Bitcoin Glossary

A human-readable string derived from a public key, used to receive Bitcoin. Formats include P2PKH (1...), P2SH (3...), and Bech32 (bc1...).

Application-Specific Integrated Circuit — specialized hardware designed solely for Bitcoin mining (SHA-256 hashing). Far more efficient than GPUs or CPUs.

A school of economic thought emphasizing individual action, sound money, and free markets. Influential in Bitcoin's philosophical foundations.

An address encoding format (BIP-173) for SegWit addresses. Uses lowercase only, has error detection, and starts with "bc1".

Bitcoin Improvement Proposal — a design document for introducing features or changes to Bitcoin. Notable: BIP-32 (HD wallets), BIP-39 (seed phrases), BIP-141 (SegWit).

A decentralized digital currency that enables peer-to-peer transactions without intermediaries, secured by proof-of-work mining.

Exchange-Traded Fund that tracks Bitcoin's price. Spot ETFs hold actual BTC; futures ETFs hold derivative contracts. US spot ETFs approved January 2024.

A stack-based programming language used to define spending conditions for Bitcoin outputs. Intentionally not Turing-complete for security.

"Bitcoin: A Peer-to-Peer Electronic Cash System" published by Satoshi Nakamoto on October 31, 2008. The 9-page document that started it all.

A data structure containing a header and a set of transactions. New blocks are added approximately every 10 minutes through mining.

An 80-byte structure containing version, previous block hash, Merkle root, timestamp, difficulty target, and nonce. The data that miners hash.

New bitcoins created with each block plus transaction fees. Started at 50 BTC, halves every 210,000 blocks. Currently 3.125 BTC.

A chain of cryptographically linked blocks containing transaction data. Each block references the previous block's hash, making the chain tamper-evident.

The ticker symbol for Bitcoin. 1 BTC = 100,000,000 satoshis.

The uneven distribution of newly created money — those who receive it first benefit at the expense of those who receive it last. Bitcoin eliminates this through fixed issuance.

The first transaction in every block that creates new bitcoins (block reward). Has no inputs — the new coins come from the protocol itself.

A privacy technique that combines multiple users' transactions into a single transaction, making it difficult to trace which inputs correspond to which outputs.

Keeping private keys completely offline (hardware wallet, paper wallet, air-gapped computer) to protect against remote theft.

The number of blocks added after the block containing your transaction. More confirmations = higher security. 6 confirmations is the standard threshold.

The set of rules that all nodes must agree on to validate transactions and blocks. Ensures everyone has the same version of the blockchain.

A fee-bumping technique where a child transaction pays a high enough fee to incentivize miners to confirm both the parent and child together.

An investment strategy of buying a fixed dollar amount of Bitcoin at regular intervals, regardless of price. Reduces the impact of volatility.

A measure of how hard it is to find a valid block hash. Adjusts every 2,016 blocks (~2 weeks) to maintain ~10 minute block intervals.

An automatic recalibration every 2,016 blocks (~2 weeks) that adjusts mining difficulty to maintain a ~10 minute average block time.

A tiny amount of Bitcoin that costs more in fees to spend than it's worth. Transactions creating dust outputs may be rejected by nodes.

Elliptic Curve Digital Signature Algorithm — the original signature scheme used in Bitcoin for authenticating transactions.

Government-issued money with no intrinsic value, backed only by decree. The USD, EUR, JPY are all fiat currencies with unlimited supply.

Bitcoin has a hard cap of 21 million coins. This fixed monetary policy is enforced by consensus rules and cannot be changed.

A divergence in the blockchain. Soft forks tighten rules (backward compatible); hard forks loosen rules (not backward compatible).

A node that independently validates every transaction and block against consensus rules without trusting any third party.

Block 0 — the first block in the Bitcoin blockchain, mined by Satoshi Nakamoto on January 3, 2009. Contains the famous Times headline about bank bailouts.

An event every 210,000 blocks (~4 years) that cuts the block reward in half. Ensures Bitcoin's fixed supply of 21 million coins.

A fixed-length fingerprint produced by a hash function. Bitcoin uses SHA-256 extensively for block hashing, transaction IDs, and address generation.

The total computational power of the mining network, measured in hashes per second (H/s). Higher hashrate = more secure network.

A misspelling of "hold" that became a Bitcoin meme meaning to hold Bitcoin long-term regardless of price volatility.

A wallet connected to the internet for convenient daily transactions. Less secure than cold storage but more accessible.

Hash Time-Locked Contract — a smart contract used in Lightning for trustless payment routing. Funds are locked with a hash and expire after a timeout.

A reference to a previous UTXO being spent in a transaction. Includes the previous TXID, output index, and unlocking script.

Identity verification requirements imposed by exchanges and financial institutions. Requires government ID, address proof, etc. Bitcoiners often prefer non-KYC acquisition.

A payment request in the Lightning Network encoded as a BOLT11 string. Contains amount, destination, expiry, and payment hash.

A Layer 2 payment protocol built on Bitcoin enabling instant, low-fee transactions through payment channels.

A protocol for Lightning Network interactions via HTTP. Enables login (LNURL-auth), payments (LNURL-pay), and withdrawals without scanning invoices.

Memory pool — the set of unconfirmed transactions waiting to be included in a block. Each node maintains its own mempool.

A binary hash tree structure used in blocks to efficiently summarize all transactions. The Merkle root is included in the block header.

The process of using computational power to find a valid block hash that meets the difficulty target, earning the block reward and transaction fees.

A group of miners who combine their hashrate and share block rewards proportionally. Reduces reward variance for individual miners.

Multi-signature — requires M of N keys to authorize a transaction. Example: 2-of-3 means any 2 of 3 keys can sign.

A Nostr Improvement Proposal for domain-based identity verification. Maps username@domain to a Nostr public key via a .well-known/nostr.json endpoint.

A computer running Bitcoin software that validates transactions and blocks, maintains a copy of the blockchain, and relays data to peers.

A 32-bit number in the block header that miners change to produce different hash outputs when searching for a valid block.

Notes and Other Stuff Transmitted by Relays — a decentralized social protocol using Bitcoin-style cryptographic keys for identity.

An operation code in Bitcoin Script. Commands like OP_DUP, OP_HASH160, OP_CHECKSIG define how transactions can be spent.

A numbering scheme that assigns a unique serial number to each satoshi based on the order it was mined. Enables inscriptions (data attached to individual sats).

A destination for Bitcoin value in a transaction. Contains a value (in satoshis) and a locking script (ScriptPubKey).

Pay to Public Key Hash — the original Bitcoin address format starting with "1". Requires a signature matching the public key hash.

Pay to Taproot — the newest address format starting with "bc1p". Uses Schnorr signatures and enables advanced smart contract features.

Pay to Witness Public Key Hash — a SegWit address format starting with "bc1q". More efficient and lower fees than P2PKH.

A two-party Bitcoin smart contract that enables multiple off-chain transactions with only two on-chain transactions (open and close).

Bitcoin is pseudonymous, not anonymous. Privacy techniques include CoinJoin, PayJoin, coin control, new address per transaction, and running your own node.

A 256-bit secret number that controls access to Bitcoin funds. Must be kept secret. Used to create digital signatures for transactions.

A consensus mechanism requiring miners to perform computational work to produce blocks. Ensures security by making block production costly.

Partially Signed Bitcoin Transaction (BIP-174) — a standard format for passing unsigned or partially signed transactions between wallets and signers.

Derived from the private key using elliptic curve multiplication (secp256k1). Can be shared publicly and is used to verify signatures.

A mechanism that allows replacing an unconfirmed transaction with a higher-fee version. BIP-125 defines opt-in RBF; Bitcoin Core 28+ enables full RBF by default.

Satoshis per virtual byte — the standard unit for measuring Bitcoin transaction fee rates. Lower sat/vB = cheaper transaction.

The smallest unit of Bitcoin, equal to 0.00000001 BTC. Named after Bitcoin's pseudonymous creator, Satoshi Nakamoto.

A digital signature scheme activated with Taproot. Simpler and more efficient than ECDSA, enables key and signature aggregation.

A 12 or 24 word mnemonic that encodes the master private key (BIP-39). The single backup for all keys in an HD wallet.

Segregated Witness — a 2017 soft fork that separates signature data from transaction data, fixing malleability and increasing effective block capacity.

Holding your own private keys rather than trusting a third party (exchange, bank). "Not your keys, not your coins" is the core principle.

Secure Hash Algorithm producing a 256-bit (32-byte) hash. The core hash function in Bitcoin used for mining, addresses, and transaction IDs.

Money with properties of scarcity, durability, divisibility, portability, and resistance to debasement. Bitcoin fulfills these through its protocol rules.

Simplified Payment Verification — a lightweight method to verify transactions without downloading the full blockchain, using Merkle proofs.

An atomic swap between on-chain Bitcoin and Lightning Network payments. Enables moving funds between layers without trusting a third party.

A 2021 soft fork (BIP-340/341/342) enabling Schnorr signatures, improved privacy for complex scripts, and more efficient multisig.

The degree to which individuals prefer present goods over future goods. Sound money like Bitcoin lowers time preference, encouraging saving over consumption.

A condition that prevents a transaction from being spent until a certain time or block height. Uses OP_CHECKLOCKTIMEVERIFY or nSequence.

The Onion Router — an anonymity network that routes traffic through multiple encrypted layers. Bitcoin nodes can run over Tor for IP privacy.

A transfer of Bitcoin value from inputs to outputs. Each transaction consumes UTXOs and creates new ones.

The difference between total inputs and total outputs in a transaction. Paid to miners as incentive for including the transaction in a block.

Transaction ID — a 64-character hex hash that uniquely identifies a transaction on the blockchain.

Unspent Transaction Output — the fundamental unit of Bitcoin accounting. UTXOs are created by transactions and consumed as inputs in new transactions.

Software or hardware that manages private keys, creates transactions, and tracks balances. The wallet doesn't store coins — it stores keys.