- Address
- A short encoding of the script that must be satisfied to spend a new output. You share an address to receive. Sharing it does not share the private key.
Glossary
What is what. One or two sentences each, then the longer read.
No matches.
A
- Address reuse
- Receiving more than one payment to the same address. It still works, but it links those payments together on the public chain. Most wallets show a fresh address for each receive.
- Address types
- The formats you will see. Legacy addresses start with 1, script addresses with 3, native SegWit with bc1q and Taproot with bc1p. A Lightning invoice (lnbc…) is not an on-chain address.
B
- BIP
- Bitcoin Improvement Proposal: a numbered design document, such as BIP39 for seed words or BIP125 for opt-in RBF. A BIP is a proposal and a record. What nodes enforce is what their software runs.
- BIP39
- The standard most wallets use to write a wallet’s secret as 12 or 24 words from a fixed list of 2,048 English words. Each word is unique in its first four letters. BIP39 also defines the optional passphrase.
- Block
- A batch of transactions plus a header, chained to the previous block by the hash of that header. Miners compete to publish the next valid one.
- Block header
- The 80-byte summary at the top of every block: version, the previous block’s hash, a fingerprint of the block’s transactions (the Merkle root), a timestamp, the target in compact form, and the nonce. Proof of work is done on the header alone.
- Block height
- A block’s position in the chain, counting the genesis block as 0. The halving and the difficulty retarget are set by height, not by calendar date.
- Block limit
- A block may carry at most 4,000,000 weight units, about 1,000,000 virtual bytes. Non-witness bytes count as 4 weight units. Witness bytes count as 1.
- Block subsidy
- The new bitcoin created in a block and paid to the miner who found it, on top of fees. The subsidy is 3.125 BTC since the halving at block 840,000 on 20 April 2024.
C
- Change
- A transaction spends whole coins (UTXOs). If they hold more than the payment, the rest comes back to you as a new output, usually at a fresh address in your own wallet. Any value the outputs do not claim goes to the miner as the fee.
- Checksum
- A few extra bits worked out from the rest, so software can spot mistakes. A BIP39 phrase carries one in its last word (4 bits for 12 words, 8 for 24), and addresses carry their own. It catches errors often, not always.
- Coinbase transaction
- The first transaction in every block. It has no real inputs and pays the miner the subsidy plus the block’s fees, spendable only in a block at least 100 blocks later. The term is older than any company that shares the name.
- Confirmation
- A transaction is confirmed once a block includes it. Each block mined on top of that block is another confirmation. Six is a common convention for large payments, not a consensus rule.
- Consensus rules
- The rules every full node enforces on blocks and transactions, such as the block limit, the subsidy schedule and valid signatures. A block that breaks one is rejected, however much work went into it. Compare policy, which each node sets for itself.
- CPFP
- Child-pays-for-parent. A recipient spends an unconfirmed output and attaches a high fee, so a miner who wants that fee has reason to include the parent as well.
D
- Descriptor
- A text description of how a wallet’s keys and scripts fit together, standardised in BIP380. With multisig, the descriptor is part of the backup, not only the seed phrases.
- Difficulty
- The setting that keeps blocks at about one every 10 minutes. It is recalculated every 2,016 blocks from the time those blocks actually took, and the change is capped at a factor of four.
- Dust
- An output so small that spending it would cost more in fees than it is worth. By default Bitcoin Core does not relay transactions that create outputs under its dust limit (for example 294 sats for a typical bc1q output). Unknown tiny deposits can be used to track a wallet, so many wallets let you leave them unspent.
F
- Fee rate
- The fee of a transaction divided by its virtual size, in satoshis per virtual byte (sat/vB). Miners who want the most fees usually fill limited block space with the highest fee rates, not the highest absolute fees.
G
- Genesis block
- Block 0, mined on 3 January 2009 and written into the software. Its coinbase carries a newspaper headline from that day: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. Its 50 BTC reward cannot be spent.
H
- Halving
- Every 210,000 blocks the new-coin subsidy is cut in half. The series caps total supply at 21,000,000 (real cap: 20,999,999.9769 BTC). The next cut is at block 1,050,000. The date moves with the real block interval.
- Hardware wallet
- A small device that keeps private keys off your everyday phone and computer, signs inside itself, and shows what you are signing on its own screen. It is only as safe as its backup and your habit of reading that screen.
- Hash
- A fixed-size fingerprint of any data. Change one bit of the input and the output changes completely, and there is no practical way to work backwards. Bitcoin hashes block headers with SHA-256, twice.
- Hashrate
- An estimate of how fast miners, together, are trying block hashes. It is inferred from the difficulty and recent block times. A node does not need the figure to check a block.
L
- Lightning
- A network of payment channels that moves bitcoin off-chain and settles on-chain when a channel opens or closes. The academy games do not use Lightning, and they do not pay sats.
M
- Mempool
- A node’s own set of valid transactions that are not in a block yet. There is no single mempool for the whole network. Nodes hear transactions at different times and can run different policy.
- Mining
- Running hardware that hashes block headers in search of a valid block. The miner who finds one picks its transactions and is paid the subsidy plus fees through the coinbase transaction. Miners order transactions, but cannot change the rules nodes check.
- Multisig
- A lock that asks for m signatures out of n keys. It can split loss from theft: one missing key need not stick the coins, and one stolen key need not move them. The descriptor has to be backed up with the seeds.
N
- Node
- Software that checks transactions and blocks against the consensus rules and relays them. A full node does not have to take a miner’s or an exchange’s word for those rules.
- Nonce
- A 32-bit number in the block header that miners change between hash attempts. Modern hardware runs through all 32 bits in well under a second, so miners also change the timestamp and data in the coinbase transaction.
P
- Passphrase
- An optional extra secret added to a BIP39 seed phrase, sometimes called the 25th word. Every passphrase opens a valid wallet, so a typo gives you a different, empty wallet, not an error. Back it up on paper or metal, apart from the words.
- Policy
- The rules a node applies to unconfirmed transactions before it relays them or keeps them in its mempool: minimum fees, dust limits, replacement and more. Policy can differ between nodes. A block that breaks only policy is still valid.
- Private key
- A secret number that can authorise a spend of the coins locked to it. Anyone who copies it can move those coins. It is what a seed phrase is for restoring.
- Proof of work
- The rule that a block header’s hash must come in under a target. Miners change a nonce and hash again. The work is what makes rewriting old blocks expensive.
- PSBT
- Partially signed Bitcoin transaction (BIP174). A standard format for passing a transaction that still needs signatures between a wallet app and a signing device, or between multisig cosigners, until it can be broadcast.
- Public key
- A value derived from the private key. Other people use it to check a signature. On its own it is not enough to spend the coins.
R
- RBF
- Replace-by-fee. Before a transaction is mined, the sender can broadcast a new version that spends the same coins with a higher fee. BIP125 defined opt-in signalling. Since Bitcoin Core 28.0, nodes accept replacements by default whether or not the original signalled. So treat any unconfirmed payment as replaceable.
- Reorg
- Short for chain reorganisation. When a competing branch with more total work appears, nodes switch to it and blocks on the old tip drop out. Their transactions go back to the mempool unless the new branch has them already, or has a conflicting spend.
S
- Sats
- The smallest unit on the Bitcoin chain. One bitcoin is 100,000,000 sats. Fees are usually counted in sats, and fee rate in sats per virtual byte.
- Script
- Bitcoin’s small built-in language for spending conditions. Each output carries a locking script, and the spender supplies data, usually a signature, that satisfies it. Multisig and timelocks are written in Script.
- Secure element
- A tamper-resistant chip that some hardware wallets use to make pulling secrets out of a lost or stolen device harder. It is one layer, not a guarantee. The screen, the firmware and the backup still matter.
- Seed phrase
- A list of 12 or 24 words, usually from the BIP39 list, that encodes the entropy for a wallet’s master seed. Anyone with the words — and the passphrase, if there is one — can restore the keys.
- SegWit
- Segregated Witness (BIP141), active since block 481,824 in August 2017. It moved signature data into a separate witness that counts less towards the block limit, and introduced weight units. Native SegWit addresses start with bc1q.
- Self-custody
- Holding the keys that can spend your coins, rather than leaving that power with an exchange or other custodian. You can move the coins without their permission, and you are responsible for the backup.
- Signature
- Proof, made with a private key, that the key holder approved a transaction. Anyone can check it against the public key, and changing the signed details breaks it. Bitcoin uses ECDSA and, since Taproot, Schnorr signatures (BIP340).
- Supply cap
- The most bitcoin that will ever exist, set by the halving schedule: 21,000,000 (real cap: 20,999,999.9769 BTC). Rounding down to whole sats at each halving is why the total lands just under. The last new sats are due around 2140.
T
- Taproot
- An upgrade active since block 709,632 in November 2021 (BIPs 340–342). It added Schnorr signatures and lets unused spending conditions stay hidden. Taproot addresses start with bc1p.
- Target
- The number a block header’s hash must not exceed for the block to be valid. A lower target means fewer winning hashes, so mining is harder. It sits in the header in compact form and changes at each difficulty retarget.
- Timelock
- A rule that a transaction cannot be mined until a given time or block height. Absolute and relative timelocks are part of the protocol. A “one year” delay in a game is a sample of the idea, not a fixed constant.
- Transaction
- A signed message that spends existing outputs (its inputs) and creates new ones (its outputs). The inputs must cover the outputs. Whatever is left over is the fee.
U
- UTXO
- An unspent transaction output. Bitcoin tracks these outputs, not account balances. A transaction spends existing outputs and creates new ones.
V
- vB
- A virtual byte: a transaction’s weight in weight units, divided by four. Fee rate is usually quoted in satoshis per virtual byte.
W
- Wallet
- Software or a device that holds your keys, builds and signs transactions, and tracks your coins. The coins are not inside it: the wallet holds keys, the chain records the coins. That is why a seed phrase can restore a wallet anywhere.
- Weight unit
- How the block limit measures size since SegWit. Non-witness bytes count as 4 weight units and witness bytes as 1, up to 4,000,000 per block. Divide a transaction’s weight by four for its size in vB.
X
- xpub
- An extended public key (BIP32), included for each cosigner in a multisig descriptor. From it a wallet can work out every receive and change address in an account, but it cannot spend. Treat it as private: it reveals all those addresses.