Bitcoin Glossary
 

Simple explanations of common Bitcoin terms

Address

A bitcoin address is a string of letters and numbers. Your wallet can generate an infinite amount of them and every one is unique

Bip

'Bitcoin Improvement Proposal' and is how changes to the protocol are submitted, approved and labelled

bitcoin (small 'b')

When expressed using a small 'b', the word bitcoin refers to the unit of currency

Block

A set of transactions grouped together and mined successfully by a miner

Blockchain

A chain of successful blocks that are built on top of one-another. Each one linked to its predecessor

Cold Storage

A method of storing bitcoin private keys in an environment that is not connected to the internet

Confirmation

When a transaction is mined part of a block is one confirmation. Every subsequent block is an additional confirmation

Consensus Rules

The set of rules that anyone wanting to participate in the network must follow

Difficulty

An adjustable value that dictates how much computational power is required for miners to mine new blocks.

Fees

The value paid to a miner to include a transaction into a block

Hardware Wallet

A dedicated secure device for storing bitcoin private keys in an offline environment

Hash

The term given to the action of converting data. Hashing is used by miners to process transactions

Hash Rate

The total number of hashes performed by a miner or mining pool expressed in hashes/second

KYC

'Know Your Customer' is a regulation that requires businesses selling bitcoin to collect identify info on the purchaser

Lightning Network

An additional layer built on top of Bitcoin that allows users to send/receive small payments with very low fees

Mempool

The group of transactions waiting to be included into a block by a miner

Miner

A network participant who contributes computational power to process transactions in a bid to earn fees and the block reward

Multisig

Multi-Signature is a wallet setup that can require more than one private key to authorise a transaction 

Node

A computer connected to the Bitcoin network running software required to broadcast, relay and verify transactions

Paper Wallet

A piece of paper containing the data necessary to store bitcoin offline. This should be kept safe

Private Key

A unique string of letters and numbers required to store and transact bitcoin. You should not share this with anyone

Proof of Work

The method miners strive to achieve to secure the network and include transactions into blocks

Public Key

Derived from the private key, a public key is used when checking signatures in a transactions 

Reward

The block reward is given to the first miner to achieve sufficient proof of work. The reward = Block subsidy + all transaction fees for that block. Current block subsidy is 6.25 BTC.

Satoshi or 'sat'

Named after Bitcoin's anonymous creator and sometimes abbreviated to 'sat', a Satoshi is the smallest unit of a bitcoin. 1 bitcoin = 100 million satoshis

Satoshi Nakamoto

The pseudonym that Bitcoin's creator (or creators) went by before he disappeared from the internet

SegWit

Segregated Witness is an improvement made in 2017 to increase the network's scalability

Subsidy

The subsidy is paid to the miner that achieves sufficient proof of work for each block. The current subsidy is 6.25 BTC. This halves every 210,000 blocks (roughly 4 years)

Testnet

A separate network with an almost identical design to Bitcoin for developers to test out improvements

Tor

The Onion Router is an alternative network used by users that want to preserve their online privacy

Txid

Transaction Identifier is a unique string of numbers and letters used to label a transaction

UTXO

An Unspent Transaction Output is the piece of bitcoin spent to a new address which can be used as an input in future transactions