Bitcoin glossary.
The terms, connected.

Bitcoin (BTC) #

A network for transferring value without a central operator. BTC is the ticker for its currency.

For exampleAn app can display a BTC price without being a Bitcoin wallet.

Keep in mindThe network and an exchange selling bitcoin are different things.

Portfolio tracker #

A record of holdings and their displayed value. A manual tracker uses amounts you enter rather than controlling the assets.

For exampleRecording 0.01 BTC does not transfer 0.01 BTC into the tracker.

Keep in mindA displayed balance is not proof that an app holds funds or can recover them.

Go deeper: Why Bitcoin prices differ between apps

Satoshi (sat) #

One hundred-millionth of a bitcoin: 100,000,000 sats equal 1 BTC.

For example25,000 sats = 0.00025 BTC.

Keep in mindA sat is a unit of bitcoin, not a separate coin.

Bitcoin address #

A receiving destination that encodes information used to construct a transaction output.

For exampleA wallet can give you a new address for another payment.

Keep in mindAn address is not a password. Sharing it can still reveal financial activity.

Cold wallet / hardware wallet #

Cold storage keeps spending keys offline. A hardware wallet is a dedicated signing device designed to isolate those keys.

For exampleThe companion app prepares a transaction; the hardware device signs it.

Keep in mindA hardware device still needs a safe backup. A connected service with the same branding may use a different custody model.

Custodial wallet #

A service that holds the spending keys and maintains an account balance for you.

For exampleYou ask the service to make a withdrawal rather than signing it yourself.

Keep in mindKnowing an account password does not mean you control the Bitcoin keys.

Hot wallet #

A wallet whose spending keys are available in an internet-connected environment.

For exampleA phone wallet may sign payments directly on the phone.

Keep in mindHot describes key exposure, not whether an app looks simple or professional.

Passphrase (BIP 39) #

An optional extra input used with a BIP 39 recovery phrase to derive a different wallet.

For exampleThe same words with a different passphrase lead to different keys.

Keep in mindIt is not the app’s login password or PIN. A typo can produce a different, empty wallet.

Private key #

Secret information used to produce signatures authorizing spending under the relevant transaction conditions.

For exampleA wallet signs with a key; a portfolio tracker only needs your recorded holdings.

Keep in mindAn app that only tracks a balance should not need your private key.

Seed phrase (recovery phrase) #

A sequence of words used by many wallets to back up the material from which keys are derived.

For exampleRestoring a compatible wallet may require both the phrase and any extra passphrase you set.

Keep in mindIt is not a customer-support verification code. Keep it secret.

Self-custody #

An arrangement in which you control the keys needed to authorize spending, rather than relying on a service to hold them for you.

For exampleKeeping your own recovery backup makes you responsible for preserving access.

Keep in mindSelf-custody does not remove loss, theft, or backup risks.

Go deeper: Self-custody and wallet recovery

Wallet #

Software or hardware that manages keys and helps construct or sign Bitcoin transactions.

For exampleA hardware wallet can sign a payment without exposing its private keys to your computer.

Keep in mindThe bitcoin is recorded on the blockchain; it is not a file inside the device.

Watch-only wallet #

A wallet that observes transactions using public information without holding the private keys needed to spend.

For exampleA watch-only view can show an incoming payment but cannot sign a withdrawal.

Keep in mindRead-only access can still reveal holdings and transaction history.

Change output #

An output that sends the remainder of a payment back under your control.

For exampleSpend a 100,000-sat output: 30,000 to the recipient, 69,000 back to you, and 1,000 as a fee.

Keep in mindChange is part of the transaction, not a refund from a merchant.

Confirmation #

Inclusion of a transaction in a block on the accepted chain; each subsequent block adds another confirmation.

For exampleA payment in the latest block has one confirmation.

Keep in mindMore confirmations increase confidence; they are not an absolute guarantee against every possible reorganization.

Fee rate (sat/vB) #

The transaction fee per virtual byte, a size measure that accounts for Bitcoin's transaction weight rules.

For exampleAn illustrative 140 vB transaction at 5 sat/vB pays 700 sats.

Keep in mindFee rate is not a percentage of the amount sent, and a quoted rate is not a confirmation deadline.

Go deeper: How Bitcoin transaction fees work

Mempool #

A node's collection of accepted transactions that have not yet been confirmed in a block.

For exampleA payment can appear as pending before a miner includes it.

Keep in mindThere is no single universal queue with a guaranteed place in line.

Transaction #

A message that spends existing outputs and creates new ones, subject to Bitcoin’s spending rules.

For exampleOne payment can send sats to a recipient and return the remainder as change.

Keep in mindBroadcasting a transaction is not the same as having it confirmed.

UTXO #

An unspent transaction output: an amount available to be used as an input to a later transaction.

For exampleSpending a 0.02 BTC output can create a payment output and a change output, with the difference paying the fee.

Keep in mindYour displayed balance can be the sum of many separate outputs.

Block #

A batch of transactions with a header linking it to the preceding block and committing to its contents.

For exampleA new valid block extends the chain that nodes verify.

Keep in mindBlocks do not arrive exactly every ten minutes.

Blockchain #

The linked history of blocks that Bitcoin nodes validate.

For exampleYour wallet reads this history to find the outputs it can spend.

Keep in mindThe chain records transactions; it is not a directory of verified people.

Full node #

Software that independently checks blocks and transactions against Bitcoin's rules.

For exampleA full node can reject a block that breaks the rules even if a miner produced it.

Keep in mindRunning a node and mining are different activities.

Halving #

The scheduled reduction of Bitcoin's block subsidy by half every 210,000 blocks.

For exampleA halving changes new issuance; it does not cut your wallet balance in half.

Keep in mindThe subsidy and transaction fees are different parts of a miner's block revenue.

Hash rate #

The rate of proof-of-work hash attempts. Network-wide figures are estimates rather than a direct meter reading.

For exampleTwo charts may use different averaging windows and show different estimates.

Keep in mindHigher hash rate is not a forecast of tomorrow's price.

Mining #

The process of assembling candidate blocks and performing proof-of-work to find a valid block hash.

For exampleA mining operation makes many hash attempts before finding a qualifying result.

Keep in mindMining does not let someone ignore the rules checked by nodes.

Mining difficulty #

A measure of how demanding the proof-of-work target is. Bitcoin adjusts it every 2,016 blocks.

For exampleDifficulty can rise after blocks have been arriving faster over the adjustment period.

Keep in mindIt does not reset after every individual block.

Lightning invoice #

A payment request. A common format, BOLT 11, encodes payment details and an expiry time.

For exampleThe recipient creates an invoice and the sender pays it using a compatible wallet.

Keep in mindAn invoice is not an on-chain Bitcoin address. Do not choose a network just because both screens say BTC.

Go deeper: Bitcoin addresses versus Lightning invoices

Lightning Network #

A payment network that uses Bitcoin-backed channels to update balances without recording every payment on the blockchain.

For exampleA payment can travel across connected channels to reach its recipient.

Keep in mindLightning uses bitcoin, not a separate investment token. Wallet design, liquidity and fees still matter.

Payment channel #

A Bitcoin-backed arrangement that lets participants update how a balance is divided, with on-chain settlement rules.

For exampleA Lightning payment can use a route across several channels.

Keep in mindHaving a displayed balance does not guarantee every payment route has enough available liquidity.

Spot Bitcoin ETF / ETP #

An exchange-traded product that holds bitcoin to provide price exposure. US spot products are commodity trusts, often called ETFs.

For exampleA brokerage account holds product shares rather than bitcoin you can send to a wallet.

Keep in mindA spot product and a Bitcoin futures fund do not hold the same assets.

Volatility #

How much prices fluctuate over a stated interval, often summarized using a statistical measure.

For exampleA calm hour and a turbulent month can describe the same asset.

Keep in mindVolatility measures movement, not whether an investment is good or which way it moves next.