Bitcoin Glossary: Essential Terms Every Bitcoiner Should Know
Welcome to the most comprehensive Bitcoin glossary you'll find. Whether you're taking your first steps into the world of cryptocurrency or you're a seasoned hodler looking to refresh your knowledge, this guide is designed for you.
Bitcoin was born in 2009 from the mind of the mysterious Satoshi Nakamoto, and since then, it has created an entirely new financial language. Terms like "blockchain," "mining," "halving," and "HODL" have become part of everyday conversation for millions of people around the world.
Understanding this vocabulary is not just about sounding smart at dinner parties. It's about truly grasping how Bitcoin works, making informed decisions, and protecting yourself from scams and misinformation. Knowledge is your best investment.
This glossary contains 100 essential terms organized alphabetically, from basic concepts like "Address" and "Wallet" to more advanced topics like "UTXO" and "Taproot." Each definition is written in plain English, avoiding unnecessary jargon while remaining technically accurate.
How to use this glossary:
- New to Bitcoin? Start with the basics: Bitcoin, Blockchain, Wallet, Private Key, and HODL
- Interested in trading? Focus on: Exchange, Market Cap, Limit Order, Stop Loss, and Volatility
- Want to understand the tech? Explore: Mining, Hash Rate, Proof of Work, SegWit, and Lightning Network
- Security conscious? Read: Cold Storage, Seed Phrase, Multisig, and "Not Your Keys, Not Your Coins"
Bookmark this page. You'll come back to it more often than you think.
51% Attack
When more than half of the computer power or mining hash rate in a network is managed by a single person or a single group, enabling them to manipulate transactions, double-spend coins, or prevent confirmations.
Address
Alphanumeric string representing a destination for Bitcoin payments. Addresses are often displayed as scannable QR codes. Three bitcoin address formats are currently in use: P2PKH (legacy), P2SH (script hash), and Bech32 (native SegWit).
Airdrop
A distribution of cryptocurrency tokens or coins, usually for free, to numerous wallet addresses. Often used as a marketing strategy to promote awareness of a new project.
Altcoin
Any cryptocurrency other than Bitcoin. The term comes from "alternative coin" and includes thousands of different cryptocurrencies like Ethereum, Litecoin, and others.
AML (Anti-Money Laundering)
A set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. Cryptocurrency exchanges must comply with AML regulations.
API (Application Programming Interface)
A set of protocols and tools that allows different software applications to communicate with each other. Exchanges use APIs to let users automate trading or access market data.
ASIC (Application-Specific Integrated Circuit)
Specialized hardware designed specifically for mining Bitcoin. ASICs are much more efficient than regular computers or GPUs for solving the cryptographic puzzles required in Bitcoin mining.
ATH (All Time High)
The highest price that a cryptocurrency has ever reached in its entire trading history. Bitcoin's ATH represents the peak of its market value.
ATL (All Time Low)
The lowest price that a cryptocurrency has ever reached in its entire trading history.
Bear Market
A prolonged period of declining prices in the market, typically characterized by pessimism and negative investor sentiment. Usually defined as a decline of 20% or more from recent highs.
BIP (Bitcoin Improvement Proposal)
A formal document proposing changes or improvements to the Bitcoin protocol. BIPs are the primary mechanism for introducing new features, collecting community input, and documenting Bitcoin design decisions.
Block
A collection of Bitcoin transactions that are bundled together and added to the blockchain. Each block contains a reference to the previous block, transaction data, and a unique identifier called a hash.
Blockchain
A decentralized, distributed digital ledger that records all Bitcoin transactions across a network of computers. Each block is cryptographically linked to the previous one, creating an immutable chain of records.
Block Height
The number of blocks in the chain between the genesis block (block 0) and the current block. It represents the length of the blockchain and increases with each new block mined.
Block Reward
The amount of new Bitcoin awarded to miners for successfully mining a new block. This reward halves approximately every four years during the halving event. Currently set at 3.125 BTC per block.
BTFD (Buy The Dip)
A popular phrase in crypto communities encouraging investors to buy when prices drop significantly, viewing the decline as a buying opportunity rather than a reason to panic sell.
Bull Market
A prolonged period of rising prices in the market, characterized by optimism, investor confidence, and expectations that strong results will continue.
Buy Wall
A large buy order or accumulation of buy orders at a specific price level on an exchange. It can prevent the price from falling below that level.
Candlestick
A type of price chart used in technical analysis that displays the high, low, open, and closing prices for a specific time period. The body shows the opening and closing prices, while the wicks show the highs and lows.
Circulating Supply
The total number of coins that are publicly available and circulating in the market. For Bitcoin, this is all mined coins minus any that are verifiably lost or locked.
Cold Storage / Cold Wallet
A method of storing Bitcoin offline, completely disconnected from the internet. This includes hardware wallets, paper wallets, or air-gapped computers. It provides maximum security against hacking.
Confirmation
When a Bitcoin transaction is included in a block, it receives one confirmation. Each subsequent block adds another confirmation. More confirmations mean greater security that the transaction is irreversible.
Consensus
The mechanism by which the Bitcoin network agrees on the current state of the blockchain. Bitcoin uses Proof of Work consensus to ensure all participants agree on which transactions are valid.
Custody
The holding and safeguarding of Bitcoin. Self-custody means you control your own private keys. Custodial services are third parties (like exchanges) that hold Bitcoin on your behalf.
Cypherpunk
The cypherpunk movement promotes the use of cryptography to defend privacy.
A Cypherpunk's Manifesto
DCA (Dollar Cost Averaging)
An investment strategy where you invest a fixed amount of money at regular intervals, regardless of the asset's price. This reduces the impact of volatility and removes emotional decision-making.
Decentralization
The distribution of power away from a central authority. Bitcoin is decentralized because no single entity controls the network; instead, thousands of independent nodes maintain and validate the blockchain.
DeFi (Decentralized Finance)
Financial services built on blockchain technology that operate without traditional intermediaries like banks. DeFi applications include lending, borrowing, trading, and earning interest on crypto assets.
Difficulty
A measure of how hard it is to mine a new Bitcoin block. The difficulty adjusts approximately every two weeks (2,016 blocks) to ensure blocks are mined roughly every 10 minutes, regardless of total network hash power.
Double Spending
The risk of a digital currency being spent twice. Bitcoin's blockchain solves this problem through its consensus mechanism, making it computationally impossible to spend the same bitcoin twice.
Dump
A rapid sell-off of a cryptocurrency, causing a sharp decline in price. Often occurs when large holders (whales) sell significant amounts at once.
DYOR (Do Your Own Research)
A common phrase in the crypto community encouraging individuals to thoroughly investigate and understand any investment before committing funds, rather than blindly following others' advice.
Exchange
A platform where users can buy, sell, and trade cryptocurrencies. Exchanges can be centralized (CEX) like Coinbase or Binance, or decentralized (DEX) where trades occur directly between users.
Faucet
A website or application that distributes small amounts of Bitcoin for free, usually for completing simple tasks or captchas. Originally used to help people obtain their first bitcoin.
Fiat
Government-issued currency that is not backed by a physical commodity like gold. Examples include US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Bitcoin is often traded against fiat currencies.
FOMO (Fear Of Missing Out)
The anxiety that an exciting opportunity is being missed, often leading to impulsive buying decisions during price rallies. FOMO can cause investors to buy at market tops.
Fork
A change to the Bitcoin protocol or a divergence in the blockchain. Forks can be soft forks (backward-compatible updates) or hard forks (non-backward-compatible changes that may create a new cryptocurrency).
FUD (Fear, Uncertainty, and Doubt)
Negative information or propaganda spread to create pessimism about Bitcoin or the crypto market. FUD can be legitimate concerns or deliberate misinformation designed to manipulate prices.
Full Node
A computer that downloads and validates every block and transaction in the Bitcoin blockchain. Full nodes enforce the consensus rules and help maintain the network's decentralization and security.
Genesis Block
The first block of the Bitcoin blockchain, mined by Satoshi Nakamoto on January 3, 2009. It contains the famous message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."
Halving
An event that occurs approximately every four years (every 210,000 blocks) when the Bitcoin block reward is cut in half. Halvings reduce the rate of new Bitcoin creation and are programmed into Bitcoin's code. The most recent halving occurred in April 2024.
Hard Fork
A permanent divergence from the previous version of the blockchain, requiring all nodes to upgrade to the new protocol. Hard forks can result in the creation of a new cryptocurrency, as happened with Bitcoin Cash.
Hardware Wallet
A physical device designed specifically to store cryptocurrency private keys offline. Popular examples include Ledger and Trezor. Hardware wallets provide high security by keeping keys away from internet-connected devices.
Hash
A fixed-length alphanumeric string produced by a cryptographic hash function. In Bitcoin, hashes are used to secure transactions, link blocks together, and in the mining process.
Hash Rate
The total computational power being used by miners to process transactions and secure the Bitcoin network. Measured in hashes per second (H/s). A higher hash rate indicates a more secure network.
HODL
A misspelling of "hold" that became a popular term meaning to hold Bitcoin long-term regardless of price volatility. Often interpreted as "Hold On for Dear Life." It represents a buy-and-hold investment strategy.
Hot Wallet
A cryptocurrency wallet connected to the internet. While convenient for frequent transactions, hot wallets are more vulnerable to hacking than cold storage solutions.
Immutability
The property of the Bitcoin blockchain that makes it virtually impossible to alter or delete recorded transactions. Once confirmed, transactions become permanent and cannot be changed or reversed.
KYC (Know Your Customer)
Identity verification procedures required by regulated exchanges and financial institutions. KYC typically involves providing personal identification documents to comply with anti-money laundering regulations.
Ledger
A record of all transactions. In Bitcoin, the blockchain serves as a public, distributed ledger that records every transaction ever made. Also refers to a popular brand of hardware wallets.
Lightning Network
A Layer 2 scaling solution built on top of Bitcoin that enables fast, low-cost transactions. It works by creating payment channels between users, allowing thousands of transactions per second without congesting the main blockchain.
Limit Order
An order to buy or sell Bitcoin at a specific price or better. The order will only execute when the market reaches the specified price.
Liquidity
The ease with which Bitcoin can be bought or sold without significantly affecting its price. High liquidity means large trades can be executed quickly with minimal price impact.
Long
A trading position that profits when the price of Bitcoin increases. Going long means buying Bitcoin with the expectation that its value will rise.
Mainnet
The primary, live Bitcoin network where real transactions with actual value occur. This is in contrast to testnets, which are used for development and testing purposes.
Market Cap (Market Capitalization)
The total value of all existing Bitcoin, calculated by multiplying the current price by the circulating supply. Market cap is used to compare the relative size of different cryptocurrencies.
Market Order
An order to buy or sell Bitcoin immediately at the best available current price. Market orders guarantee execution but not the price.
Mempool (Memory Pool)
A waiting area for unconfirmed Bitcoin transactions. When you send a transaction, it first enters the mempool, where miners select transactions to include in the next block, typically prioritizing those with higher fees.
Mining
The process of using computational power to validate transactions and add new blocks to the Bitcoin blockchain. Miners compete to solve complex mathematical puzzles, and the winner receives the block reward plus transaction fees.
Mining Pool
A group of miners who combine their computational resources to increase their chances of successfully mining a block. Rewards are distributed among pool participants based on their contributed hash power.
Moon / Mooning
Slang term used when a cryptocurrency's price is rising dramatically. "To the moon" expresses the hope or expectation that prices will increase significantly.
Multisig (Multi-Signature)
A security feature requiring multiple private keys to authorize a Bitcoin transaction. For example, a 2-of-3 multisig wallet requires any 2 of 3 designated keys to sign a transaction, providing enhanced security.
Node
A computer that participates in the Bitcoin network by maintaining a copy of the blockchain and relaying transactions. Nodes can be full nodes (complete blockchain copy) or light nodes (partial data).
Nonce
A random number used once in the mining process. Miners repeatedly change the nonce value to find a hash that meets the network's difficulty target, which is required to create a valid block.
Not Your Keys, Not Your Coins
A popular phrase emphasizing that if you don't control your private keys (e.g., keeping Bitcoin on an exchange), you don't truly own your Bitcoin. It encourages self-custody for security.
Orphan Block
A valid block that is not part of the main blockchain. Orphan blocks occur when two miners solve a block at nearly the same time, and the network eventually chooses one chain over the other.
OTC (Over The Counter)
Trading that occurs directly between two parties without using a public exchange. OTC desks are often used for large transactions to avoid affecting market prices.
Paper Wallet
A physical document containing a Bitcoin address and its private key, often as QR codes. Paper wallets are a form of cold storage but are vulnerable to physical damage or loss.
P2P (Peer-to-Peer)
A decentralized network architecture where participants interact directly with each other without intermediaries. Bitcoin is a peer-to-peer electronic cash system where transactions occur directly between users.
Private Key
A secret cryptographic code that proves ownership of Bitcoin and allows you to sign transactions. Private keys must be kept secure and never shared. Losing your private key means losing access to your Bitcoin forever.
Proof of Work (PoW)
The consensus mechanism used by Bitcoin where miners must solve complex mathematical puzzles to validate transactions and create new blocks. PoW requires significant computational energy, which secures the network.
Public Key
A cryptographic code derived from the private key that can be shared publicly. The public key is used to generate Bitcoin addresses and verify digital signatures without revealing the private key.
Pump
A rapid increase in a cryptocurrency's price, often driven by coordinated buying or positive news. When followed by a "dump," it's called a pump-and-dump scheme.
Pump and Dump
A market manipulation scheme where a group artificially inflates (pumps) the price of an asset through misleading statements, then sells (dumps) their holdings at the higher price, leaving other investors with losses.
QR Code
A two-dimensional barcode that can be scanned to quickly share Bitcoin addresses. QR codes make it easy to transfer address information without manually typing long alphanumeric strings.
Rekt
Slang derived from "wrecked," meaning to suffer severe financial losses, typically from a bad trade or market crash. Often used humorously in crypto communities.
ROI (Return on Investment)
A measure of the profitability of an investment, calculated as the percentage gain or loss relative to the initial investment amount.
Satoshi
The smallest unit of Bitcoin, equal to 0.00000001 BTC (one hundred millionth of a bitcoin). Named after Bitcoin's creator, Satoshi Nakamoto. Commonly abbreviated as "sat" or "sats."
Satoshi Nakamoto
The pseudonymous creator of Bitcoin who published the Bitcoin whitepaper in 2008 and mined the genesis block in 2009. Satoshi's true identity remains unknown, and they are estimated to hold around 1 million BTC.
Seed Phrase (Recovery Phrase)
A sequence of 12 or 24 words that can be used to recover a Bitcoin wallet. The seed phrase generates all private keys for the wallet. It must be stored securely offline and never shared.
SegWit (Segregated Witness)
A Bitcoin protocol upgrade activated in 2017 that separates (segregates) signature data from transaction data, increasing block capacity and fixing transaction malleability. SegWit addresses start with "bc1."
Sell Wall
A large sell order or accumulation of sell orders at a specific price level on an exchange. It can prevent the price from rising above that level until the orders are filled.
SHA-256
The cryptographic hash function used by Bitcoin's Proof of Work algorithm. SHA-256 produces a unique 256-bit (64-character) output for any input, and it's computationally infeasible to reverse.
Shitcoin
A derogatory term for cryptocurrencies considered to have no value, utility, or future. Bitcoin maximalists often use this term for all altcoins.
Short
A trading position that profits when the price of Bitcoin decreases. Shorting involves borrowing Bitcoin to sell at the current price, hoping to buy it back cheaper later.
Signature
A cryptographic proof that a transaction was authorized by the owner of the private key. Digital signatures verify ownership without revealing the private key itself.
Smart Contract
Self-executing code stored on a blockchain that automatically enforces the terms of an agreement. While more limited on Bitcoin than on Ethereum, Bitcoin supports basic smart contracts through its scripting language.
Soft Fork
A backward-compatible upgrade to the Bitcoin protocol. Nodes running old software can still participate in the network, though they may not validate new features. SegWit was implemented as a soft fork.
Stacking Sats
The practice of accumulating small amounts of Bitcoin (satoshis) over time, regardless of price. Popular among long-term Bitcoin believers who regularly add to their holdings.
Stop Loss
An order type that automatically sells Bitcoin when it reaches a specified price, designed to limit potential losses if the market moves against your position.
Supply
The total amount of Bitcoin that exists or will exist. Bitcoin has a maximum supply of 21 million coins, making it a deflationary asset. The last bitcoin is expected to be mined around the year 2140.
Taproot
A major Bitcoin upgrade activated in November 2021 that improves privacy, efficiency, and smart contract capabilities. Taproot makes complex transactions look like simple ones on the blockchain.
Testnet
A separate Bitcoin blockchain used for testing and development purposes. Testnet coins have no real value, allowing developers to experiment without risking actual bitcoin.
Token
A digital asset created on an existing blockchain. Unlike Bitcoin, which has its own blockchain, tokens are built on top of other networks like Ethereum or (via protocols like Omni) Bitcoin.
Transaction Fee
The amount paid to miners to include a transaction in a block. Fees are measured in satoshis per byte of transaction data. Higher fees typically result in faster confirmation times.
TPS (Transactions Per Second)
A measure of how many transactions a network can process per second. Bitcoin's base layer handles approximately 7 TPS, while the Lightning Network can process thousands of TPS.
UTXO (Unspent Transaction Output)
The output of a Bitcoin transaction that has not yet been spent. UTXOs serve as the inputs for future transactions. Your Bitcoin balance is the sum of all UTXOs you control.
Volatility
The degree of price fluctuation over a given period. Bitcoin is known for its high volatility, with significant price swings occurring regularly. Volatility decreases as adoption and market cap increase.
Wallet
Software or hardware used to store, send, and receive Bitcoin. Wallets don't actually store bitcoin; they store the private keys needed to access Bitcoin on the blockchain.
Whale
An individual or entity that holds a large amount of Bitcoin, enough to potentially influence market prices through their trading activity. Whale movements are closely watched by traders.
Whitepaper
A document explaining the technology and purpose of a cryptocurrency project. Bitcoin's whitepaper, titled "Bitcoin: A Peer-to-Peer Electronic Cash System," was published by Satoshi Nakamoto in October 2008.
