Bitcoin & Crypto Glossary — Key Terms Explained

Bitcoin (BTC)

Bitcoin is the first decentralized digital currency, created in 2009. It runs on a public blockchain with no central bank, and its supply is capped at 21 million coins.

Blockchain

A blockchain is a public, append-only ledger maintained by thousands of computers worldwide. Each block of transactions is cryptographically linked to the previous one, making the history practically impossible to alter.

Satoshi

A satoshi is the smallest unit of Bitcoin: 0.00000001 BTC. There are 100 million satoshis in one bitcoin, named after Bitcoin’s pseudonymous creator, Satoshi Nakamoto.

Halving

The Bitcoin halving is a built-in event roughly every four years that cuts the reward miners earn for new blocks in half, slowing the creation of new bitcoin. It has historically preceded major bull markets.

Private key

A private key is the secret number that controls your bitcoin. Anyone who holds it can spend the coins, so it must never be shared — the principle behind "not your keys, not your coins".

Seed phrase

A seed phrase (recovery phrase) is a list of 12 to 24 words that backs up your wallet. Written down and kept offline, it can restore all your bitcoin if your device is lost or broken.

Cold wallet

A cold wallet stores your private keys offline, such as a hardware wallet like Ledger or Trezor. It is far safer from hackers than keeping coins on an exchange or phone app.

Hot wallet

A hot wallet is connected to the internet — an app or exchange wallet. It is convenient for spending but more exposed to hacking than cold storage.

KYC

KYC (Know Your Customer) is the identity verification that regulated exchanges require — usually a government ID and a selfie — before you can trade or withdraw funds.

Dollar-cost averaging (DCA)

Dollar-cost averaging means buying a fixed amount of bitcoin on a regular schedule regardless of price. It smooths out volatility instead of trying to time the market.

Network fee

A network fee is the small amount paid to miners to process your Bitcoin transaction. Fees rise when the network is congested and fall when it is quiet.

Mining

Mining is the process where specialized computers compete to add new blocks to the blockchain, securing the network and earning newly issued bitcoin plus transaction fees.

Hash rate

Hash rate measures the total computing power securing the Bitcoin network. A higher hash rate means a more secure network that is harder and more expensive to attack.

Peer-to-peer (P2P)

Peer-to-peer trading lets people buy and sell bitcoin directly with each other, often used in markets where bank transfers to exchanges are restricted.

Stablecoin

A stablecoin is a crypto token pegged to a stable asset such as the US dollar (for example USDT or USDC), used to hold value or trade without leaving the crypto market.

Limit order

A limit order executes only at a price you set, giving you control but no guarantee it fills. A market order, by contrast, buys or sells instantly at the current price.

Leverage

Leverage lets you trade with borrowed funds to amplify gains — and losses. High leverage can liquidate (wipe out) your position on a small price move, so it is risky for beginners.

All-time high (ATH)

ATH means all-time high — the highest price an asset has ever reached.

FOMO & FUD

FOMO is "fear of missing out", which drives buying near market tops; FUD is "fear, uncertainty and doubt", which drives panic selling. Both lead to emotional, costly decisions.

Self-custody

Self-custody means holding your own bitcoin in a wallet only you control, rather than leaving it on an exchange. It removes counterparty risk but makes you fully responsible for security.

Lightning Network

The Lightning Network is a layer built on top of Bitcoin for instant, near-free payments. It settles most activity off-chain through payment channels, making Bitcoin practical for small everyday transactions.

Public key

A public key is the shareable address others use to send you bitcoin or verify your signatures. It is mathematically linked to your secret private key, but the private key cannot be derived from it.

Node

A Bitcoin node is a computer that downloads and verifies the entire blockchain, independently enforcing the network rules. Running your own node lets you check transactions yourself instead of trusting a third party.

Proof of Work

Proof of Work is the mechanism that secures Bitcoin: miners spend real electricity solving a hard puzzle to add each block, making it expensive to attack but cheap for anyone to verify.

UTXO

A UTXO (Unspent Transaction Output) is a discrete chunk of bitcoin you have received and not yet spent. Your wallet balance is simply the sum of all your UTXOs, which are consumed and recreated by each transaction.

Inflation

Inflation is a general rise in prices over time, which means money loses purchasing power. It is driven mainly by an expanding money supply, and is a key reason people hold scarce assets like Bitcoin.

Fiat currency

Fiat currency is government-issued money not backed by a physical commodity, such as the US dollar or yen. Its value rests on trust and legal decree, and central banks can create more of it at will.

Encryption

Encryption scrambles data so only someone with the right key can read it. It secures everything from HTTPS websites and messaging apps to the cryptography that makes Bitcoin ownership possible.

Two-factor authentication (2FA)

Two-factor authentication adds a second step beyond your password, such as a code from an app or hardware key. App- or hardware-based 2FA is far safer than SMS for protecting crypto accounts.

Tor

Tor is free software that anonymizes your internet connection by routing it through several relays, hiding your location and helping bypass censorship. It is widely used by privacy-conscious people and activists.

Monero (XMR)

Monero is the leading privacy cryptocurrency, where the sender, receiver and amount of every transaction are hidden by default. It works like digital cash, unlike Bitcoin’s public, traceable ledger.

DeFi

DeFi (decentralized finance) recreates financial services like trading, lending and earning yield using open smart contracts instead of banks. It is powerful but carries real risks: hacks, scams and complexity.

Smart contract

A smart contract is self-executing code on a blockchain that runs exactly as written, with no one able to stop or alter it. It powers DeFi, tokens and NFTs, but a bug in it is permanent and public.

NFT

An NFT (non-fungible token) is a unique, verifiable record of ownership on a blockchain. Unlike a bitcoin, each is one-of-a-kind, used for art, tickets or in-game items, though most NFTs lost their value after the 2021 mania.

Liquidation

Liquidation is when a leveraged trading position is automatically closed because the price moved against it past a threshold, wiping out the trader’s margin. Higher leverage means a smaller move triggers it.

Rug pull

A rug pull is a crypto scam where a project’s creators hype it, take investors’ money, then drain the liquidity or dump their tokens and vanish, leaving holders with worthless coins.

Phishing

Phishing tricks you into revealing passwords, codes or your seed phrase through fake emails and websites that impersonate a trusted service. It is the most common way crypto users get hacked.

Cold storage

Cold storage keeps your private keys completely offline — on a hardware wallet or paper — so they cannot be reached by online hackers. It is the safest way to hold large amounts of bitcoin long-term.

Bull & bear market

A bull market is a sustained period of rising prices and optimism; a bear market is a prolonged decline marked by pessimism. Crypto is famous for dramatic swings between the two.