Bitcoin Glossary: Every Term You Need to Know

Bitcoin Glossary

New to Bitcoin? This glossary defines the most important terms you’ll encounter, all in plain language. Entries are organized alphabetically and link to our in-depth guides where available.

---

A

Address — A string of letters and numbers where Bitcoin can be sent, similar to an email address for money. Modern addresses start with bc1. See What Is a Bitcoin Address?

ASIC — Application-Specific Integrated Circuit. A computer chip designed to do one thing: mine Bitcoin. ASICs are much faster at mining than regular computers or GPUs.

ATM (Bitcoin ATM) — A physical machine that lets you buy Bitcoin with cash or debit card. See Bitcoin ATMs Explained.

B

Bear market — A period when prices are falling or expected to fall. The opposite of a bull market.

Block — A batch of Bitcoin transactions that have been verified and added to the blockchain. A new block is created roughly every 10 minutes.

Block reward — The Bitcoin awarded to the miner who successfully adds a new block to the blockchain. As of 2024, the reward is 3.125 BTC per block. It halves approximately every four years.

Blockchain — The public ledger that records every Bitcoin transaction ever made. It’s a chain of blocks, where each block references the one before it, creating a tamper-proof record. See How Bitcoin Works.

BTC — The ticker symbol for Bitcoin, similar to USD for the US dollar.

Bull market — A period when prices are rising or expected to rise. The opposite of a bear market.

C

Cold storage — Keeping Bitcoin in a wallet that is not connected to the internet. Hardware wallets and paper wallets are forms of cold storage. See How to Store Bitcoin Safely.

Confirmation — When a transaction is included in a block, it has one confirmation. Each additional block added after that adds another confirmation. More confirmations = more security. Six confirmations is the traditional standard for considering a transaction fully settled.

Consensus — The process by which all nodes on the Bitcoin network agree on which transactions are valid and what the current state of the blockchain is, without any central authority.

Custodial wallet — A wallet where a third party (like an exchange) holds your private keys. You trust them to manage your Bitcoin on your behalf.

D

DCA (Dollar-Cost Averaging) — An investment strategy where you buy a fixed dollar amount of Bitcoin on a regular schedule, regardless of price. See Dollar-Cost Averaging Bitcoin.

Decentralized — Not controlled by any single entity. Bitcoin is decentralized because it’s maintained by thousands of independent nodes around the world.

DeFi (Decentralized Finance) — Financial services (lending, trading, borrowing) built on blockchain technology without traditional intermediaries. See What Is DeFi?.

Difficulty — A measure of how hard it is to mine a new Bitcoin block. Difficulty adjusts automatically every 2,016 blocks (~2 weeks) to maintain the target of one block every 10 minutes.

Double spend — Attempting to spend the same Bitcoin twice. Bitcoin’s blockchain prevents this through its consensus mechanism.

E

Exchange — A platform where you can buy, sell, and trade Bitcoin. Examples include Coinbase, Kraken, and Binance. See Best Bitcoin Exchanges.

F

Fiat — Government-issued currency like the US dollar, euro, or yen. “Fiat” means “by decree” — these currencies have value because governments say they do.

Fork — A change to Bitcoin’s software rules. A soft fork is a backward-compatible upgrade. A hard fork creates a permanent split in the blockchain, resulting in two separate chains (e.g., Bitcoin and Bitcoin Cash).

Full node — A computer that downloads and validates the entire Bitcoin blockchain independently. See What Is a Bitcoin Node?.

G

Genesis block — The very first block in the Bitcoin blockchain, mined by Satoshi Nakamoto on January 3, 2009.

H

Halving — An event every 210,000 blocks (~4 years) where the Bitcoin block reward is cut in half. This controls the rate at which new Bitcoin enters circulation. See What Is the Bitcoin Halving?.

Hardware wallet — A physical device that stores your private keys offline, providing the strongest security for your Bitcoin. Examples include Ledger and Trezor. See Best Hardware Wallets.

Hash — The output of a cryptographic function. In Bitcoin, hashes are used to link blocks together and to secure the mining process. Each hash is a unique “fingerprint” of a piece of data.

Hash rate — The total computing power being used to mine Bitcoin. A higher hash rate means more security for the network.

HODL — Slang for holding Bitcoin rather than selling it, originating from a misspelling of “hold” in a 2013 Bitcoin forum post. Often backronymized as “Hold On for Dear Life.”

Hot wallet — A wallet that is connected to the internet. More convenient for frequent transactions but less secure than cold storage.

K

KYC (Know Your Customer) — Identity verification required by regulated exchanges. You typically need to provide your name, address, and ID to buy Bitcoin through an exchange.

L

Layer 2 — A system built on top of Bitcoin’s base layer that enables faster or cheaper transactions. The Lightning Network is the most prominent Layer 2 for Bitcoin.

Ledger — In general terms, a record of transactions. Also the brand name of a popular hardware wallet manufacturer.

Lightning Network — A Layer 2 payment system that enables instant, low-cost Bitcoin transactions. See Bitcoin Lightning Network Explained.

M

Mainnet — The primary Bitcoin network where real transactions with real value take place. As opposed to testnet, which uses valueless test coins.

Market cap — The total value of all Bitcoin in circulation, calculated as price per BTC multiplied by the circulating supply.

Mempool — The waiting area for unconfirmed Bitcoin transactions. When you send Bitcoin, your transaction enters the mempool until a miner includes it in a block.

Miner — A computer (or the person operating it) that processes transactions and adds new blocks to the blockchain. See Bitcoin Mining Explained.

Multi-sig (Multi-signature) — A wallet setup that requires multiple private keys to authorize a transaction. For example, a 2-of-3 multi-sig requires any 2 of 3 key holders to sign off on a transaction.

N

Node — A computer running Bitcoin software that validates transactions and blocks. See What Is a Bitcoin Node?.

Non-custodial wallet — A wallet where you hold your own private keys. No third party can access or control your funds.

Nonce — A number that miners change repeatedly while trying to find a valid block hash. The process of finding the right nonce is the “puzzle” in proof of work.

P

Paper wallet — A printed copy of your Bitcoin private key and address. An older form of cold storage, now largely replaced by hardware wallets.

Peer-to-peer (P2P) — Direct transactions between people without an intermediary. Bitcoin was designed as a peer-to-peer electronic cash system.

Private key — A secret number that controls access to your Bitcoin. Whoever knows the private key can spend the Bitcoin at that address. Never share your private key.

Proof of work — The consensus mechanism Bitcoin uses to validate transactions and create new blocks. Miners must perform computational work to earn the right to add a block. See Bitcoin Mining Explained.

Public key — Derived from your private key using one-way math. Your Bitcoin address is derived from your public key. Safe to share — it can’t reveal your private key.

S

Satoshi — The smallest unit of Bitcoin: 0.00000001 BTC. Named after Bitcoin’s creator. See What Is a Satoshi?.

Satoshi Nakamoto — The pseudonymous creator of Bitcoin who published the white paper in 2008 and launched the network in 2009. Their true identity remains unknown. See The Bitcoin White Paper Explained.

Seed phrase — A sequence of 12 or 24 words that backs up your entire wallet. If you lose your wallet, the seed phrase can restore all your keys and Bitcoin. Keep it offline and private. See How to Store Bitcoin Safely.

SegWit (Segregated Witness) — An upgrade to Bitcoin that reduced transaction sizes and enabled Layer 2 solutions like Lightning. SegWit addresses start with bc1q.

Smart contract — A program that runs on a blockchain and automatically executes when predetermined conditions are met. More common on Ethereum than Bitcoin, but increasingly available on Bitcoin through Layer 2s.

Soft fork — A backward-compatible upgrade to Bitcoin’s protocol. Nodes that don’t upgrade can still participate, but won’t benefit from new features.

T

Taproot — A Bitcoin upgrade activated in 2021 that improved privacy, efficiency, and smart contract capabilities. Taproot addresses start with bc1p.

Testnet — A separate Bitcoin network used for testing. Testnet coins have no real-world value.

Transaction fee — A small amount of Bitcoin paid to miners for processing your transaction. Higher fees typically result in faster confirmation. See How to Send Bitcoin.

U

UTXO (Unspent Transaction Output) — The technical term for a “chunk” of Bitcoin in your wallet. When you receive Bitcoin, you receive a UTXO. When you spend, you consume UTXOs and create new ones.

W

Wallet — Software or hardware that manages your Bitcoin keys and lets you send and receive transactions. See Bitcoin Wallets Explained.

Whale — A person or entity that holds a very large amount of Bitcoin, large enough to potentially influence the market with their trades.

White paper — The original document describing Bitcoin, published by Satoshi Nakamoto in 2008. See The Bitcoin White Paper Explained.

---

Missing a Term?

This glossary covers the most essential Bitcoin terms. As the technology evolves, we’ll continue adding new entries. For deeper explanations of any topic above, follow the links to our full-length guides.

New to Bitcoin? Start with What Is Bitcoin? for a complete introduction.

This article is for educational purposes only and is not financial advice.