Bitcoin Glossary
Whether you’re new to Bitcoin or been in the space for years - understanding Bitcoin terminology is a crucial part of grasping and comprehending the multi-faceted nature of Bitcoin.
Here at Bitcoin Bits & Bytes we aim to provide simple and easy-to-understand educational resources on all things Bitcoin.
Helping you navigate the world of Bitcoin - bit by bit, one byte at a time.
Glossary of Bitcoin and Cryptocurrency Terms:
A:
Address: A unique alphanumeric string used to send and receive Bitcoin transactions, similar to a bank account number but for cryptocurrency.
Altcoin: Any digital currency other than Bitcoin. These often aim to improve upon or offer different features than Bitcoin.
ASIC (Application-Specific Integrated Circuit): Specialized hardware for Bitcoin mining, designed to perform the mining process more efficiently than general-purpose computers.
Atomic Swap: A technology that enables the exchange of one cryptocurrency for another without needing a centralized third party, using smart contracts.
ATH (All-Time High): The highest price point that a cryptocurrency, like Bitcoin, has ever reached.
Altseason: A period in the cryptocurrency market cycle where altcoins experience significant price increases, often outperforming Bitcoin.
Arbitrage: The practice of buying and selling the same asset in different markets to profit from price differences.
ASIC Resistance: A quality of some cryptocurrencies that are designed to be less efficient to mine with ASICs, aiming to prevent mining centralization.
Airdrop: A method of distributing new or existing cryptocurrencies, often for free, to multiple wallet addresses.
AML (Anti-Money Laundering): Regulations, laws, and procedures intended to prevent individuals from disguising illegally obtained funds as legitimate income, relevant in the cryptocurrency world.
Anonymity: Refers to the privacy feature of certain cryptocurrencies that hide user identities or transaction details to varying degrees.
Anonymous: Bitcoin transactions do not require personal information, but they are not entirely anonymous. They are pseudonymous, meaning that transactions are associated with wallet addresses rather than real identities.
ATM (Bitcoin ATM): A physical machine that allows users to buy or sell Bitcoin with cash or debit/credit cards.
Algorithm: The mathematical rules and processes that govern how Bitcoin transactions are validated and how new blocks are added to the blockchain.
B:
Bitcoin (BTC): The first and most well-known cryptocurrency, created by an anonymous entity known as Satoshi Nakamoto in 2008.
Blockchain: A decentralized, distributed ledger technology that underlies Bitcoin and records all transactions across a network of computers.
Block: A collection of Bitcoin transactions that are grouped together and added to the blockchain.
Block Reward: The number of bitcoins released with each mined block, which halves in an event known as the halving.
Block Explorer: An online tool or website that allows users to view information about Bitcoin transactions, blocks, and addresses on the blockchain.
BTC: The abbreviation for Bitcoin, representing the digital currency's symbol and ISO currency code.
Byzantine Generals' Problem: A computer science problem related to achieving consensus in a distributed network, which Bitcoin's Proof of Work (PoW) mechanism solves.
Bit: A subunit of a bitcoin, equal to 100 satoshis.
Bitcoin Network: The entire infrastructure of nodes, miners, and users that collectively maintain and operate the Bitcoin blockchain.
Bitcoin Wallet: Software or hardware that allows users to store, send, and receive Bitcoin securely.
BIP (Bitcoin Improvement Proposal): A document outlining changes, upgrades, or improvements to the Bitcoin protocol, which is submitted for community review and consensus.
Bull Market: A period of rising Bitcoin prices and positive market sentiment.
Bear Market: A period of falling Bitcoin prices and negative market sentiment.
BitLicense: A regulatory framework specific to cryptocurrencies and virtual currencies, particularly in the state of New York.
Block Height: The number of blocks in the blockchain from the genesis block (the first block) to a specific block.
Bitcoin Core: The reference implementation of the Bitcoin software, maintained by the Bitcoin Core development team.
C:
Cryptocurrency: A digital or virtual form of currency secured by cryptography, making it resistant to counterfeiting.
Cryptographic Hash Function: A mathematical function used in Bitcoin to secure transactions and blocks on the blockchain.
Confirmation: The process by which transactions are added to the Bitcoin blockchain after being verified by miners and included in a block.
Consensus: The general agreement among participants in the Bitcoin network regarding the validity of transactions and the addition of new blocks to the blockchain.
Cold Storage: A method of securely storing Bitcoin offline, typically on hardware devices or paper wallets, to protect them from online threats.
Change Address: An additional Bitcoin address used to receive the change when a transaction's output value is less than the input value.
Centralized Exchange: A cryptocurrency exchange operated by a single entity, where users trade digital assets through a centralized platform.
Crypto Wallet: Software or hardware that stores private keys and enables users to manage their cryptocurrency holdings and make transactions.
Confirmation Time: The average time it takes for a Bitcoin transaction to be confirmed and added to the blockchain.
Coinbase: The reward given to miners for adding a new block to the Bitcoin blockchain, which consists of newly created bitcoins and transaction fees.
Contract: In the context of cryptocurrencies, a set of predefined conditions that govern a transaction.
Cold Storage: Keeping a cryptocurrency reserve offline to enhance security.
Cryptography: The science of secure communication through the use of mathematical techniques, essential for Bitcoin's security.
Custodial Wallet: A cryptocurrency wallet managed by a third-party service provider that holds control over the private keys on behalf of the user.
Crypto Mining: The process of validating transactions and adding them to the blockchain, typically carried out by miners using specialized hardware.
Confirmation Bias: A cognitive bias that can affect decision-making in cryptocurrency trading, where individuals seek information that confirms their preexisting beliefs.
Consensus Algorithm: The mechanism used by the Bitcoin network to agree on the state of the blockchain and confirm transactions. Bitcoin primarily uses Proof of Work (PoW).
Circulating Supply: The total number of coins or tokens that are actively available and traded.
Cross-Chain: Refers to the interoperability between different blockchain networks.
D:
Decentralization: The distribution of control and authority across a network of participants rather than being concentrated in a single entity.
Double Spending: An attempt to spend the same Bitcoin more than once, which is prevented by the Bitcoin network's consensus mechanism.
Digital Signature: A cryptographic technique used to verify the authenticity and integrity of messages or transactions in Bitcoin.
Difficulty: A measure of how hard it is to mine new blocks on the Bitcoin blockchain, which adjusts approximately every two weeks to maintain a consistent block production rate.
DAO (Decentralized Autonomous Organization): A concept in blockchain technology where smart contracts and code facilitate the governance and operation of an organization without centralized control.
Dust Transaction: A very small Bitcoin transaction that is often ignored by miners due to its negligible value.
Dapp (Decentralized Application): Software applications built on blockchain platforms, such as Ethereum, that operate without a central authority.
Digital Gold: A metaphorical term often used to describe Bitcoin, highlighting its attributes as a store of value and a hedge against inflation.
Darknet: A part of the internet that is not indexed by traditional search engines and is often associated with illegal activities. Some darknet marketplaces accept Bitcoin as a form of payment.
Difficulty Adjustment: The process by which the Bitcoin network recalibrates the difficulty level for mining to ensure that blocks are produced approximately every 10 minutes.
Dump: The rapid selling of a significant amount of Bitcoin or other cryptocurrencies, often leading to a decrease in price.
Distributed Ledger: A digital ledger that is decentralized and maintained across multiple nodes or computers, as opposed to a single central authority.
Deflation: A decrease in the overall price level of goods and services, which can occur with Bitcoin due to its limited supply.
E:
Exchange: A platform or service that allows users to buy, sell, and trade cryptocurrencies, including Bitcoin.
Encryption: The process of securing data and transactions using cryptographic techniques, a fundamental component of Bitcoin's security.
Escrow: A financial arrangement where a third party holds and verifies funds during a transaction until specific conditions are met.
Ethereum (ETH): A popular blockchain platform that supports smart contracts and decentralized applications (DApps) and is separate from Bitcoin.
Ethereum Classic (ETC): A cryptocurrency and blockchain that split from Ethereum following a contentious hard fork.
Exchange Rate: The value of Bitcoin in terms of another currency, often expressed as BTC/USD or BTC/EUR.
ERC-20: A standard for creating and issuing tokens on the Ethereum blockchain, widely used for initial coin offerings (ICOs) and token projects.
Emission: The rate at which new bitcoins are created and distributed to miners as block rewards.
ECDSA (Elliptic Curve Digital Signature Algorithm): The cryptographic algorithm used in Bitcoin for creating digital signatures to verify transactions.
Exit Scam: A fraudulent scheme in which the operators of a cryptocurrency project or platform disappear with users' funds.
Exchange Wallet: A wallet used specifically for trading and managing cryptocurrency assets on an exchange.
Explorer: Short for "block explorer," an online tool or website that allows users to explore and view information about Bitcoin transactions, blocks, and addresses on the blockchain.
F:
Faucet: A website or application that distributes small amounts of free Bitcoin to users, often for educational or promotional purposes.
Fiat Currency: Traditional government-issued currencies, such as the US Dollar (USD) or Euro (EUR), which are not backed by a physical commodity like gold.
FOMO (Fear of Missing Out): A psychological phenomenon in which individuals feel compelled to buy Bitcoin or other assets due to the fear of missing out on potential gains.
Fork: A split in the Bitcoin blockchain, resulting in two separate chains with different rules. Forks can be hard forks (permanent) or soft forks (backward-compatible).
Fork (Hard Fork): A type of blockchain fork that results in a permanent divergence from the original chain, often due to changes in the protocol's rules.
Fork (Soft Fork): A type of blockchain fork that is backward-compatible with the original chain, with new rules that do not force all participants to upgrade.
Full Node: A computer or device that fully validates and stores a copy of the entire Bitcoin blockchain, contributing to the network's security and decentralization.
Fees: The transaction fees paid by users to miners for processing and including their transactions in the Bitcoin blockchain.
Fiat-to-Crypto Exchange: A cryptocurrency exchange that allows users to trade traditional fiat currencies for cryptocurrencies like Bitcoin.
Fungibility: The property of Bitcoin that ensures all individual bitcoins are interchangeable and have equal value, regardless of their transaction history.
FUD (Fear, Uncertainty, Doubt): Negative information spread with the intent to affect the price of a cryptocurrency.
Flash Crash: A sudden and extreme drop in the price of Bitcoin or another cryptocurrency, often followed by a rapid recovery.
Fundamental Analysis: The evaluation of Bitcoin's value based on factors such as technology, adoption, and macroeconomic trends, as opposed to technical analysis.
FinTech: Short for "Financial Technology," a sector that encompasses technology-driven innovations and solutions in the financial industry, including cryptocurrencies like Bitcoin.
Futures Contract: A financial contract that obligates the buyer to purchase, and the seller to sell, a specific amount of Bitcoin at a predetermined price and future date.
G:
Genesis Block: The first block in the Bitcoin blockchain, mined by Satoshi Nakamoto in January 2009, marking the beginning of the cryptocurrency.
GPU (Graphics Processing Unit): Hardware used for cryptocurrency mining, particularly in the early days of Bitcoin, before ASICs became prevalent.
Graphical User Interface (GUI): The graphical user interface (GUI) is a form of user interface that allows users to interact with electronic devices through graphical icons and audio indicators such as primary notation, instead of text-based user interfaces, typed command labels or text navigation.
Gas (Ethereum): A unit of measurement for computational work on the Ethereum blockchain, used to determine transaction fees and smart contract execution costs.
Genesis Address: The first public Bitcoin address, from which no bitcoins can be spent, as it has no corresponding private key.
Governance: The process of decision-making and the process by which decisions are implemented in a blockchain network.
H:
Halving (Bitcoin Halving): A programmed event in Bitcoin's protocol that reduces the rewards miners receive for adding new blocks to the blockchain, occurring approximately every four years.
Hash Rate: The measure of computing power used in Bitcoin mining, representing the number of calculations a miner can perform per second.
HODL: A misspelling of "hold," used in the cryptocurrency community to mean holding onto Bitcoin or other assets rather than selling them.
Hardware Wallet: A physical device used to store Bitcoin and other cryptocurrencies securely, typically offline to protect against online threats.
Hash Function: A mathematical function used in Bitcoin to convert input data (e.g., a transaction) into a fixed-length string of characters (the hash).
Hard Fork: A type of blockchain fork that results in a permanent divergence from the original chain, often due to changes in the protocol's rules.
Hot Wallet: A cryptocurrency wallet that is connected to the internet, often used for frequent transactions but considered less secure than cold wallets.
Halving (Bitcoin Halving): A programmed event in Bitcoin's protocol that reduces the rewards miners receive for adding new blocks to the blockchain, occurring approximately every four years.
HODL: A misspelling of "hold," used in the cryptocurrency community to mean holding onto Bitcoin or other assets rather than selling them.
Hardware Wallet: A physical device used to store Bitcoin and other cryptocurrencies securely, typically offline to protect against online threats.
I:
ICO (Initial Coin Offering): A fundraising method used by cryptocurrency projects to raise capital by selling tokens to investors.
Immutable: In the context of blockchain, it means that once data is recorded on the blockchain, it cannot be altered or deleted.
Input: In a Bitcoin transaction, the input refers to the source of the bitcoins being spent, often coming from a previous transaction's output.
Inflation: The increase in the supply of a currency, leading to a decrease in its purchasing power. Bitcoin is designed to have a limited supply to prevent inflation.
Initial Exchange Offering (IEO): A fundraising method similar to ICOs, but tokens are sold directly on cryptocurrency exchanges.
Internet of Money: A term used to describe the concept of using cryptocurrencies like Bitcoin as a global, decentralized form of digital money.
J:
JOMO (Joy of Missing Out): The opposite of FOMO, where individuals find happiness in not participating in a particular investment or trend.
Jackpot: A term used humorously in the crypto community to describe substantial gains from cryptocurrency investments.
JavaScript Miner: A script that can be embedded in a website to mine cryptocurrencies like Bitcoin using visitors' computing power.
K:
KYC (Know Your Customer): A process used by exchanges and financial institutions to verify the identity of their customers, often required for cryptocurrency transactions.
Key Pair: In Bitcoin, a pair of cryptographic keys consisting of a public key (used to receive funds) and a private key (used to sign transactions and access funds).
KeepKey: A hardware wallet for storing and securing Bitcoin and other cryptocurrencies.
Kilobyte (KB): A unit of data measurement, often used to describe the size of Bitcoin transactions.
L:
Lightning Network: A second-layer solution built on top of the Bitcoin blockchain to enable faster and cheaper microtransactions.
Liquidity: The ease with which an asset, such as Bitcoin, can be bought or sold without significantly affecting its price.
Ledger: A record-keeping system that stores all Bitcoin transactions, forming the blockchain.
Litecoin (LTC): A cryptocurrency created by Charlie Lee, often considered a "lite" version of Bitcoin with faster block times.
Lambo: A slang term in the cryptocurrency community referring to the desire to make significant profits and purchase a Lamborghini sports car.
Limit Order: An order to buy or sell a cryptocurrency at a specific price or better.
Leverage: Using borrowed funds to increase the size of a trading position beyond what would be possible with one's own capital alone.
M:
Mining Pool: A group of miners who combine their computational resources to increase the chances of earning Bitcoin rewards and share them proportionally.
Market Capitalization (Market Cap): The total value of all Bitcoins in circulation, calculated by multiplying the current price by the total supply.
Multisignature (Multisig): A security feature that requires multiple private keys to authorize a Bitcoin transaction, adding an extra layer of protection.
Mempool: Short for "memory pool," it's the list of unconfirmed Bitcoin transactions waiting to be included in a block.
Mt. Gox: A prominent Bitcoin exchange that filed for bankruptcy in 2014 after losing a large amount of Bitcoin due to security breaches.
Miner: A participant in the Bitcoin network who uses computational power to validate transactions, add them to the blockchain, and earn rewards.
Market Order: A type of order on a cryptocurrency exchange to buy or sell Bitcoin at the current market price, typically executed quickly.
Mainnet: The live and operational blockchain network where real Bitcoin transactions occur, as opposed to testnets or other development environments.
Mining Rig: A set of specialized hardware components configured for cryptocurrency mining, optimized for high computational power.
Mnemonic Phrase (Seed Phrase): A series of words used to recover a Bitcoin wallet's private keys, ensuring wallet access and recovery.
Moon/Mooning: Slang in the crypto community for a cryptocurrency price skyrocketing.
N:
Node: A computer or device that participates in the Bitcoin network by validating transactions, relaying information, and maintaining a copy of the blockchain.
Nonce: A random number included in the header of a Bitcoin block, adjusted by miners to find a suitable hash that meets the network's difficulty requirements.
Network Fork: A situation in which the Bitcoin network experiences a temporary split, leading to two or more competing chains until consensus is reached.
Nakamoto Consensus: The consensus mechanism used in Bitcoin, which relies on miners competing to solve mathematical puzzles to add new blocks to the blockchain.
NFT (Non-Fungible Token): Unique digital assets representing ownership of specific items, often used in digital art and collectibles on blockchain platforms.
Nakamoto Institute: An organization and website dedicated to advancing the understanding and research of Bitcoin and cryptocurrency technologies.
O:
Open Source: A software development approach where the source code is made publicly available for anyone to view, modify, and distribute, often used in Bitcoin's development.
Orphan Block: A valid Bitcoin block that is not included in the main blockchain because another block with the same height is added before it.
Over-the-Counter (OTC) Trading: A method of trading Bitcoin directly between buyers and sellers, often in large quantities, outside traditional cryptocurrency exchanges.
On-Chain Transaction: A Bitcoin transaction that occurs directly on the blockchain, recorded in the public ledger.
Off-Chain Transaction: A transaction conducted outside the Bitcoin blockchain, often using second-layer solutions like the Lightning Network.
OpenDime: A hardware Bitcoin wallet that resembles a physical coin and can be loaded with a specific amount of Bitcoin.
P:
Private Key: A cryptographic key known only to the owner, used to sign Bitcoin transactions and control the associated funds.
Public Key: A cryptographic key derived from a private key and used to receive Bitcoin and verify digital signatures.
Peer-to-Peer (P2P): A decentralized network structure where participants communicate directly without intermediaries, a fundamental aspect of Bitcoin.
Pump and Dump: A fraudulent scheme in which the price of a cryptocurrency, including Bitcoin, is artificially inflated (pumped) and then sold off (dumped) for profit.
Paper Wallet: A physical document or storage medium containing a Bitcoin address and private key, often used for secure long-term storage.
Proof of Work (PoW): The consensus algorithm used in Bitcoin, where miners compete to solve complex mathematical puzzles to add new blocks to the blockchain.
Proof of Stake (PoS): An alternative consensus algorithm to PoW, where validators are chosen to create new blocks based on the amount of cryptocurrency they hold and are willing to "stake."
Privacy Coin: A type of cryptocurrency designed to offer enhanced privacy and anonymity features in transactions, different from Bitcoin's transparent ledger.
Public Ledger: The transparent and publicly accessible record of all Bitcoin transactions on the blockchain.
Peer Review: The process of having experts in the field review and validate the work and code of Bitcoin software updates and proposals.
Q:
Quantum Computing: An emerging technology that could potentially break the cryptographic algorithms that secure Bitcoin and other cryptocurrencies.
QR Code: A machine-readable optical label that contains information about the item to which it is attached, often used in cryptocurrencies to easily share wallet addresses.
R:
Ripple: A digital payment protocol more than a cryptocurrency, used for global money transfers.
Rekt: Slang term derived from "wrecked," indicating a significant financial loss in cryptocurrency trading.
ROI (Return on Investment): A measure used to evaluate the efficiency of an investment in the cryptocurrency world.
Rootstock (RSK): A smart contract platform connected to the Bitcoin blockchain.
Ring Signature: A type of digital signature that can be performed by any member of a group of users that each have keys.
Ransomware: Malware that encrypts a user's data and demands payment in cryptocurrency for the decryption key.
Regulation: Rules and guidelines established by authorities to govern the use and operation of cryptocurrencies.
Rehypothecation: The practice of reusing collateral from one loan in other financial transactions.
Recovery Phrase: A series of words generated by your cryptocurrency wallet that gives you access to the crypto associated with that wallet.
Replace By Fee (RBF): Replace-by-fee is a way to resend a Bitcoin transaction with higher fees in order to get it mined more quickly.
Risk: The potential for financial loss or other negative outcomes in cryptocurrency investments and transactions.
S:
Satoshi: The smallest unit of Bitcoin, named after its creator, Satoshi Nakamoto. One Satoshi is equal to one hundred millionth of a Bitcoin.
Smart Contract: Self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.
SHA-256: SHA = Secure Hash Algorithm. A 256-bit cryptographic hash function used by Bitcoin.
SegWit (Segregated Witness): A protocol upgrade that changes the way data is stored, increasing the block size limit.
Staking: Participating in a proof-of-stake (PoS) system by holding funds in a cryptocurrency wallet to support the operations of a blockchain network.
Scalability: The ability of a blockchain network to handle a large number of transactions.
Sidechain: A separate blockchain that is attached to its parent blockchain using a two-way peg.
Stablecoin: A type of cryptocurrency that is designed to have a stable value, as opposed to the high volatility of most cryptocurrencies.
Soft Fork: A backward-compatible upgrade to a blockchain.
Shitcoin: Slang for a worthless cryptocurrency.
Seed Phrase: A series of words generated by a cryptocurrency wallet that gives access to the crypto associated with that wallet.
Solidity: A programming language used for smart contract development on Ethereum.
Stablecoin: A cryptocurrency with stable value, commonly pegged to the U.S. Dollar. Examples are Tether (USDT) and Circle USD (USDC).
T:
Transaction: An instance of transferring crypto from one wallet to another.
Transaction Fee: A fee that spenders may include in any Bitcoin on-chain transaction. The fee may be collected by the miner who includes the transaction in a block.
Token: A representation of a particular asset or utility, often residing on top of another blockchain.
Turing Complete: A system capable of performing any logical step of the computational function, used in reference to some blockchain systems.
Two-Factor Authentication (2FA): An extra layer of security used to ensure the security of online accounts beyond just a username and password.
TPS (Transactions Per Second): A measure of the number of transactions a blockchain network can process each second.
Testnet: An alternative blockchain used for testing.
Trezor: A popular hardware wallet for storing cryptocurrencies.
Trustless: A property of blockchain technology where no trust is required between parties in a transaction.
U:
Unconfirmed: A state of a transaction that has not yet been added to the blockchain.
UTXO (Unspent Transaction Output): A piece of digital currency that remains after a cryptocurrency transaction, available for use in future transactions.
Utility Token: A token that gives users access to a product or service, typically within a specific blockchain ecosystem.
V:
Volatility: The degree of variation in the price of a cryptocurrency over time, often higher than traditional financial assets.
Vitalik Buterin: A co-founder of Ethereum, one of the most significant blockchain platforms next to Bitcoin.
Validator: In a proof-of-stake (PoS) blockchain, a validator is a participant who locks up some of their tokens to gain the right to validate transactions, create new blocks, and earn rewards.
W:
Wallet: A digital means of storing cryptocurrency, either online ('hot' wallet) or offline ('cold' wallet).
Whale: An individual or entity that holds a significant amount of cryptocurrency, capable of influencing market prices.
White Paper: A document issued by a cryptocurrency project, detailing its technology, methodology, and purpose.
Wrapped Bitcoin (WBTC): A tokenized version of Bitcoin that operates on the Ethereum blockchain, enabling Bitcoin to be used in Ethereum's decentralized finance ecosystem.
X:
XBT: An alternative ticker symbol for Bitcoin, used in some financial and trading contexts.
XRP: The digital currency that operates on the Ripple network, known for its real-time gross settlement system and currency exchange.
Y:
Yield: In the context of cryptocurrency, yield often refers to the earnings generated and realized on an investment over a particular period of time, expressed as a percentage. This includes interest from lending crypto assets or rewards from staking.
Z:
Zero-Knowledge Proof: A method in cryptography where one party can prove to another party that a statement is true, without conveying any additional information apart from the fact that the statement is indeed true. This has implications for privacy in blockchain transactions.