Bitcoin Dictionary

Quick Answer

The Bitcoin Dictionary is a comprehensive glossary of cryptocurrency terminology. It provides clear, plain-English definitions for essential concepts like blockchain, private keys, self-custody, and the Lightning Network.

A beginner-friendly glossary to help you master the language of Bitcoin and cryptocurrency.

Address

A string of characters (like a bank account number) used to receive, send, and hold Bitcoin. It is derived from your public key.

Bitcoin (BTC)

The first decentralized digital currency, created in 2009 by Satoshi Nakamoto. It operates without a central bank or single administrator.

Blockchain

A public, decentralized ledger that records all Bitcoin transactions. It's essentially a growing list of records (blocks) linked together using cryptography.

Block Reward

The newly created Bitcoin awarded to a miner for successfully solving the cryptographic puzzle and adding a new block to the blockchain.

Cold Storage

Storing Bitcoin offline, typically on a hardware wallet or paper wallet, to protect it from hacking and online threats.

Custodial Wallet

A wallet where a third party (like an exchange) holds your private keys and controls your funds. (Remember: Not your keys, not your coins).

Decentralization

The distribution of power and control away from a central authority. In Bitcoin, no single entity controls the network.

Difficulty Adjustment

A mechanism that automatically adjusts how hard it is to mine a new block, ensuring that blocks are found roughly every 10 minutes regardless of how much computing power is on the network.

Fiat Currency

Government-issued money (like the US Dollar or Euro) that is not backed by a physical commodity like gold, but by the government that issued it.

Halving

An event that occurs roughly every four years where the block reward given to Bitcoin miners is cut in half, reducing the rate at which new Bitcoin is created.

Hash Rate

The total combined computational power being used to mine and process transactions on the Bitcoin network.

Hot Wallet

A Bitcoin wallet that is connected to the internet, making it convenient for frequent transactions but more vulnerable to hacking than cold storage.

Lightning Network

A 'Layer 2' solution built on top of Bitcoin that enables instant, nearly free transactions without having to record every single one on the main blockchain.

Mining

The process by which specialized computers compete to solve complex math problems to process transactions and secure the network, earning new Bitcoin as a reward.

Node

A computer connected to the Bitcoin network that keeps a full copy of the blockchain and helps verify and relay transactions.

Non-Custodial Wallet

A wallet where you alone hold the private keys and have full control over your funds. Also called a self-custody wallet.

Private Key

A secret, alphanumeric password that allows you to spend your Bitcoin. It must never be shared with anyone.

Public Key

A cryptographic code derived from your private key that allows you to receive Bitcoin. It is safe to share with others.

Satoshi (Sat)

The smallest unit of a Bitcoin. There are 100 million satoshis in one Bitcoin.

Satoshi Nakamoto

The pseudonymous creator (or creators) of Bitcoin who published the white paper in 2008 and released the software in 2009 before disappearing.

Seed Phrase

A list of 12 to 24 words that stores all the information needed to recover a Bitcoin wallet. If you lose your wallet, this phrase restores your funds.

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