A Guide to Bitcoin Terminology
This dictionary provides simple explanations of common Bitcoin and cryptocurrency terms. Whether you're new to the space or looking to refresh your knowledge, this resource will help you navigate the complex world of digital assets.
| Term | Definition |
|---|---|
| A | |
| Address | A string of alphanumeric characters used to send and receive Bitcoin, similar to an email address but for cryptocurrency. Example: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa (the first Bitcoin address ever created). |
| ASIC | Application-Specific Integrated Circuit. Specialized hardware designed specifically for Bitcoin mining, much more efficient than general-purpose computers. |
| ATH | All-Time High. The highest price that Bitcoin (or any asset) has ever reached. |
| B | |
| Block | A collection of transactions that are bundled together and added to the blockchain. Each block contains a reference to the previous block, creating a chain. |
| Block Reward | The new bitcoins issued to miners who successfully mine a block. The reward halves approximately every four years in an event known as the "halving." |
| Blockchain | A digital ledger that records all Bitcoin transactions. It's distributed across a network of computers and is designed to be immutable and transparent. |
| BTC | The ticker symbol for Bitcoin, similar to how USD represents US Dollar. |
| Bull/Bear Market | A bull market refers to a period of rising prices and optimism, while a bear market refers to a period of falling prices and pessimism. |
| C | |
| Cold Storage | Keeping Bitcoin offline in a device not connected to the internet to protect it from hacking. Examples include hardware wallets and paper wallets. |
| Confirmation | When a transaction is included in a block and added to the blockchain, it receives one confirmation. Each subsequent block adds another confirmation, making the transaction more secure. |
| Consensus | The mechanism by which all nodes in the Bitcoin network agree on the state of the blockchain. Bitcoin uses a consensus algorithm called "Proof of Work." |
| Cryptocurrency | A digital or virtual currency that uses cryptography for security and operates on a decentralized network (typically a blockchain). Bitcoin was the first cryptocurrency, but there are now thousands of others with various features and purposes. |
| Custodial | When a third party (like an exchange) holds your Bitcoin for you, as opposed to "non-custodial" where you control your own private keys. |
| D | |
| DYOR | "Do Your Own Research." A common phrase in the cryptocurrency community encouraging people to investigate before investing. |
| Difficulty | A measure of how hard it is to mine a Bitcoin block. The difficulty adjusts approximately every two weeks to maintain a consistent block time of about 10 minutes. |
| Decentralization | The distribution of power away from a central authority. Bitcoin is decentralized because no single entity controls the network. |
| E | |
| Exchange | A platform where you can buy, sell, and trade cryptocurrencies. Exchanges can be centralized (controlled by a company) or decentralized ("DEX", running on smart contracts). |
| F | |
| FOMO | "Fear Of Missing Out." The anxiety that drives people to buy Bitcoin when prices are rising rapidly, often leading to buying at peak prices. |
| FUD | Fear, Uncertainty, and Doubt. Often refers to negative information spread with the intention of manipulating people's opinions about Bitcoin. |
| Fungible | The property of an asset where all units are identical and interchangeable. One bitcoin is equal to another bitcoin, making it fungible like traditional currency. |
| H | |
| Halving | An event that occurs approximately every four years where the block reward for miners is cut in half. This reduces the rate at which new bitcoins are created, enforcing Bitcoin's scarcity. |
| Hash Rate | The total computational power being used to mine Bitcoin and process transactions. Higher hash rates mean more security for the network. |
| HODL | A deliberate misspelling of "hold" that became a popular term for keeping your Bitcoin long-term instead of selling, regardless of price volatility. Often humorously backronymed as "Hold On for Dear Life". |
| L | |
| Lightning Network | A "layer 2" payment protocol built on top of Bitcoin that enables faster and cheaper transactions by processing them off the main blockchain. |
| M | |
| Mining | The process of validating transactions and adding them to the blockchain. Miners use powerful computers to solve complex mathematical problems, and are rewarded with newly created bitcoins. |
| Model | A mathematical or conceptual representation used to predict Bitcoin's price or behavior. Common models include the Saylor Model and Power Law Model. |
| Multisig | Short for "multi-signature," a security feature that requires multiple private keys to authorize a Bitcoin transaction, rather than just one. |
| N | |
| Node | A computer that connects to the Bitcoin network and helps validate transactions. Full nodes maintain a complete copy of the blockchain. |
| Non-custodial | When you have full control of your Bitcoin private keys, rather than trusting a third party to hold them for you. "Not your keys, not your coins" is a common saying. |
| P | |
| Power Law Model | A mathematical model that suggests Bitcoin's price follows a power law relationship over time, where price increases at a decreasing rate. This model uses logarithmic regression to predict future Bitcoin prices based on historical patterns. |
| Private Key | A secret number that allows bitcoins to be spent. Anyone with access to a private key can control the associated bitcoins, which is why security is so important. |
| Public Key | Derived from the private key, the public key is used to create a Bitcoin address where others can send funds. |
| Proof of Work (PoW) | The consensus algorithm used by Bitcoin. Miners compete to solve complex mathematical puzzles, with the winner getting to add the next block to the blockchain and receive the block reward. |
| S | |
| Satoshi | The smallest unit of Bitcoin, equal to 0.00000001 BTC (one hundred millionth of a bitcoin). Named after Bitcoin's creator, Satoshi Nakamoto. |
| Satoshi Nakamoto | The pseudonymous person or group who created Bitcoin and published the Bitcoin whitepaper in 2008. Their true identity remains unknown. |
| Saylor Model | A Bitcoin valuation model proposed by MicroStrategy CEO Michael Saylor that suggests Bitcoin's value is derived from its role as digital property and monetary energy. The model compares Bitcoin to other store-of-value assets and predicts significant long-term price appreciation. |
| Seed Phrase | A series of words (usually 12 or 24) that can be used to recover a Bitcoin wallet if the device is lost or damaged. Also called a recovery phrase or mnemonic. |
| W | |
| Wallet | Software or hardware that stores your private keys and allows you to interact with the Bitcoin blockchain to send and receive funds. |
| Whale | An individual or entity that holds a large amount of Bitcoin, enough to potentially influence market prices when they buy or sell. |
| Whitepaper | The original document published by Satoshi Nakamoto in 2008 that outlined the principles and technical details of Bitcoin. |
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