The world of cryptocurrency, especially Bitcoin, can be confusing with all its unique terms and concepts. We’ve made a Cryptocurrency Glossary of Terms to help you. Whether you’re new to Bitcoin or just want to know more about digital money, this glossary will make it easier to learn and understand this exciting technology.
Mastering Cryptocurrency: Your Easy Guide to Key Terms
A
Address: A special string of letters and numbers where you can receive Bitcoin. Think of it like an email address for money.
Altcoin: Any digital money other than Bitcoin. Examples are Ethereum, Litecoin, and Ripple.
Airdrop: A distribution of a cryptocurrency token or coin, usually for free, to a large number of wallet addresses. Often used as a marketing tool.
ATH (All-Time High):
The highest price that Bitcoin or any cryptocurrency has ever reached.
Atomic Swap: A way to exchange different cryptocurrencies directly between users without needing a third party, using smart contracts.
ASIC (Application-Specific Integrated Circuit): A special kind of computer chip made for doing a specific job, like mining bitcoins. ASICs are designed to solve complex mathematical problems quickly and efficiently.
ASIC-Resistant: A type of cryptocurrency designed to be resistant to mining using specialized ASIC hardware, encouraging mining with regular computers.
B
Bagholder: A person who holds a cryptocurrency that has dropped significantly in value and is now worth less than the purchase price.
Batching: Combining several Bitcoin payments into one transaction to save space and fees.
Bearwhale:
A term used to describe a large holder of Bitcoin (a whale) who sells a significant amount of Bitcoin, causing the price to drop (bear market).
BIP (Bitcoin Improvement Proposal):
A document that proposes changes or improvements to Bitcoin’s protocol. A suggestion for changing or improving how Bitcoin works. Developers review these ideas to decide if they should become part of Bitcoin’s rules.
Bit:
A common unit used to designate a sub-unit of a Bitcoin. 1 Bitcoin (BTC) = 1,000,000 bits.
Bitcoin Address: A code made of letters and numbers where bitcoins can be sent. It’s like a bank account number.
Bitcoin Client: Software that handles sending and receiving bitcoins. Bitcoin Core is the main one, but there are others with different features.
Bitcoin Core: This is the main software used to run Bitcoin. It helps manage and secure the Bitcoin network by validating transactions and blocks.
Bitcoin Network: All computers that share information about Bitcoin transactions. They help keep track of who owns which bitcoins.
Block: A piece of information in the blockchain that holds several transactions. It’s like a page in a ledger.
Block Header: Info about each block in the blockchain, like its number, time made, and a special code. This helps keep the blockchain secure.
Block Height: How many blocks are in the blockchain, counting from the very first one.
Block Reward: Bitcoins that miners get for making a new block. The new Bitcoins given to miners when they successfully add a new block to the blockchain. It’s like a payment for helping to process and keep track of Bitcoin transactions.
BTC: The symbol for bitcoins.
Bubble: When people buy bitcoins to make money, so the price goes up a lot, then falls back down.
C
Chain Reorganization: When a part of the blockchain is changed by a mistake, and some blocks are removed. When some blocks are removed from the blockchain and replaced with different blocks due to a mistake or a longer chain becoming accepted. This ensures that the blockchain remains accurate and up-to-date.
Coinbase: This is the first transaction in a block on the Bitcoin blockchain. It creates new bitcoins and includes the miner’s reward for adding the block.
CoinControl: A feature in some wallets that allows users to choose specific unspent transaction outputs (UTXOs) to be used in a transaction, which can help manage privacy and fees.
CoinJoin: A way to mix Bitcoin payments to make them harder to trace. A method to mix Bitcoin transactions from multiple users into one large transaction. This makes it harder to trace who sent and received the Bitcoin, helping to protect privacy.
Cold Storage: Keeping Bitcoin offline to protect it from hacking. Examples include hardware wallets and paper wallets.
Cold Wallet: A type of wallet used to store cryptocurrency offline. It’s not connected to the internet, which helps protect it from hackers and online threats. Examples include hardware wallets and paper wallets.
Confirmation: When a Bitcoin transaction is added to the blockchain, so it can’t be spent again.
Consensus: Agreement among nodes in the network about the state of the blockchain. Agreement among computers in the Bitcoin network about the state of the blockchain. This ensures that all transactions are accurate and trustworthy.
Cryptojacking: The unauthorized use of someone else’s computer to mine cryptocurrency.
Cryptography: Using math to keep information secure. It’s used in Bitcoin to protect money and records.
D
DAO (Decentralized Autonomous Organization): An organization run by computer rules, not people.
Decentralized:
A system not controlled by one person or company. Bitcoin is decentralized because it runs on many computers around the world.
DeFi (Decentralized Finance): Financial services that use smart contracts on blockchains to offer decentralized banking, lending, and trading services.
Difficulty: How hard it is to make a new block in the blockchain.
Digital Signature: A way to prove you own a Bitcoin address without showing the secret key.
Digital Wallet:
A software or device where you can keep your Bitcoin. It lets you send and receive Bitcoin.
Distributed Ledger: This is a record of transactions that is shared across many computers. Each computer keeps a copy, so everyone can see and agree on the information. The blockchain is an example of it.
Dust: Very small amounts of Bitcoin that cost more to use than they’re worth. They are so small that it’s not worth using them because the fees are higher than the amount.
Dust Limit: The minimum amount of Bitcoin that can be sent in a transaction. Transactions below this amount are considered dust and usually ignored by miners.
Dust Transactions: Very small amounts of Bitcoin that are considered unspendable because the transaction fees would be higher than the amount of Bitcoin being sent.
DYOR (Do Your Own Research): Check things yourself before trusting them. A reminder to look into things yourself before making decisions, especially when it comes to buying or investing in something.
E
Encryption Algorithm: A way to make information unreadable to anyone without a special key.
Escrow: A service where a third party holds and regulates payment of funds required for two parties involved in a given transaction, providing security for both.
Exchange: A service where people buy and sell bitcoins.
Exchange Volume: How many bitcoins are traded on an exchange.
F
Fiat: Money like dollars or euros that the government says is valuable. Unlike cryptocurrencies, fiat money isn’t backed by physical assets but is accepted for transactions because people trust its value.
Fiat Gateway: A service or exchange that allows the conversion of fiat currency into cryptocurrency.
Faucet: A website that dispenses small amounts of Bitcoin or other cryptocurrencies for free, often in exchange for completing a simple task or captcha.
Finality: The assurance that once a transaction has been added to the blockchain, it cannot be altered or reversed.
Flippening: When one cryptocurrency becomes more popular than another, often in terms of market value or usage.
FOMO (Fear Of Missing Out): Feeling like you should buy bitcoins before the price goes up.
Fork: A change in how Bitcoin works. A fork happens when the rules of Bitcoin change. It can split the blockchain into two separate chains. There are two kinds:
• Soft Fork: A small change that older versions of the blockchain can still handle, but with some restrictions.
• Hard Fork: A big change that requires everyone to update to the new version for it to work.
FUD (Fear, Uncertainty, and Doubt): Scary news that might not be true. This is when people spread scary or uncertain stories to make others worried or confused about Bitcoin or other cryptocurrencies. The idea is to make you doubt or be afraid of them to influence prices or opinions by creating negative feelings.
G
Genesis Block: The very first block created in the Bitcoin blockchain. It’s like the starting point for all Bitcoin transactions.
GPU (Graphics Processing Unit): A computer part used for making images, and once used for mining bitcoins.
H
Halving: Halving is a process where the reward for making new Bitcoins is reduced by half. This happens about every four years to control the supply of new Bitcoins.
Hard Fork: A major change to how Bitcoin works that isn’t compatible with older versions. This means that everyone has to update their software to follow the new rules.
Hash: A code that shows info can’t be changed. A special code created from information using a formula. In Bitcoin, hashes are used to link blocks together and keep everything secure.
Hash Rate: How strong the Bitcoin network is. The speed at which a computer solves complex puzzles to help create new Bitcoin blocks. It measures how powerful the computer is in the Bitcoin network.
HODL: Holding onto bitcoins instead of selling them. A term that comes from a misspelling of “hold.” It means keeping your Bitcoin and not selling it, especially when prices drop.
Hot Wallet: A type of wallet that is connected to the internet. It’s used for easy access to your cryptocurrency and allows you to send and receive funds quickly. Examples include mobile apps and desktop software. However, because it’s online, it’s more vulnerable to hacking compared to a cold wallet.
Hybrid Wallet: A digital wallet that combines features of both hot wallets (online) and cold wallets (offline).
I
Inflation: When prices go up.
Instant Send: A feature in some cryptocurrencies that allows transactions to be confirmed almost instantly.
K
KYC (Know Your Customer): This is a process where businesses, especially financial ones, verify the identity of their customers. It helps to prevent fraud and illegal activities. For example, when you sign up for a cryptocurrency exchange, they might ask for your ID and other details to confirm who you are.
L
Layer 2: This refers to a technology built on top of an existing blockchain to make it work better. It aims to handle more transactions quickly and at lower costs. For example, the Lightning Network is a Layer 2 solution for Bitcoin that helps speed up transactions and reduce fees.
Ledger: A record book of all transactions. The blockchain is a digital ledger for Bitcoin.
Light Client: A simpler Bitcoin app. A type of Bitcoin software that doesn’t download the entire blockchain. It only gets part of the blockchain, which makes it faster and easier to use but less secure compared to full clients.
Lightning Network: This is a Layer 2 technology for Bitcoin designed to make transactions faster and cheaper. It works by creating a network of payment channels off the main Bitcoin blockchain. Transactions can be made instantly and with lower fees within these channels, and only the final balances are recorded on the blockchain.
M
Margin Trading: This is a method where you borrow money to trade more Bitcoin than you actually own. It lets you potentially earn higher profits if your trade goes well, but it also increases the risk of bigger losses if the trade doesn’t go as planned.
Market Depth: This shows how much Bitcoin is available for buying and selling at different prices on an exchange. It helps you see how busy the market is and what prices people are willing to trade at.
MEV (Miner Extractable Value): The maximum value that can be extracted from block production in excess of the standard block reward and gas fees, often through reordering, including, or censoring transactions.
Mempool: Where new Bitcoin transactions wait. The area where Bitcoin transactions wait before being added to a block. When you make a transaction, it first goes into the mempool until a miner includes it in the blockchain.
Miner: A person or computer that helps process Bitcoin transactions by solving difficult puzzles. Miners add new blocks of transactions to the Bitcoin ledger and earn new bitcoins as a reward.
Mining: Making new bitcoins. Using computers to solve tough problems to add new blocks of transactions to the Bitcoin record. This helps keep Bitcoin safe and running. Miners get new bitcoins as a reward for their work.
Mining Pool: A group of miners. A group of people who use their computers together to find new Bitcoin. They share the rewards they get for finding it.
Mixer: Mixing bitcoins for privacy. A tool that mixes up Bitcoin transactions to make it harder to see who sent and received the Bitcoin.
Mt. Gox: An old Bitcoin exchange. A former Bitcoin exchange that was once very popular but shut down after losing a lot of Bitcoin due to a hack.
Multisignature: Many keys to spend bitcoins. A security method where multiple people must sign a transaction before it is approved. This makes it safer because it needs more than one person’s approval to spend the Bitcoin.
N
NFT (Non-Fungible Token): Unique digital tokens. A special kind of digital item that shows you own something unique, like a digital picture or collectible. Unlike regular money or cryptocurrencies, each NFT is different from others and cannot be swapped one-for-one.
Node: A computer on the Bitcoin network that helps run and check transactions on the Bitcoin network. It keeps a copy of the blockchain and helps verify and share information with other nodes.
Nonce: A number used to create a block. A special number used in Bitcoin mining to help create a new block. Miners try different nonces to find one that solves a math problem, allowing them to add a new block to the blockchain.
Not Your Keys, Not Your Coins: A reminder to own your private keys to truly own your bitcoins. If you don’t have control of the special codes (private keys) needed to access your Bitcoin, then you don’t really own it. It’s like not having the key to your own safe.
O
Off Chain: Not on the blockchain. Where transactions or activities that happen outside of the main blockchain network. They don’t get recorded directly on the blockchain, which can make them faster and cheaper.
On Chain: On the blockchain. Things that happen directly on the blockchain. These transactions and data are recorded and stored in the blockchain ledger.
OPSEC (Operations Security): Stay safe online. Ways to keep your important information and activities safe from others. It means being careful about what you share and how you handle your data.
Orphan Block: A block that isn’t in the main chain. A block of transactions that was created but isn’t part of the main blockchain. This happens when two blocks are made at almost the same time, and only one gets included in the chain. The other block is left out and called an orphan block.
P
Paper Wallet:
A physical document that contains your Bitcoin private key and public address, often in the form of a QR code.
Payment Channel: A fast way to send bitcoins. A way to send Bitcoin quickly and cheaply by creating a private channel between two users. Instead of recording every transaction on the main blockchain, users can make many transactions off the main chain and only record the final result. This makes many small payments faster and cheaper.
Peer-To-Peer (P2P): No middleman. A system where people share or trade directly with each other, without needing a middleman like a bank or company. For Bitcoin, this means you can send and receive Bitcoin directly with others.
Private Key: Secret to spend bitcoins. A secret code used to access and spend your Bitcoin. It’s like a password that you need to keep safe because anyone who has it can use your Bitcoin. If you want to know how to get the Private Key of a Bitcoin’s Address, click here
Private Sale:
A fundraising event where a new cryptocurrency is sold to a select group of investors before being offered to the general public.
Proof of Activity (PoA):
A hybrid consensus algorithm that combines proof of work (PoW) and proof of stake (PoS).
Proof of Burn (PoB):
A consensus mechanism where miners show proof of burned coins (sent to an unusable address) to earn the right to mine new blocks.
Proof Of Keys: Own your bitcoins. It means moving your Bitcoin from exchanges to your own wallet to prove you actually own it.
Proof of Stake (PoS):
A consensus algorithm that selects validators based on the number of coins they hold and are willing to “stake” as collateral.
Proof Of Work (PoW): Mining bitcoins. This is a way Bitcoin miners prove they’ve done a lot of work to help the network. They solve tricky puzzles to add new blocks to the blockchain.
Proof of Space (PoSpace):
A consensus mechanism where miners allocate unused disk space to earn the right to create new blocks.
Protocol: A set of rules for Bitcoin. In Bitcoin, it’s the system that explains how transactions are processed and how the network operates.
Pseudonymous:
Bitcoin transactions are public, but users are identified by addresses, not by their real names.
Public Key: Key to get bitcoins. A code that others use to send you Bitcoin. It’s like your email address for receiving money. You can share it with anyone who wants to send you Bitcoin.
Public Key Cryptography: Secure messages. A way to keep information safe using two keys. One key is public and can be shared with everyone, while the other key is private and kept secret. This system lets you receive messages or money safely because only you can open them with your private key.
Q
QR Code: Scan to get bitcoins.
R
Recovery Seed Phrase: Backup for wallets. A list of words that help you get back into your cryptocurrency wallet if you lose access. You should keep this list safe because it’s the key to recovering your wallet and the money in it.
Rekt: Lost money. A slang word used to describe a situation where someone loses a lot of money, especially in trading or investing. It comes from the word “wrecked.”
Replay Attack:
A type of attack where a transaction is maliciously or fraudulently repeated on a blockchain network.
S
Sat (BTC Denomination): Small bitcoin. A sat, short for satoshi, is the smallest unit of Bitcoin. One Bitcoin is made up of 100 million sats.
Satoshi Nakamoto: Bitcoin’s creator. Satoshi Nakamoto is the name used by the person or group of people who created Bitcoin. Their true identity is still unknown.
Schnorr Signature: Secure signatures. A Schnorr Signature is a way of proving that a message comes from a specific person without revealing the private key. It’s a more efficient and secure method of creating digital signatures compared to older techniques.
SegWit (Segregated Witness): Bitcoin upgrade. SegWit is an upgrade to Bitcoin that helps make transactions faster and more secure by separating (or “segregating”) the digital signatures (or “witnesses”) from the main part of the transaction data. This change allows more transactions to fit into each block on the blockchain.
SHA-256: Secure Bitcoin. SHA-256 is a method used to convert data into a unique string of letters and numbers. This string is always 256 bits long, no matter how big or small the original data is. This method is used in Bitcoin to ensure data is secure and hasn’t been tampered with.
Sharding: Splitting a blockchain into smaller parts to improve scalability. Sharding is a way to break a database into smaller, more manageable pieces. In the context of blockchain, it means splitting the network into smaller parts (shards) so that not every computer needs to process every transaction. This helps the network run faster and handle more transactions at once.
Shitcoin: Bad cryptocurrency. This is a slang wird for a cryptocurrency that is considered to have little to no value or potential. People use it to describe coins they believe are poorly designed or have no real use.
Sidechain: Another blockchain connected to the main one. A sidechain is a separate blockchain that is attached to a main blockchain. It allows digital assets to move between the main blockchain and the sidechain. This helps with scaling and adding new features without changing the main blockchain.
Signature: Proof of Bitcoin. A signature in the context of cryptocurrency is a digital way to prove ownership of a transaction. When you sign a transaction with your private key, it creates a unique code that others can verify with your public key. This ensures that the transaction is authentic and was approved by the owner.
Smart Contracts: Digital contracts. Smart contracts are self-executing contracts where the terms of the agreement are directly written into code. They automatically perform actions when certain conditions are met. For example, a smart contract could automatically transfer funds when a service is completed, without needing a middleman.
Soft Fork: A small Bitcoin upgrade. A soft fork is a type of update to the blockchain’s rules that is backward-compatible. This means that even if you don’t update to the new rules, your transactions can still be understood by others. It’s like changing the rules of a game slightly, but still allowing players using old rules to participate.
Stale Blocks: Old blocks. Stale blocks are blocks that were mined but are no longer part of the main blockchain. This happens when two miners create blocks at almost the same time, and only one block can become part of the main chain. The other block is called a stale block. It’s like two people finishing a race at the same time, but only one person’s result counts.
T
Testnet: A test version of Bitcoin. Testnet is a separate version of a blockchain used for testing and experimenting without using real money. It’s like a practice field where developers can try out new ideas and features safely.
Timestamp: Information identifying when an event occurred. It is a mark that shows the exact time something happened. In blockchains, it records the time when a block was added, helping to keep track of the order of transactions.
Trezor: A popular brand of hardware wallet used to store Bitcoin securely. Trezor is a brand of hardware wallet used to store cryptocurrencies safely. It keeps your private keys offline, away from hackers and online threats, making your digital assets more secure.
U
UTXO (Unspent Transaction Output): The amount of Bitcoin left after a transaction, which can be used as input for a new transaction. It is the amount of cryptocurrency left over from a transaction that can be used in future transactions. Think of it as change you get back from a purchase.
UTXO Set: All Bitcoin. The UTXO Set is a list of all the unspent transaction outputs in a blockchain network. It keeps track of all the “change” available for future transactions.
V
Vanity Address: A Bitcoin address with a recognizable pattern or word. A vanity address is a cryptocurrency address that has a custom or personalized pattern, like “1BitcoinLover” in the address. This is done by generating addresses with specific words or characters, which can be visually appealing or meaningful to the owner.
Vesting: The process of locking and releasing cryptocurrency tokens over a set period. It is the process where someone earns rights to something, like cryptocurrency or stock, over time. For example, if you receive a reward that vests over four years, you’ll earn it bit by bit each year until you have the full amount.
W
Wallet: A Bitcoin app. A wallet in cryptocurrency is a tool or software used to store, manage, and use your digital money or assets. It keeps your private keys, which are needed to access and manage your cryptocurrencies. Wallets can be digital (software-based) or physical (hardware-based).
Watch-Only Wallet: A wallet that allows you to see and track your Bitcoin balance and transactions without having access to spend the funds.
WIF (Wallet Import Format): A format for encoding a Bitcoin private key so it can be easily imported into a wallet. WIF is a way of representing a private key for a cryptocurrency wallet in a more user-friendly format. It makes it easier to import or export private keys between different wallet programs. This format includes extra information to ensure the private key is kept safe and can be used correctly.
X
XBT: This is another symbol for Bitcoin, like BTC. It’s used to represent Bitcoin in a different format but means the same thing.
xPub (Extended Public Key): This is a special type of key in Bitcoin wallets. It helps you generate multiple Bitcoin addresses from a single key without needing to access the private key. This way, you can get new addresses for receiving Bitcoin while keeping the private key secure.
Z
Zero-Knowledge Proof: A way to prove something is true without giving details, that you know something without revealing the actual information. It’s used in cryptocurrency to confirm transactions or data without exposing any details, keeping your information private and secure.
zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge): A cryptographic method that allows one party to prove they know something without revealing the actual information. It helps keep transactions private and secure by confirming details without showing the full data.
Other
51 Percent Attack: An attack on a blockchain where a single person or group controls more than half of the network’s mining power. This control can let them manipulate transactions or double-spend coins.
Conclusion
In Bitcoin and cryptocurrencies, there are lots of new words and ideas. This guide breaks down the most important terms into simple language. By learning these basics, you’ll find it easier to understand and use Bitcoin and other digital money. This glossary helps you get to know the essential concepts so you can feel more comfortable with cryptocurrency.
I tried to mention as many as possible in this article and so far I can remember. If you think I missed something, mention that in comment. I will add that in this list.
Thank you.