BitcoinlumbusPlay. Learn. Understand Bitcoin.
92 central terms about Bitcoin and money, explained briefly, precisely, and with sources.
All 92 terms are shown.
The consensus rules limit scheduled issuance to just under 21 million bitcoin.
Repeated subsidy halvings make cumulative issuance approach the limit. Validating nodes enforce the rule, and one miner cannot change it alone.
Also: maximum bitcoin supply · 21 million cap
A 51% attack occurs when an attacker temporarily controls a dominant share of mining hash power.
The attacker could reorganize their own payments or censor transactions, but cannot create arbitrary bitcoin, forge signatures, or override rules enforced by nodes.
Also: majority attack
An encoded payment destination for receiving bitcoin; not an account or the public key itself.
It is derived from cryptographic keys or scripts, but it is not an account and is not identical to a public key.
Saved information used to restore access after loss or failure.
Depending on the wallet, it may be a recovery phrase, a descriptor backup, or another method. It should be protected, readable, and tested.
Inclusion of a transaction in a block; later blocks increase its depth.
Each later block increases confirmation depth. More confirmations make reorganization harder, although they do not make every possible situation absolutely irreversible.
Bitcoin names the network and protocol; bitcoin names a unit.
The system enables digital value transfer without central bookkeeping and limits issuance through consensus rules.
Abbreviation: BTC
The reference implementation of Bitcoin node software.
It can operate as a full node, verify blocks and transactions, and optionally provide wallet functions. It is not the only possible implementation.
A documented proposal for information, standardization, or development in Bitcoin.
Having a BIP number does not mean that a proposal has been approved, implemented, or activated on the network.
Abbreviation: BIP
A data structure containing transactions and a reference to the previous block.
Miners propose blocks with valid proof of work. Full nodes accept them only when every consensus rule is satisfied.
A miner's revenue from the block subsidy and transaction fees.
The subsidy creates new bitcoin under the issuance schedule; fees come from the included transactions.
The chronologically linked sequence of valid Bitcoin blocks.
It makes confirmed transaction history publicly verifiable. The blockchain is one component of Bitcoin, not Bitcoin as a whole.
A block position counted from the genesis block.
The genesis block has height 0. During temporary chain forks, more than one block can briefly have the same height.
An output that returns surplus input value to the spender.
When a UTXO is not paid entirely to the recipient, the wallet creates a new change output controlled by the sender.
A wallet feature for manually selecting which UTXOs to spend.
It allows more deliberate control over fees, privacy, and the merging of different payment histories.
A wallet setup in which private keys are kept offline.
A hardware wallet can be part of this setup, but it is not automatically always offline and is not identical to cold storage by itself.
With CPFP, a new transaction spends an unconfirmed output and pays a higher fee.
Miners may evaluate the parent and child together when their combined fee rate is attractive enough.
Abbreviation: CPFP
DCA means buying a fixed monetary amount at regular intervals regardless of the current price.
It spreads entry points over time, but does not prevent losses or guarantee a favorable average price.
Abbreviation: DCA
Also: dollar-cost averaging
The distribution of functions and control among independent participants.
In Bitcoin, many independently operated nodes verify rules and data; the actual degree of distribution varies by area.
An attempt to spend the same bitcoin output in conflicting transactions.
Bitcoin orders confirmed transactions through blocks and proof of work and rejects inputs spent twice within a valid chain.
Money not fixedly redeemable for a commodity and accepted within a monetary system.
It is typically issued and used through central and commercial banks within a legal and institutional monetary system.
Emotional fear of missing a perceived opportunity.
Time pressure, rising prices, and group dynamics are not evidence of safety or a reliable opportunity.
Abbreviation: FOMO
The spread or effect of fear, uncertainty, and doubt.
The label alone does not show whether a warning is true or false; verifiable facts and sources are what matter.
Abbreviation: FUD
A node that independently verifies blocks and transactions against consensus rules.
It does not need to mine and can assess blockchain validity without trusting somebody else’s server.
The fee paid per virtual byte of a transaction.
It helps compare the fee with the block space used. Total fee is the fee rate multiplied by virtual transaction size.
Abbreviation: sat/vB · Sats/vByte
The first block in the Bitcoin block chain.
It has height 0 and is the starting point from which full nodes verify the later block sequence.
The scheduled halving of the block subsidy every 210,000 blocks.
It does not halve existing bitcoin or transaction fees automatically. It is triggered by block height, not by an exact calendar date.
A specialized device that isolates keys and signs transactions.
Its own display can independently show the recipient and amount. Security also depends on backup, operation, and the supply chain.
A fixed-length output produced by a hash function.
A tiny change usually produces a completely different hash. Bitcoin uses hashes for blocks, transactions, and proof of work.
The number of hash calculations performed per unit of time.
A higher total hash rate increases the work needed to obtain a comparable mining share or reorganize the chain.
A cultural term for holding bitcoin long term despite short-term price swings.
It describes an attitude or strategy, but does not guarantee profit. Personal liquidity needs and risks still matter.
Abbreviation: HODL
A wallet used in an environment that is regularly online.
It makes payments convenient, but increases the attack surface compared with keys kept strictly offline.
The part of a transaction that references a UTXO to be spent.
It includes the data that satisfy the spending conditions. A used UTXO is spent in full.
Operational agreement on the rules and state accepted by a system.
Each full node independently decides which data it accepts. Consensus is not a central vote or a simple majority opinion.
KYC refers to procedures used by a provider to verify a customer’s identity.
These checks are often used to meet legal or regulatory requirements, which depend on the provider and jurisdiction.
Abbreviation: KYC
Also: know your customer
The base layer of Bitcoin protocol and block chain.
Changes at this layer affect fundamental validation or direct use of the Bitcoin network.
Abbreviation: L1
An additional protocol layer built on Bitcoin.
These systems use Bitcoin as a settlement or security layer but have their own rules and risks. The Lightning Network is one example.
Abbreviation: L2
A layer-2 network of payment channels for fast bitcoin payments.
Payments can be routed through several nodes. Availability, fees, and liquidity affect whether a route works.
Abbreviation: LN
A payment channel between Lightning Network participants.
The current state determines how the balance is divided. Opening and closing normally require on-chain transactions.
The ease of trading an asset quickly with limited price impact.
In Lightning it also describes the directional channel capacity available for outgoing or incoming payments.
A node local pool of valid unconfirmed transactions.
It is local: different nodes may hold different transactions depending on timing, fee policies, and configuration.
A participant that computes proof of work and publishes valid block candidates.
The found block is broadcast to the network. Full nodes accept it only if it satisfies every consensus rule.
The competitive process of finding blocks using proof of work.
It orders transactions, makes later changes costly, and rewards successful miners with subsidy and fees.
A spending condition requiring multiple signatures under a defined rule.
In a 2-of-3 setup, two of three keys are sufficient. It can improve resilience but requires careful backup and documentation.
Abbreviation: multisig
A software instance connected to Bitcoin that performs particular functions.
A node is not automatically a miner. A full node also verifies the complete consensus rules and the blockchain itself.
A process without standard identity verification by a central provider; legal duties depend on context.
It does not automatically mean anonymity or exemption from law. Obligations depend on the country, provider, and specific transaction.
Activity not individually recorded on-chain, though it may rely on on-chain enforcement.
Off-chain systems can use Bitcoin as a settlement layer but have their own mechanisms and trust assumptions.
Activity processed directly on the Bitcoin block chain.
These transactions use block space and pay a network fee. Lightning channel opens and closes are common examples.
The part of a transaction that creates a new spendable amount under conditions.
Until a later input spends it, it is a UTXO. A transaction can create several outputs, for example for the recipient and change.
An additional string that, with the mnemonic, derives a different seed.
Every different passphrase derives a different wallet. It is not merely a device password and must be known exactly for recovery.
A network model in which participants communicate directly.
Bitcoin nodes connect to several peers, relay transactions and blocks, and verify received data under their own rules.
Abbreviation: P2P
A deception designed to obtain sensitive information or keys.
Common warning signs include artificial urgency, unexpected links, and requests for secret data or remote access.
A secret cryptographic value used to create valid signatures.
Whoever controls it can spend the corresponding UTXOs. A private key, recovery phrase, public key, and address are different things.
Verifiable computational work that makes block creation costly.
Full nodes can verify the proof quickly. Among valid chains, the chain with the most accumulated work is followed.
Abbreviation: PoW
A set of rules and message formats that allow systems to interoperate.
Implementations may differ, but must use compatible rules and formats to interoperate.
A cryptographic value derived from a private key and used to verify signatures.
It can be involved in creating addresses or spending conditions, but it is not identical to an address.
RBF allows an unconfirmed replaceable transaction to be replaced by a conflicting version with a higher fee.
The replacement must satisfy the applicable rules. RBF does not alter an already confirmed transaction.
Abbreviation: RBF
Also: replace-by-fee
The smallest standard bitcoin unit; 100 million satoshis equal one bitcoin.
One bitcoin consists of 100 million satoshis.
Abbreviation: sat
The periodic change to the mining target to stabilize average block time.
Its purpose is to keep average block production near the intended long-term pace despite changes in hash rate.
A sequence of words used to restore a deterministic wallet; not the same as one private key.
It is not the same as one private key. Anyone who knows the phrase and any passphrase can recover the corresponding wallet.
Direct control of private keys and spending authorization.
The user assumes responsibility for backup, transaction checking, and protection against loss or theft.
Mathematical proof that a transaction was authorized by the corresponding private key.
It satisfies an input’s spending conditions. It does not automatically prove a person’s identity or the truth of other claims.
Manipulating people to bypass security controls.
In Bitcoin it often targets recovery phrases, remote access, accounts, or irreversible payments.
Wallet software installed on a computer or mobile device.
When active on a connected device, it is usually a hot wallet. A watch-only setup may contain no private keys.
A signed data structure that spends existing UTXOs and creates new outputs.
It is signed, broadcast to the network, and can then be included by a miner in a block.
The difference between transaction input and output values, available to the miner.
It rewards miners for inclusion. Wallets usually estimate it from transaction size, target time, and mempool conditions.
An unspent transaction output that can be used as an input in a later transaction.
Bitcoin does not use a classic account model. A wallet calculates available amounts from the UTXOs it can spend.
Abbreviation: UTXO
Transforming readable data into a form accessible with the appropriate key.
It can protect wallet files or backups, but does not replace a sound backup or protect a recovery phrase that is disclosed.
The magnitude and frequency of price changes.
High volatility means larger fluctuations and risks, but by itself predicts neither future direction nor long-term value.
Software or a device that manages keys and creates or signs transactions.
The bitcoin are not stored inside the wallet. The network represents available amounts as UTXOs spendable with the appropriate keys.
A wallet without private keys that can monitor funds but cannot spend them.
It can display balances and prepare unsigned transactions that are later signed on another device.
Authentication requiring two different types of proof.
It can better protect exchange or email accounts, but does not secure a recovery phrase or replace self-custody. SMS methods can also be exposed to SIM swapping.
Abbreviation: 2FA
A transfer of bitcoin to an address supplied by a recipient or service provider.
A Bitcoin address supplied by a provider for deposits to a customer account.
An order intended to execute promptly at available market prices.
It prioritises execution but does not guarantee a particular price; the final execution price may differ from the displayed quote.
An order that may execute only at a specified limit price or better.
It limits the price but does not guarantee execution.
The price actually used for a purchase or sale.
It may differ from the reference or displayed price because of spread, liquidity, order type, or market movement.
A money balance recorded inside a service provider after a sale.
It is not yet money received in the user’s bank account and remains exposed to provider risk until withdrawn.
A transfer of an internal fiat balance from a provider to a bank or payment account.
A broad economic tradition emphasizing aggregate demand, uncertainty, and possible stabilizing roles for monetary and fiscal policy.
It is not one uniform position or merely the opposite of the Austrian school.
An approach emphasizing the financing capacity of monetarily sovereign states and real constraints on public spending.
It is not equivalent to unlimited, consequence-free money creation.
Historical economic policies emphasizing state power, trade surpluses, and monetary reserves.
It should not be treated as a uniform modern school.
An international system of fixed gold parities with defined currency convertibility into gold.
A system in which reserves may be held in gold-convertible key currencies rather than only gold.
The postwar system of adjustable fixed exchange rates centered on the US dollar and limited official gold convertibility.
A time value in the block header that must be plausible but does not prove an exact trusted event time.
Distinguish it from confirmation time and exact transaction time.
A consensus reference derived from previous block timestamps for certain time conditions.
It is not a global real-time clock.
Point-in-time evidence of certain controlled assets.
An organization’s ability to meet its total obligations with assets and sustainable financing.
Reuse or re-pledging of entrusted assets by a custodian or borrower.
It can create additional counterparty and repayment risk.
Increasing a market position through borrowed capital or derivatives.
It magnifies gains and losses.
Automatic or contractual closing of a leveraged position when collateral is insufficient.
Do not equate it with a general loss in bitcoin’s value.
Protection of IP address, connection data, wallet-server queries, and origin clues.