Glossary

A short string encoding a destination for bitcoin — usually a hash of a public key with a checksum.

Receiving multiple payments at the same Bitcoin address. Cheap to do, terrible for privacy.

Splitting a Lightning payment across multiple routes simultaneously. Lets you pay more than any single channel can route.

A chip designed to do exactly one job — for Bitcoin, compute double-SHA-256 as fast and efficiently as silicon allows.

A numbered design document describing a proposed change or convention for Bitcoin.

Hierarchical Deterministic Wallets — derives an unlimited tree of keys from a single 64-byte seed.

A standard for cryptographically signing arbitrary messages with any Bitcoin address — including bech32 and Taproot, which the legacy message-signing scheme didn't support.

The standard that turns wallet entropy into 12 or 24 English words — and then stretches those words into a 64-byte seed.

The five-level derivation path standard that organizes BIP-32 trees into purpose/coin/account/change/index — legacy P2PKH addresses.

The derivation-path standard for native SegWit addresses — purpose 84', producing modern bech32 addresses like bc1q…

The derivation-path standard for single-key Taproot addresses — purpose 86', producing bc1p… bech32m addresses.

A batch of transactions plus a header, added to the chain roughly every ten minutes when a miner finds a valid hash.

The 2015–2017 conflict over whether to scale Bitcoin by raising the block-size limit or by moving load off-chain.

The Lightning Network's specification documents. Like BIPs are to Bitcoin, BOLTs are to Lightning.

A two-party balance state anchored by an on-chain transaction. Both parties can update the balance off-chain at any speed.

The first transaction in every block. It has no real inputs and pays the miner the block subsidy plus all the block's fees.

A collaborative transaction where multiple users combine inputs and outputs to break the link between sender and recipient on-chain.

The number of blocks built on top of the one containing a transaction. More confirmations → exponentially harder to reverse.

The set of rules every node enforces to agree on which transactions and blocks are valid.

A loose 1990s movement that believed strong cryptography, deployed by individuals, was the only durable check on state and corporate power.

The address in a BIP-32 key tree, written as a slash-separated string like m/84'/0'/0'/0/0. Apostrophes mark hardened steps.

A periodically-adjusted parameter that keeps Bitcoin's block time at ~10 minutes regardless of how much hashrate is online.

A proposed Bitcoin soft fork letting users move BTC to sidechains secured by miners. Long-running, controversial, not deployed.

Sending tiny amounts of bitcoin to many addresses, then watching to see which ones get spent together — linking addresses to the same owner.

The signature algorithm Bitcoin used from genesis until Taproot. Built on the secp256k1 elliptic curve.

An attacker monopolizes all of a node's peer connections, isolating it from the real network and feeding it a fake view.

Unpredictability, measured in bits. Bitcoin private keys need at least 128 bits of real entropy to be safe.

A bandwidth-efficient transaction-relay protocol. Instead of announcing every transaction to every peer, nodes reconcile sets periodically.

A federation of guardians runs a Chaumian e-cash mint backed by Bitcoin. Privacy and scalability for community-sized groups.

The price a transaction pays the miner per virtual byte (sat/vB). Higher fee rate → priority for the next block.

Money whose value comes from government decree, not from any underlying commodity or fixed supply rule.

A divergence in the chain or the rules. Either two valid blocks at the same height, or a change to the consensus rules.

How nodes propagate information — transactions, blocks, channel announcements — by telling a few peers, who tell a few more, until everyone has it.

Every 210,000 blocks (~four years), the new-bitcoin subsidy paid to miners is cut in half.

A rule change incompatible with old nodes. If both rule sets retain hashrate and users, the chain permanently splits.

A fixed-size fingerprint of arbitrary data. One-way: easy to compute, infeasible to reverse.

How many SHA-256 hashes per second a miner — or the whole network — can compute. The metric for raw mining power.

A script condition that requires the spender to reveal a preimage whose hash matches a value committed on-chain. The cryptographic half of an HTLC.

A payment that's redeemable by revealing a preimage before a deadline. The primitive Lightning uses to route multi-hop payments trustlessly.

An increase in the money supply, or in the general price level — depending on whose definition you accept.

A reference to a previous transaction's UTXO, plus proof — a signature and/or script — that the spender is allowed to consume it.

A payment network layered on Bitcoin, using payment channels for near-instant, low-fee transfers settled on-chain when needed.

Heuristic: the longer a non-perishable thing has survived, the longer it's expected to survive. Time is the strongest filter.

A federated Bitcoin sidechain operated by ~15 exchanges and businesses. Faster blocks, confidential transactions, asset issuance.

On Lightning, the available balance on a particular side of a channel that determines whether you can send or receive a given amount.

A simple bech32-encoded URL that wallets follow to fetch a Lightning invoice — turning "give me money" into an email-style address.

The script attached to a transaction output that defines what data a future spender must provide to unlock the coins.

An optimization where a script's branches are committed via a merkle tree. Only the branch actually executed is revealed on-chain.

One of the three classical functions of money: the thing you trade for goods and services instead of bartering directly.

The set of valid transactions a node has seen but not yet included in a block.

A single 32-byte hash committing to every transaction in a block. Lets nodes prove a tx is in a block without downloading it.

Profit a miner can extract beyond block subsidy and fees by reordering, inserting, or censoring transactions in the blocks they produce.

The process of running specialized hardware to produce valid Bitcoin blocks and earn the block reward.

The most liquid form of money in an economy — for fiat, central-bank reserves plus cash; for Bitcoin, all coins ever mined.

A spending condition requiring signatures from m of n possible keys. The canonical way to share custody without a custodian.

A protocol for combining Schnorr signatures from multiple signers into one signature, indistinguishable from a single-signer signature.

A computer running Bitcoin software that independently validates every block and transaction against the consensus rules.

The 32-bit field in a block header that miners increment while searching for a valid hash.

A single instruction in Bitcoin Script — a one-byte value that tells the interpreter to push data, hash, compare, verify a signature, etc.

A valid block that loses a race — another miner found a block at the same height and the network built on the other one.

A chunk of bitcoin locked to a spending condition (usually an address). Once created, lives in the UTXO set until consumed by a future input.

A compact text format describing how to derive Bitcoin addresses from one or more keys — wallet-portable and explicit about its assumptions.

The original Bitcoin address format. Addresses start with '1'. Locks bitcoin to a hash of a public key.

Native SegWit single-sig address. Starts with 'bc1q'. Cheaper, more reliable, and the recommended default since 2017.

A key-stretching function that hashes a password many times to make brute-forcing expensive. BIP-39 uses it with 2048 rounds of HMAC-SHA512.

A 256-bit secret number. Whoever knows it can spend the bitcoin at the corresponding address.

The rule that says a block is only valid if its hash is below a target. Costly to produce, trivial to verify.

A standardized transaction format that lets multiple parties — or an air-gapped device — sign in stages, without exchanging private keys.

A point on the secp256k1 curve, derived from a private key. Used to verify signatures and derive addresses.

The process of finding a path of payment channels through the Lightning network so a payment can hop from sender to recipient.

A signature scheme — patent-free since 2008, in Bitcoin since 2021 (Taproot) — with cleaner math, smaller signatures, and trivially-combinable keys.

Bitcoin's stack-based, non-Turing-complete programming language for expressing spending conditions on outputs.

12 or 24 English words encoding the entropy that derives every key in a wallet. Lose it, lose the coins.

Segregated Witness — a 2017 soft fork that moves signature data outside the legacy transaction body, fixing malleability and effectively increasing block capacity.

The profit a money issuer captures from the gap between the face value of money and the cost of producing it.

The cryptographic hash function Bitcoin uses everywhere — block hashing, address derivation, signatures, all of it.

Cryptographic proof that the owner of a private key authorized a specific message — without revealing the key.

A consensus rule change that tightens what is valid. Old nodes still accept new blocks; they just don't enforce the new rule.

Adjusting the capacity of an open Lightning channel by adding or removing on-chain funds, without closing and reopening it.

Verifying transactions without running a full node — by downloading only block headers and merkle proofs.

An off-chain protocol that lets users transfer ownership of a UTXO by passing the private key — coordinated by a server that can't unilaterally steal.

Existing supply divided by annual new supply. A scarcity ratio. Higher means a smaller fraction of the stock is added each year.

One of the three classical functions of money: holding purchasing power across time.

The protocol miners use to talk to pools — and, in V2, to construct their own block templates instead of accepting the pool's.

A trustless atomic swap between on-chain bitcoin and an off-chain Lightning payment, secured by HTLCs on both sides.

Bitcoin's 2021 soft-fork upgrade. Schnorr signatures, a unified address format for single-sig and complex scripts, and significantly better privacy for cooperative spends.

The scripting language used inside Taproot script-path spends. A cleaned-up Script with Schnorr signature support and some opcodes restored.

How much you prefer present consumption to future consumption. Low time preference is the willingness to defer gratification.

A script condition that forbids spending until a specific block height or timestamp. Comes in absolute (CLTV) and relative (CSV) flavors.

Anonymity network that routes traffic through multiple encrypted relays. Bitcoin nodes use it to hide their IP addresses from peers.

Outsourcing route construction to a well-connected node. The sender just picks a trampoline node; the trampoline figures out the rest.

A signed message that consumes existing UTXOs as inputs and creates new UTXOs as outputs. The atomic unit of value transfer in Bitcoin.

One of the three classical functions of money: the unit prices and contracts are denominated in.

The data a spender provides when consuming a UTXO — historically scriptSig, now mostly the witness — that has to satisfy the output's locking script.

An unspent transaction output — a discrete chunk of bitcoin sitting at an address, waiting to be spent in full.

Software (or hardware) that manages your private keys, derives addresses, and signs transactions.

A wallet that can see balances and construct transactions but cannot sign them. The signing keys live elsewhere — usually on hardware.

A third-party service that watches for a Lightning channel partner cheating by publishing an old state, and punishes them on your behalf.

Signature data moved outside the transaction body by SegWit. Fixes transaction malleability and gets a 75 % size discount when computing fees.

An extended private key: a private key plus its BIP-32 chain code. Holding it lets you derive and spend every key in the subtree.

An extended public key: a public key plus its BIP-32 chain code, Base58-serialized, that can generate every receive address in an account.