Here are 20 common terms used in Bitcoin conversations along with their definitions to help you understand what Bitcoin is about:
- Bitcoin – A decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
- Blockchain – A distributed ledger that records all Bitcoin transactions across a network of computers.
- Mining – The process by which new Bitcoins are entered into circulation; it involves using computer power to solve complex mathematical problems that validate transactions.
- Satoshi – The smallest unit of Bitcoin, named after its pseudonymous creator, Satoshi Nakamoto. One satoshi is equal to 10^-8 Bitcoin.
- Wallet – A digital or physical medium which stores your Bitcoin and allows you to receive and send it.
- Private Key – A secure alphanumeric code known only to the owner that allows them to spend their Bitcoin.
- Public Key – The publicly disclosed part of the key pair that is used to verify that a transaction was signed using the corresponding private key.
- Address – A string of alphanumeric characters that represents a possible destination for a Bitcoin payment.
- Exchange – A platform where buyers and sellers trade Bitcoins with different currencies, including fiat currencies or other digital currencies.
- Fiat Currency – Government-issued currency that is not backed by a physical commodity, such as gold or silver, e.g., USD, EUR, JPY.
- Hash Rate – The speed at which a computer is completing an operation in the Bitcoin code, a measure of the miner’s performance.
- Block – A file containing a permanent record of a certain number of Bitcoin transactions.
- Node – Any computer that connects to the Bitcoin network and uses the protocol to validate transactions and blocks.
- Cold Storage – The practice of keeping a reserve of Bitcoin offline for security purposes, such as in a hardware wallet or paper wallet.
- Halving – An event that halves the rate at which new Bitcoins are created, occurring approximately every four years. It reduces the reward for miners.
- Confirmation – A measure of how many blocks have passed since a transaction was added to a block; more confirmations reduce the risk of a transaction being reversed.
- Transaction Fee – A fee that is paid to miners to incentivize them to include a transaction in a block.
- SegWit (Segregated Witness) – A protocol upgrade that changed the way data is stored, increasing the block size limit and allowing for the implementation of second-layer solutions like the Lightning Network.
- Lightning Network – A second-layer protocol that operates on top of the Bitcoin blockchain to enable faster transactions.
- FUD (Fear, Uncertainty, Doubt) – A strategy to influence perception by spreading negative, misleading or false information about Bitcoin.
- Altcoin – Any cryptocurrency other than Bitcoin.
- ASIC (Application-Specific Integrated Circuit) – Specialized hardware designed for Bitcoin mining
- Decentralization – The distribution of power away from a central point, a key principle in Bitcoin.
- Fork – A change to the protocol rules that results in the creation of a new blockchain branch.
- HODL – Originally a typo for “hold”, now it stands for “Hold On for Dear Life”; a philosophy of holding onto Bitcoin despite volatility.
- ICO (Initial Coin Offering) – A fundraising mechanism in which new projects sell their underlying crypto tokens in exchange for Bitcoin or other cryptocurrencies.
- Paper Wallet – A physical document containing a public address for receiving Bitcoin and a private key for spending or transferring Bitcoin stored at that address.
- Peer-to-Peer (P2P) – Direct interactions between participants in a network without the need for a centralized authority.
- Proof of Work (PoW) – The consensus algorithm that Bitcoin uses to validate transactions and add new blocks to the blockchain.
- Satoshi Nakamoto – The pseudonymous person or group of people who created Bitcoin.
- Sharding – A proposed scaling solution for blockchains, involving dividing the network into smaller pieces or “shards”.
- Smart Contract – Self-executing contracts with the terms of the agreement directly written into code, also used in other blockchain platforms like Ethereum.
- Soft Fork – A backward-compatible upgrade to the blockchain protocol that can work with older versions.
- Token – A digital asset used within a blockchain project to represent value or for other utility.
- Wallet Address – See Address; it’s the location that Bitcoin is sent to and from, represented in alphanumeric characters.
- Whale – An individual or organization that holds a significant amount of cryptocurrency.
- 51% Attack – A situation where a single entity gains control of more than half of the network’s computing power, allowing them to disrupt the network.
- Multisig (Multisignature) – A security feature that requires more than one signature to authorize a Bitcoin transaction.
- Non-fungible Token (NFT) – Although primarily associated with the Ethereum blockchain, NFTs can represent ownership of a unique item or piece of content, using blockchain technology.
- Layer 2 – Secondary frameworks or protocols built on top of an existing blockchain system. The primary goal is to solve the transaction speed and scaling issues.
Each term adds depth to the technical and cultural aspects of Bitcoin and to the broader field of cryptocurrencies.