Bitcoin Glossary: Key Terms Explained in Plain English

Key takeaways

• The entries run alphabetically in five groups, each definition stands on its own, and each links to the full guide on this site where one exists.
• Learn the terms for holding and moving bitcoin first: wallet, private key, seed phrase, address and custody. Mining terms can wait.
• Bitcoin with a capital B is the network, and bitcoin in lowercase is the unit.
• Definitions are short and general. Fees, rules and products change, so check current details before acting on them.

How do you use this glossary?

Use it as a lookup page: find the letter group, read the short definition, and follow the link for the full explanation. If you are new, learn wallet, private key, seed phrase, address, transaction, fee and custody first. They cover how bitcoin is held and moved, and most costly beginner mistakes involve one of them. Mining terms such as ASIC, difficulty and hash rate can wait.

Capitalization trips people up. Bitcoin with a capital B means the network and its software, and bitcoin in lowercase, or BTC, means the unit of money.

Three terms are mixed up more than any others. A wallet is the software or device that manages your keys, a private key is the secret that authorizes spending, and a seed phrase is the list of words that can regenerate all of a wallet’s keys.

You do not need every term before you buy. Custody, wallets, seed phrases, fees and scams matter most, and a qualified professional can help with decisions about your money. The Start Here path puts these ideas in order.

Terms A to C

Address. A string of characters that tells the network where to send bitcoin, generated by your wallet from a public key. Sharing it is safe, and a fresh address for each payment is the better habit.

Altcoin. Short for “alternative coin”: any cryptocurrency other than Bitcoin. Altcoins vary widely in purpose, design and risk, as Bitcoin vs Altcoins explains.

ASIC. Short for application-specific integrated circuit: a chip, and the mining machine built around it, designed to compute only Bitcoin’s hash function. It is far more efficient at that job than a home computer.

Bitcoin. With a capital B, the network, protocol and software. With a lowercase b, the unit of money it tracks, abbreviated BTC. What Is Bitcoin? covers the basics.

Block. A batch of transactions, bundled by a miner and added to the chain about every ten minutes, with a header that links it to the previous block. See how Bitcoin works.

Block explorer. A website or tool for searching the public record of blocks, transactions and addresses. You can use one to look up the genesis block or to check whether a payment has confirmed.

Block reward. The payment a miner receives for adding a block: newly created bitcoin, called the subsidy, plus the fees in that block. The subsidy is cut in half every 210,000 blocks.

Blockchain. The shared, public record of all Bitcoin transactions, stored as a chain of blocks in which each block contains the hash of the one before it. What Is a Blockchain? explains why that makes tampering costly.

Cold storage. Keeping private keys on a device or medium that never connects to the internet, out of reach of remote hackers. It protects against theft, not against loss, as cold storage explained shows.

Confirmation. A transaction gets its first confirmation when a miner includes it in a block, and one more for each block added on top. More confirmations make it harder to reverse. See sending and receiving.

Cryptocurrency. Digital money or a digital token that relies on cryptography and a shared ledger instead of a central issuer such as a bank. Bitcoin was the first, and many others followed.

Custody. Who controls the private keys that move the coins. A custodian, such as an exchange, holds them for you, while a non-custodial wallet leaves them with you, as wallets explained shows.

Terms D to H

Difficulty. A number that sets how hard it is to find a valid block. It adjusts every 2,016 blocks, about every two weeks, to keep blocks arriving roughly every ten minutes. Hash rate and difficulty explained goes further.

Double spending. Spending the same digital coin more than once, which copyable files make possible unless something prevents it. Bitcoin prevents it with a public ledger and proof of work, as the whitepaper describes.

Exchange. A platform where people buy, sell and trade bitcoin, usually for dollars. Most exchanges hold customers’ coins for them, so choosing one means trusting how it protects your funds.

Fee. Either the network fee paid to miners, which depends on a transaction’s size and on demand and not on the amount sent, or the fees an exchange charges for trading or withdrawing. See Bitcoin fees explained.

Fork. A change to Bitcoin’s rules or a split of its chain. A soft fork tightens the rules and stays compatible with older software, while a hard fork loosens them and old nodes reject the new blocks. The 2017 split that created Bitcoin Cash was a hard fork. See forks explained.

Genesis block. The first block of the chain, block 0, created by Satoshi Nakamoto on 3 January 2009 and built into every node’s software as the starting point. Its 50 bitcoin reward is commonly described as unspendable. See the genesis block.

Halving. The event, every 210,000 blocks or roughly every four years, when the block subsidy is cut in half. It slows the creation of new bitcoin over time, as the halving explains.

Hardware wallet. A small dedicated device that keeps private keys offline and signs transactions inside the device, so the keys never reach your computer or phone. See how hardware wallets work.

Hash. A fixed-length fingerprint made by running data through a mathematical function, and Bitcoin uses one called SHA-256. A tiny change to the input changes the output completely, and the output cannot practically be reversed. Blocks use it to link together.

Hash rate. The number of hash attempts per second made by one miner or by the whole network, a measure of the computing power behind the chain. See hash rate explained.

Hot wallet. A wallet on a device connected to the internet, such as a phone or desktop app. It is convenient for everyday use and more exposed to hacking and malware. See wallet types.

Terms I to M

KYC. Short for “know your customer”: the identity checks that regulated exchanges and brokers run before opening an account, as part of anti-money-laundering rules. See how US rules apply.

Lightning Network. A payment layer built on top of Bitcoin that sends small, fast payments through channels between users and settles on the blockchain only when a channel opens or closes. See the Lightning Network.

Mempool. Short for memory pool: each node’s waiting room of valid transactions that are not yet in a block. Miners tend to pick those paying the most per unit of space. See the mempool.

Miner. A person or company running specialized computers that bundle transactions into blocks and compete to add them to the chain, earning the block reward. See inside a mining operation.

Mining pool. A group of miners who combine computing power and share the reward in proportion to the work each contributes, which makes payouts steadier than mining alone. See mining pools explained.

Multisig. Short for multi-signature: a wallet setup that needs approval from several keys, for example any two of three, before coins can move. It removes a single point of failure and adds backup duties, as multisig explained shows.

Terms N to R

Node. A computer running Bitcoin software that downloads and checks every block and transaction against the rules. A node is not a miner and earns nothing for the work. See what running a node means.

On-chain. Recorded directly on the blockchain, as opposed to off-chain activity such as Lightning payments or transfers between two customers of the same exchange. How Bitcoin works shows how a transaction reaches the chain.

Passphrase. An optional extra word or phrase added to a seed phrase that produces a completely different set of wallets. If it is forgotten, those coins cannot be recovered. See seed phrases.

Peer-to-peer. A network in which participants deal directly with each other instead of through a central server or middleman. The whitepaper describes Bitcoin as peer-to-peer electronic cash.

Private key. A secret number that lets you authorize spending of your bitcoin. Anyone who has it can move the coins, so it is never shared. See public key vs private key.

Proof of work. The system that makes creating a block costly: a miner must find a hash below a target by trial and error, while anyone can check the answer quickly. See proof of work vs proof of stake.

Public key. A number derived from a private key through one-way mathematics that cannot be reversed to reveal the private key. Addresses are derived from public keys, and nodes use them to verify signatures. See public key vs private key.

Terms S to Z

Satoshi. The smallest on-chain unit of bitcoin, one hundred-millionth of a bitcoin (0.00000001 BTC), named after Satoshi Nakamoto. Wallets often show amounts in “sats”, as how many satoshis are in a bitcoin explains.

Satoshi Nakamoto. The pseudonym of the person or group who published the whitepaper in 2008 and released the first software in 2009. The real identity has never been confirmed. See who Satoshi Nakamoto is.

Seed phrase. A list of 12 or 24 words that can regenerate all the keys in a wallet. Anyone who has the words can take the coins, so they are written down offline and never typed into a website. See what a seed phrase is.

SegWit. Short for Segregated Witness, an upgrade activated in August 2017 that moved signature data into a separate part of each transaction, fixed a technical flaw and made room for more transactions per block. Addresses starting with bc1q use it. See the history of Bitcoin.

Self-custody. Holding your own private keys, so no exchange or company can freeze or lose your coins. The trade-off is that you alone are responsible for backups and security. See self-custody.

Spot ETF. An exchange-traded fund that holds actual bitcoin and trades like a stock. US spot Bitcoin ETFs began trading in January 2024, and owners hold shares, not coins or keys. See Bitcoin ETFs.

Stablecoin. A token designed to hold a steady value, usually one US dollar, backed by an issuer’s reserves. Unlike bitcoin, it has a company behind it and no fixed supply. See what a stablecoin is.

Taproot. An upgrade activated in November 2021 that added Schnorr signatures and more flexible spending conditions, so that complex transactions can look like ordinary ones. Addresses starting with bc1p use it. See what Taproot is.

Transaction. A signed message that moves bitcoin by spending existing outputs and creating new ones. It waits in the mempool until a miner includes it in a block. See how Bitcoin works.

UTXO. Short for unspent transaction output. Bitcoin has no account balances: your balance is the sum of the outputs your keys can spend, much like a pocket of separate bills and coins. See what a UTXO is.

Wallet. Software or a device that manages your private keys and lets you receive, send and view bitcoin. It stores the keys, not the coins themselves, which exist only as entries on the blockchain. See wallets explained.

Whitepaper. The nine-page paper “Bitcoin: A Peer-to-Peer Electronic Cash System”, published on 31 October 2008, in which Satoshi Nakamoto first described Bitcoin. See the whitepaper explained.

Where to go next

• What Is Bitcoin? A Plain-English Introduction: the fundamentals these terms describe.
• How Does Bitcoin Work? Blocks, Miners and Keys Explained: the terms in action, from transaction to block.
• Bitcoin Wallets Explained: Types and How to Choose One: the most important terms for holding bitcoin safely.
• The History of Bitcoin: From a Whitepaper to a Global Network: how many of these terms entered the vocabulary.