Glossary (Bitcoin 101)

A string that looks like an account number, used to receive bitcoin. An address is derived from a public key (or script) and is safe to share.

More people and institutions using Bitcoin to save, spend, settle payments, and run infrastructure (nodes, Lightning, etc.).

A device kept offline (no internet) to reduce attack risk. Often used for signing transactions in high-security setups.

A way to recover your wallet if a device is lost. Usually your seed phrase (and sometimes a passphrase).

A decentralized digital monetary network with a fixed supply cap (21 million). BTC is the unit used to measure amounts on the network.

A bundle of transactions added to the blockchain. Blocks are produced roughly every ~10 minutes on average.

The public ledger of Bitcoin transactions. Blocks link together in order, forming a history that nodes can verify.

A standard way for developers and the community to propose changes or standards for Bitcoin (e.g., wallet formats, address types).

The bitcoin paid to miners for producing a valid block. It includes the block subsidy + transaction fees.

New bitcoin issued with each block. This subsidy decreases over time via the halving.

When your transaction is included in a mined block, it has 1 confirmation. Each new block added afterward increases confirmations, making reversal increasingly unlikely.

Who holds the keys. Self-custody means you control the private keys. Third-party custody means an exchange or company controls them.

A measure of how hard it is to find a valid block. Bitcoin adjusts difficulty about every 2016 blocks to keep block times near ~10 minutes.

No single party controls the network. Many independent nodes enforce the same rules, and miners compete globally.

A service where you can buy/sell bitcoin (usually with KYC). Exchanges are convenient but introduce custodial risk if you leave coins on them.

Government-issued currency (USD, EUR). Fiat supply can expand; its value is maintained by policy and demand.

A change to the rules. Soft forks are backward-compatible (old nodes still recognize new blocks). Hard forks are not (old nodes reject new blocks).

An event that cuts the block subsidy in half about every 210,000 blocks (~4 years), slowing new issuance until the cap is reached.

A “digital fingerprint” of data produced by a hash function (Bitcoin uses SHA-256). Small input changes produce a totally different output.

The total computing power securing Bitcoin (hashes per second). Higher hashrate generally means higher cost to attack the network.

A public key helps generate addresses. A private key proves ownership and authorizes spending. Never share your private key.

A layer-2 network for fast, low-fee bitcoin payments using payment channels. It still anchors to Bitcoin’s base layer for security.

A two-party (or multi-path) payment channel funded by an on-chain transaction. Once open, payments can flow instantly off-chain.

The waiting room for unconfirmed transactions. Miners typically prioritize transactions with higher fees per byte.

The process of using Proof-of-Work to add new blocks. Miners compete to find a valid block hash and earn the block reward.

A group of miners who combine hashrate and share rewards more frequently. Payout methods vary (FPPS, PPS, PPLNS, etc.).

Software that verifies Bitcoin rules. A full node downloads/validates blocks and transactions and enforces the protocol without trusting anyone.

A wallet or service where you control the private keys. You can transact without relying on a third party to authorize spending.

Software whose code is public and inspectable. Bitcoin’s transparency helps people verify how the system works.

An optional extra word/phrase added to your seed phrase (BIP39) to create a new wallet. If used, losing it can make funds unrecoverable.

Tricking you into revealing secrets (seed phrase, passwords). Never type your seed phrase into random sites or share it with “support.”

The consensus mechanism Bitcoin uses. Miners spend energy to produce verifiable work, making attacks expensive and history hard to rewrite.

A feature that lets a sender bump fees on an unconfirmed transaction by replacing it with a higher-fee version.

Restoring wallet access using your seed phrase (and passphrase, if used). Recovery depends on correct backups and compatible wallet standards.

The smallest bitcoin unit. 1 BTC = 100,000,000 sats. Most everyday Lightning payments are measured in sats.

A list of 12–24 words that can recreate your wallet keys. Anyone with your seed phrase can spend your bitcoin—treat it like treasure.

A protocol upgrade that improved transaction format and capacity, reducing certain malleability issues and enabling better scaling.

A major upgrade improving privacy and efficiency for certain scripts and multisig setups, and enabling more flexible smart-contract-like behavior.

A signed message that moves bitcoin from one set of UTXOs to new UTXOs. It includes inputs, outputs, and fees.

The incentive paid to miners to include your transaction. Fees are usually based on transaction size (bytes), not the amount of BTC sent.

The “chunks” of bitcoin in your wallet. Bitcoin doesn’t work like a bank balance; it works like spendable outputs you can combine and split.

A tool for managing keys and signing transactions. Hot wallets are connected to the internet (convenient). Cold wallets keep keys offline (safer).

The original 2008 paper “Bitcoin: A Peer-to-Peer Electronic Cash System” published by Satoshi Nakamoto.