Glossary.
What 93 of Bitcoin's technical words mean, each on a short page of its own.
Sending and receiving
- AddressA string of letters and numbers that tells someone where to send you bitcoin, a bit like an account number for one payment.
- Address types (1, 3, bc1q, bc1p)The prefix marks the address type: 1 and 3 are older formats, bc1q is SegWit, bc1p is Taproot. Newer types usually cost less to spend from.
- Mainnet and test networksMainnet is Bitcoin's live network. Test networks let people try software with coins that are not intended to have real value.
- TransactionA signed instruction that moves bitcoin: it spends some earlier outputs and creates new ones, each with an amount and an owner.
- Transaction ID (txid)A 64-character code that identifies one Bitcoin payment, so anyone can look it up.
- Satoshi (sat)The smallest unit of bitcoin: one hundred-millionth of a bitcoin. 100,000,000 sats make 1 BTC.
- ConfirmationA payment has one confirmation once it's in a block, and one more for each block after. The more it has, the harder it is to reverse.
- Double spendAn attempt to spend the same bitcoin twice. Only one of the conflicting payments can ever confirm.
- Lightning NetworkA network built on Bitcoin for payments through channels, without recording every payment as its own blockchain transaction.
- Payment channelA shared pot of bitcoin between two parties on the blockchain, which they can pay each other from, off-chain, as often as they like.
- UTXOAn unspent transaction output: an amount of bitcoin left by a transaction, with rules for spending it.
- UTXO setThe unspent outputs a Bitcoin node keeps track of to check new payments against its accepted blockchain.
- Inputs and outputsOrdinary payments spend previous outputs as inputs and create new outputs. Coinbase transactions, which create miner rewards, are the exception.
- ChangeThe part of a payment that goes back to the sender, because wallets spend whole pieces of bitcoin, like getting change from a note.
- DustA very small bitcoin output. Bitcoin Core defines a dust threshold; whether spending an output is worthwhile also depends on current fees.
- OP_RETURNA payment output that stores data instead of paying someone. It can never be spent, so nodes don't track it as spendable.
- Inscription (ordinals)Data, such as an image, written into a Taproot payment's witness and tied to one satoshi, so it lives on the blockchain.
- RunesA way to make tradable tokens on Bitcoin itself, storing their data in OP_RETURN outputs. Each token is an entry in a transaction, not a separate coin.
- StablecoinA token designed to keep a steady value, usually one US dollar, which its issuer promises to buy back. It isn’t bitcoin, and it depends on that issuer.
- Taproot AssetsA protocol from Lightning Labs for creating tokens, such as dollar stablecoins, on Bitcoin and sending them over the Lightning Network.
- TimelockA rule inside a payment that stops coins being spent until a certain block height or time has passed.
- Smart contractA program that carries out an agreement by itself, such as releasing money once set conditions are met. Nick Szabo coined the term in 1994.
Fees and waiting
- Fee rate (sat/vB)The fee a payment offers for each unit of block space, in satoshis per virtual byte. Miners can evaluate related transactions together.
- MempoolThe waiting room for Bitcoin transactions that have been sent but aren't in a block yet.
- Replace-by-fee (RBF)A way to replace an unconfirmed payment with a conflicting version that pays a higher fee. Only one can remain in the same valid chain.
- Child pays for parent (CPFP)A way to make an unconfirmed parent and a child that spends it more attractive to miners as a package. Confirmation is not guaranteed.
- Transaction acceleratorA service, usually run by a mining pool, that tries to include a stuck payment in its next block, sometimes for a charge.
Wallets and keys
- WalletAn app or device that holds your keys and makes, signs and sends payments. The bitcoin itself stays on the blockchain.
- Coin controlA wallet feature that lets you choose which unspent outputs to use in a payment.
- UTXO consolidationSpending several outputs into fewer outputs in your own wallet, paying a fee now to simplify later spending.
- Self-custody (non-custodial)Holding your own keys, so no company can freeze, lose or take your bitcoin. The alternative, a custodial service, holds them for you.
- Recovery words (seed phrase)A list of 12, 15, 18, 21 or 24 words that can restore wallet keys. Anyone who has them can take your bitcoin.
- Shamir backup (SLIP-39)A backup split into several word lists, so any threshold of them — say 2 of 3 — restores the wallet, while one alone reveals nothing.
- Passphrase (25th word)An extra word or sentence added to recovery words, which creates a completely different wallet. Losing it means the words alone cannot help.
- Private keyThe secret number that lets you spend your bitcoin. Whoever knows it controls the coins, so it must never be shared.
- WIF (wallet import format)The text format a single private key takes when you export or import it — a string starting with 5, K or L.
- Public keyThe partner of a private key. It lets anyone check a signature without revealing the private key under current computing assumptions.
- xpub (extended public key)An extended public key for one branch of a wallet. It reveals addresses and payments in that branch, but cannot by itself spend them.
- Derivation pathThe route a wallet follows to turn one seed into many keys, written like m/84'/0'/0'. A different path gives different addresses.
- Gap limitHow many unused addresses in a row a wallet checks before it stops looking for your coins when recovering — usually 20.
- Output descriptorA short string that describes exactly how a wallet's addresses and spending rules are made from its keys, so any wallet can rebuild the same setup.
- Cold storageKeeping your keys on something that never touches the internet, such as a hardware wallet. An online wallet is a hot wallet.
- Hardware walletA small device that holds your private keys and signs payments inside itself, so the keys never touch your internet-connected computer or phone.
- ExchangeA business where people swap ordinary money for bitcoin and other coins. Coins left there are held by the exchange, which controls their keys.
- Paper walletA key printed or written on paper rather than kept on a device. Once common, it's now mostly outdated and risky to make safely.
- Watch-only walletA wallet that holds addresses or an xpub but no keys, so it can track balances and payments without being able to spend.
- Multisig (multi-signature)A wallet whose coins need signatures from several keys, such as 2 of 3, so no single key can spend alone.
- PSBTA standard format for passing an unsigned or partly signed payment between wallets and signers, until it is fully signed and broadcast.
- Address reuseReceiving bitcoin more than once to the same address. It links those payments together publicly and can harm your privacy.
- CoinJoinA payment made together by several people, which breaks the easy link between their old and new addresses. Nobody gives up their coins.
- Payjoin (P2EP)A payment where the receiver adds an input too, breaking the assumption that every input belongs to the sender. It looks like an ordinary payment.
- Silent paymentsA reusable payment code. Each sender works out a fresh address from it, so two payments to the same code cannot be linked on chain.
- TorA free network that hides where internet traffic comes from by relaying it through three volunteer-run computers. Bitcoin nodes can use it.
- Digital signature (ECDSA, Schnorr)Proof, made with a private key, that the owner approved a payment. Anyone can check it; practical forgery is infeasible under current assumptions.
- Elliptic curve (secp256k1)The curve y² = x³ + 7, whose maths turns a private key into a public key that ordinary computers cannot reverse efficiently.
- Hash (SHA-256)The fingerprint of some data: a fixed-length output of the SHA-256 function, which Bitcoin uses for addresses, transaction IDs and mining.
Mining
- BlockchainBitcoin's shared record of every payment since 2009, stored in blocks that each link to the one before — which is what makes it a chain.
- BlockA batch of transactions added to Bitcoin's shared record, about every 10 minutes on average.
- Block heightA block's number, counting from the genesis block at height 0. The current height is how many blocks the chain has.
- Genesis blockBitcoin's first block, mined by Satoshi Nakamoto on 3 January 2009. Every block since links back to it.
- Coinbase transactionThe first payment in every block, created by its miner. It has no inputs and pays out the block reward.
- Block rewardWhat a block's miner earns: new bitcoin from the subsidy, plus the fees of every transaction in the block.
- Supply cap (21 million)Bitcoin's rules halve the new supply every 210,000 blocks, so issuance slows towards zero. The total approaches 21 million without quite reaching it.
- MinerA computer, or a pool of them, that bundles waiting transactions into blocks and secures the network, paid in new bitcoin and fees.
- Mining poolA group of miners who share the work of finding blocks and split the rewards, so each gets paid steadily instead of rarely.
- StratumThe protocol most mining pools use to hand out work to miners’ machines and collect the results. Marek Palatinus introduced it in 2012.
- ASICA machine built to do nothing but Bitcoin mining: chips that hash trillions of times a second, far beyond any ordinary computer.
- Proof of workA puzzle that takes a computer real effort to solve, so the answer proves the effort was spent. Bitcoin’s miners use it to add each block.
- HashrateHow many guesses a second all of Bitcoin's miners make together. More hashrate makes the network harder to attack.
- DifficultyHow hard it is to mine a block. Bitcoin resets it every 2,016 blocks, about two weeks, so blocks keep coming about every 10 minutes.
- HalvingEvery 210,000 blocks, about every four years, the new bitcoin created in each block is cut in half.
- Chain reorganisation (reorg)A replacement of recent blocks when nodes switch to a valid chain with more accumulated work. Recent confirmations can change.
- Stale blockA valid block that lost the race: another block at the same height was built on instead, so the stale one is not in the chain.
- 51% attackOne miner or pool controlling most of the hashrate. They could reverse their own recent payments, but not steal coins or change the rules.
Upgrades
- NodeA computer running Bitcoin software that checks every payment and block against the rules, and passes them on to others.
- Policy vs consensusConsensus rules decide whether a block is valid — breaking them splits the chain. Policy is what your own node relays, and each operator can change it.
- Light client (SPV)A wallet that checks payments using block headers and proofs instead of the whole chain. It trusts miners more than a full node does.
- SidechainA separate blockchain that bitcoin can move to and back from, trading Bitcoin's rules for different features or speed.
- Layer 2A system built on top of Bitcoin that handles payments off the main chain, using it mainly to settle. The Lightning Network is the best known.
- BIPA public document describing a proposed change to Bitcoin, or a standard that wallets can follow.
- Soft forkA change that tightens Bitcoin's rules, so nodes that haven't upgraded still accept the new blocks.
- Hard forkA change that loosens Bitcoin's rules, so nodes running old software reject the new blocks. Without near-universal agreement it splits the chain.
- SegWitSegregated Witness: a 2017 upgrade that moved signatures into a separate part of each payment, making room for more payments.
- TaprootA 2021 upgrade that added Schnorr signatures and addresses starting bc1p, making complex payments cheaper and more private.
- Schnorr signatureA kind of digital signature Bitcoin added with Taproot in 2021. Several people can combine keys so their joint signature looks like one person's.
- Pay-to-public-key (P2PK)The earliest kind of Bitcoin payment, which locked coins straight to a public key and left that key on show.
Quantum computing
Bitcoin’s history
- CypherpunkSomeone who believes in using strong cryptography to protect people’s privacy. Many ideas behind Bitcoin came from the cypherpunks of the 1990s.
- Blind signatureA signature on something the signer can’t see. David Chaum published the idea in 1983 so a bank could issue digital cash it couldn’t trace.
- bitcoin.orgThe website Satoshi Nakamoto registered in August 2008. It published the Bitcoin white paper and still hosts it. Volunteers run it today.
- BitcointalkThe Bitcoin forum Satoshi Nakamoto opened in November 2009. Much of Bitcoin’s early history, from the pizza offer to Satoshi’s last post, happened there.
- HODLBitcoin slang for holding coins instead of selling, from a 2013 forum post whose author misspelled “hold” in its title.