.

Block Subsidy — The newly created Bitcoin awarded to miners with each block. This started at 50 BTC in 2009 and halves every 210,000 blocks. Currently 3.125 BTC per block (post-2024 halving).

Blockchain — The complete, continuously growing record of all Bitcoin transactions, organized into blocks. The blockchain is maintained by thousands of independent nodes globally. It is immutable — once a transaction is confirmed in a block with sufficient depth, it cannot be altered.

BTC — The ticker symbol for Bitcoin, used on exchanges and in financial contexts.

Bull Market — A sustained period of rising Bitcoin prices. Bitcoin bull markets have historically followed halvings by 12-18 months.

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C

Cold Storage — Bitcoin stored in a wallet that is not connected to the internet. Hardware wallets and paper wallets are forms of cold storage. Cold storage dramatically reduces the risk of remote theft.

Coinbase — (1) The first transaction in every Bitcoin block, where miners collect their block reward. (2) A major US cryptocurrency exchange (unrelated to the protocol concept).

Coinjoin — A privacy technique where multiple Bitcoin users combine their transactions into a single transaction, making it harder to trace which inputs correspond to which outputs. CoinJoin is a voluntary privacy tool built on Bitcoin's base layer.

Confirmation — When a transaction is included in a block, it receives one confirmation. Each subsequent block adds another confirmation. More confirmations make a transaction harder to reverse. Six confirmations is generally considered highly secure for large transactions.

Consensus — The process by which all full nodes in the Bitcoin network agree on the valid blockchain. Bitcoin uses proof-of-work consensus — the chain with the most accumulated work is the valid one.

CFTC (Commodity Futures Trading Commission) — The US regulatory agency for commodity markets. Under the Digital Asset Clarity Act framework, Bitcoin would be explicitly classified as a commodity under CFTC jurisdiction.

Custodial Wallet — A wallet where a third party (an exchange or service) controls your private keys. "Not your keys, not your coins" applies here — if the custodian is hacked or goes bankrupt, your Bitcoin may be lost.

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D

Decentralized — Having no single point of control. Bitcoin is decentralized — no person, company, or government controls the Bitcoin network. Protocol changes require consensus among thousands of independent participants.

Difficulty — A measure of how hard it is to mine a Bitcoin block. Bitcoin's difficulty automatically adjusts every 2016 blocks (~2 weeks) to keep average block times near 10 minutes. If more miners join, difficulty rises; if miners leave, it falls.

Difficulty Adjustment — Bitcoin's automatic mechanism for maintaining 10-minute average block times regardless of how much hash rate is on the network. One of Bitcoin's most elegant engineering solutions.

DYOR (Do Your Own Research) — A Bitcoin community shorthand for the principle that you should independently verify information rather than relying solely on others' claims or recommendations.

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E

ECDSA (Elliptic Curve Digital Signature Algorithm) — The cryptographic algorithm Bitcoin uses to create and verify signatures. Your private key creates a signature that proves you authorized a transaction, which the network verifies without ever seeing your private key.

Entropy — Randomness. In Bitcoin, high-entropy random number generation is essential for secure private key creation. Poor entropy during key generation is a security vulnerability.

ETF (Exchange-Traded Fund) — An investment fund traded on a stock exchange. Spot Bitcoin ETFs hold actual Bitcoin and allow investors to gain Bitcoin exposure through standard brokerage accounts.

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F

Fiat Currency — Government-issued currency not backed by a commodity (like gold). Examples: US Dollar, Euro, Japanese Yen. Fiat currencies can be created in unlimited quantities at the discretion of central banks.

FOMO (Fear of Missing Out) — The anxiety that others are profiting while you're not, which drives impulsive buying at market peaks. One of the most common behavioral traps in Bitcoin markets.

Fork — A change to Bitcoin's protocol rules. A soft fork is backward-compatible and doesn't split the network. A hard fork is not backward-compatible and can create two separate chains if nodes don't agree.

FUD (Fear, Uncertainty, and Doubt) — Negative or misleading information intended to create fear about Bitcoin. Used by traders to suppress prices or by institutions that perceive Bitcoin as a threat.

Full Node — A computer running Bitcoin software that independently validates every transaction and block against Bitcoin's rules. Full nodes are the backbone of Bitcoin's decentralization. Anyone can run one.

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G

Genesis Block — The very first Bitcoin block, mined by Satoshi Nakamoto on January 3, 2009. It contains a famous message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."

Halving — The scheduled event every 210,000 blocks (~4 years) where the block subsidy is cut in half. The 2024 halving cut the reward from 6.25 BTC to 3.125 BTC. Next halving: approximately 2028.

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H

Hash — The output of a hash function — a fixed-length string of characters that represents data of any size. Bitcoin uses SHA-256 hashing. A small change in input produces a completely different hash output.

Hash Rate — The total computational power being applied to mining Bitcoin, measured in hashes per second (EH/s at the network level in 2026). Higher hash rate means a more secure, harder-to-attack network.

HODL — Bitcoin community slang for holding Bitcoin long-term rather than trading. Originally a misspelling of "hold" in a 2013 forum post, now an acronym backronymed as "Hold On for Dear Life."

Hot Wallet — A Bitcoin wallet connected to the internet. Hot wallets are convenient for spending but more vulnerable to remote theft than cold storage. Lightning wallets are hot wallets.

HTLC (Hash Time-Locked Contract) — A cryptographic smart contract used in Lightning Network payments to ensure atomic routing — the payment either completes fully or is fully refunded. HTLCs prevent routing nodes from stealing funds.

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I

Immutability — The property of Bitcoin transactions being unchangeable once confirmed. No entity can alter or reverse a transaction buried in the blockchain with sufficient confirmations.

Inflation — An increase in the money supply or a general rise in price levels. Bitcoin's supply schedule (fixed cap, halving) is designed to be disinflationary — new supply growth slows over time until it reaches zero.

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K

KYC (Know Your Customer) — Regulatory requirements for financial institutions to verify the identity of their customers. US exchanges are required to collect KYC information (name, address, ID) from users.

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L

Layer 1 (L1) — Bitcoin's base blockchain — the foundational settlement layer where all final transactions are recorded. All other layers (like Lightning) build on top of Layer 1.

Layer 2 (L2) — Systems built on top of Bitcoin's base layer that enable faster or cheaper transactions. The Lightning Network is Bitcoin's primary Layer 2.

Ledger — In the Bitcoin context, the blockchain is a distributed ledger — a record of all transactions, shared by thousands of nodes. (Also a hardware wallet manufacturer.)

Lightning Network — Bitcoin's payment channel network — a Layer 2 enabling instant, near-zero-fee Bitcoin payments.

Liquid Network — A Bitcoin sidechain developed by Blockstream for institutional settlement, enabling faster transactions with some tradeoffs in trustlessness.

Long-Term Holder (LTH) — On-chain analytics terminology for wallets that have held Bitcoin for 155+ days without moving coins. LTH behavior is closely watched as a signal of conviction.

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M

Mempool (Memory Pool) — The queue of unconfirmed Bitcoin transactions waiting to be included in a block. During periods of high network activity, the mempool fills up and transaction fees rise as users compete for limited block space.

Merkle Tree — A data structure used in Bitcoin blocks where transactions are hashed and organized into a tree. The Merkle root — a single hash representing all transactions in a block — is included in the block header.

Mining — The process of competing to produce the next valid Bitcoin block by finding a hash that meets the network's difficulty target. Miners use computational power (hash rate) and are rewarded with newly created Bitcoin and transaction fees.

Mining Pool — A group of miners who combine hash rate and share rewards proportionally. Pools reduce individual variance — instead of rarely winning large rewards, pool members receive frequent small payouts proportional to their hash contribution.

Multisig (Multi-Signature) — A Bitcoin security setup requiring multiple private keys to authorize a transaction. Example: 2-of-3 multisig requires any 2 of 3 private keys to sign. Used by corporations, exchanges, and security-conscious individuals.

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N

Node — A computer participating in the Bitcoin network. Full nodes download the entire blockchain and validate every transaction. Light nodes (SPV) rely on full nodes for validation.

Nonce — A "number used once." In Bitcoin mining, miners iterate through nonce values until they find one that produces a valid block hash. Mining is essentially the process of finding a nonce that satisfies the difficulty target.

NYKNYC (Not Your Keys, Not Your Coins) — The foundational Bitcoin security principle: if you don't control the private keys, you don't truly own the Bitcoin. Coins on an exchange are the exchange's Bitcoin, not yours.

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O

On-chain — Transactions that are recorded directly on the Bitcoin blockchain. Contrasted with off-chain transactions (like Lightning payments) that are settled outside the blockchain and only ultimately settle on-chain.

OPEX — Operating expense. In mining, OPEX is the ongoing cost of electricity, maintenance, and facilities — the primary factor determining which mining operations are profitable at different Bitcoin prices.

Orphan Block — A valid block that is not part of the main Bitcoin chain because another block at the same height was accepted by the network first. Orphan blocks occur naturally but rarely due to network propagation timing.

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P

P2P (Peer-to-Peer) — Direct communication between participants without a central intermediary. Bitcoin is a peer-to-peer electronic cash system — transactions are broadcast directly between nodes, not through a central server.

Paper Wallet — A physical document containing a Bitcoin private key or seed phrase. An early form of cold storage, now largely superseded by hardware wallets which are more secure and user-friendly.

Passphrases (BIP-39) — An optional 25th word added to a 24-word seed phrase for additional security. A passphrase creates an entirely different wallet, making it harder for anyone who finds the seed phrase to access funds.

Private Key — A 256-bit number that proves ownership of Bitcoin. Anyone with your private key can spend your Bitcoin. Private keys must be kept absolutely secret. Never share them.

Proof of Work (PoW) — Bitcoin's consensus mechanism where miners compete to solve a computationally difficult puzzle. The energy expended is "proof" that work was done, making it costly to rewrite history.

Public Key — Derived mathematically from a private key. The public key is used to create Bitcoin addresses. It can be shared publicly — knowing someone's public key does not enable spending their Bitcoin.

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R

Replace-by-Fee (RBF) — A protocol feature allowing an unconfirmed transaction to be replaced with a new version that pays a higher fee. Useful when you need to accelerate a stuck transaction.

REKT — Bitcoin slang for suffering significant financial losses, typically from poor trading decisions or exchange failure.

Running a Node — Operating a full Bitcoin node that independently validates the blockchain. Running your own node is the highest level of Bitcoin verification — you trust no one else's data.

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S

Satoshi (sat) — The smallest unit of Bitcoin: 0.00000001 BTC (one hundred millionth of a Bitcoin). Named after Bitcoin's pseudonymous creator, Satoshi Nakamoto. At current prices, 1 satoshi ≈ $0.0006.

Satoshi Nakamoto — The pseudonymous creator of Bitcoin. Nakamoto published the Bitcoin whitepaper in October 2008 and launched the network in January 2009. They disappeared from public communication in 2011. Their identity remains unknown. Their estimated 1 million BTC has never been moved.

SEC (Securities and Exchange Commission) — The US regulatory agency for securities markets. Under the Clarity Act framework, Bitcoin would be explicitly removed from SEC jurisdiction and treated as a commodity under CFTC oversight.

Seed Phrase (Recovery Phrase) — A human-readable backup of a Bitcoin wallet, typically 12 or 24 words. Generated from a BIP-39 word list. Anyone with your seed phrase has full access to your Bitcoin. Store it offline, never digitally.

SegWit (Segregated Witness) — A 2017 upgrade to Bitcoin that changed how transaction data is stored, increasing effective block capacity and fixing transaction malleability. Required for Lightning Network channels.

Self-Custody — Holding Bitcoin with private keys you control, without relying on an exchange or custodian. The gold standard of Bitcoin security.

SHA-256 — The cryptographic hash function used in Bitcoin's proof-of-work mining and other operations. SHA-256 produces a 256-bit hash. Bitcoin's security relies in part on SHA-256's collision resistance.

Short-Term Holder (STH) — On-chain analytics terminology for wallets that have held Bitcoin for fewer than 155 days. STH spending behavior often indicates more speculative activity and can signal selling pressure.

Sidechain — A separate blockchain connected to Bitcoin, enabling experimentation or specific use cases without changing Bitcoin's main chain. Sidechains require trust assumptions not present in Bitcoin itself.

Soft Fork — A protocol upgrade that is backward-compatible with older nodes. Soft forks tighten the rules — transactions valid under the new rules are also valid under the old rules. SegWit and Taproot were soft forks.

Stack — Colloquial term for the amount of Bitcoin someone holds. "What's your stack?" = "How much Bitcoin do you own?"

Stacking Sats — The practice of regularly accumulating small amounts of Bitcoin (satoshis) over time, typically through dollar-cost averaging.

Stranded Energy — Energy that cannot be economically transported to consumers (e.g., remote hydroelectric power or flared natural gas). Bitcoin mining can utilize stranded energy that would otherwise be wasted, improving the economics of energy projects.

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T

Taproot — A November 2021 Bitcoin upgrade that improved privacy, efficiency, and flexibility for complex transactions including multisig. Taproot makes complex Bitcoin transactions look the same as simple ones on-chain, improving privacy.

Transaction Fee — The fee paid to miners for including a transaction in a block. Fees are set by the sender and are denominated in satoshis per virtual byte (sat/vB). During congested periods, fees rise significantly.

Transaction ID (TXID) — A unique identifier for each Bitcoin transaction — essentially the hash of the transaction data. You can look up any transaction on a block explorer using its TXID.

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U

UTXO (Unspent Transaction Output) — Bitcoin doesn't use account balances. Instead, Bitcoin wallets hold a collection of UTXOs — individual "coins" received in previous transactions that haven't been spent yet. When you spend Bitcoin, you consume UTXOs and create new ones.

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V

Vanity Address — A Bitcoin address containing a specific string chosen by the owner (e.g., 1BitcoinEaterAddressDontSendf59kuE). Vanity addresses require significant computation to generate but are cosmetic — they offer no security advantage.

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W

Wallet — Software or hardware that stores private keys and enables you to send and receive Bitcoin. Despite the name, a Bitcoin wallet doesn't "store" Bitcoin — Bitcoin exists on the blockchain. The wallet stores the keys that control access to Bitcoin on the blockchain.

Whale — A Bitcoin holder with a large enough position to influence market prices. Definitions vary — commonly wallets holding 100+ BTC or 1,000+ BTC. Whale accumulation behavior is closely tracked by on-chain analysts.

Whitepaper — The original academic paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System," published by Satoshi Nakamoto in October 2008. Nine pages. The foundation of Bitcoin.

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Z

Zero-Confirmation (0-conf) — Accepting a Bitcoin transaction as valid before it has been included in a block. 0-conf transactions can theoretically be double-spent, making them risky for high-value transactions. Acceptable for small, in-person transactions where the risk of double-spend is low.

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