Bitcoin & Finance Terms
A complete reference guide for Bitcoin and financial terminology. 543+ terms defined — from addresses and ASICs to zero-knowledge proofs and yield curves.
1040 Schedule-D Form
Individuals must record and report any investments or assets sold and pay taxes on the profits from the same.
1099-B Form
Form 1099-B is a tax form issued by the Internal Revenue Service.
1099-K Form
Form 1099-K is sent from transaction providers and processors to the retailers whose payments they process.
1099-MISC Form
Form 1099-MISC reports payments made to others as part of business activities, not including payments made to employees or for nonemployee compensation.
1099-R Form
Form 1099-R is a tax form issued by the Internal Revenue Service.
21 Million
There will never be more than 21 million bitcoin in existence.
401k Account
A 401(k) plan allows employees to tax deductible contributions to their company-sponsored retirement account.
51% Attack
If an attacker wishes to alter a block in the Bitcoin blockchain, they must recreate the Proof-of-Work, not only for the block they wish to change, but for all subsequent blocks as well.
8949 Form
IRS Form 8949 is a tax form used to report investment short and long-term capital gains and losses.
Abenomics
Abenomics refer to economic policies set forth by prime minister Shinzo Abe in 2012, that were intended to reinflate Japan’s stagnant economy and improve its position in the global economic system.
Account Beneficiary
The beneficiary of an account is the person named to benefit from the account after the account holder’s death.
Adaptor Signature
An adaptor signature is an additional signature which is combined with an initial signature to reveal a secret piece of data.
Address
An address is used to receive bitcoin and is represented as a string of letters and numbers.
Agency Model
The agency model of trading involves a brokerage customer trading with another investor or brokerage.
Air Gap
An air gap is a security measure that involves completely isolating a device from any network connections, particularly the internet, to protect it from cyber threats such as malware, hacking, and data breaches.
Algorithmic Trading
Algorithmic trading is financial trading that is executed by software as opposed to humans.
All-Time High (ATH)
The all-time high is measured from when the asset first starts trading on an exchange, and changes whenever the most recent record high is exceeded.
Allocation
Allocation is the distribution of goods, services, and capital to individuals, companies, or assets in an economy or specific market.
Alpha
Alpha is used in investing to describe an investment strategy’s ability to beat the market.
Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is the cost of borrowing money over a one-year period, including both interest and fees.
Annual Percentage Yield (APY)
Annual Percentage Yield (APY) is the interest rate earned on an investment or deposit over one year, including the effects of compounding interest.
Annuity
An annuity is a fixed cash payment that is received several times over fixed time intervals, such as a cash disbursement of $10,000 a year for 50 years.
Anonymity
Anonymity is the quality of a person whose identity is unknown.
Anti-Money Laundering (AML)
Anti-Money Laundering (AML) is a category of laws and regulations that are intended to prevent money laundering, terrorist financing, tax evasion, and other illicit activities.
Application-Specific Integrated Circuit (ASIC)
An Application-Specific Integrated Circuit (ASIC) is a special microchip built for exactly one purpose.
Arbitrage
Arbitrage is the process of taking both sides of a trade simultaneously in order to realize an immediate and riskless profit.
Ask
An ask is a standing offer to sell an asset.
Assets Under Management (AUM)
Assets under management (AUM) is the total market value of all financial assets held by a financial institution.
Assume Valid
Assume Valid is a method for speeding up initial block download (IBD) by allowing a node to skip verification of each transaction and signature in older blocks.
AssumeUTXO
AssumeUTXO is a proposed, optional setting that would allow users to make use of their Bitcoin node before initial block download (IBD) is complete.
Asynchronous Payments
Asynchronous payments is a feature where transactions can be initiated even when the receiver is offline.
Atomic Multi-Path Payments (AMP)
Atomic Multipath Payments (AMP) is an implementation of the concept of Multipath Payments (MPP) on the Lightning Network.
Austrian Economics
Austrian Economics is a branch of economics that emphasizes the importance of individual choices and actions, the role of entrepreneurship, and the limitations of government intervention.
Automated Clearing House (ACH)
An Automated Clearing House (ACH) is a digital payment settlement system that facilitates capital transfers between connected financial institutions.
Average Cost Basis
The average cost basis of an investment is relevant when the same asset was purchased over several trades with different prices.
Backwardation
Backwardation is a market phenomenon which occurs when the spot price of an underlying asset is higher than prices trading in the futures market.
Backwards Compatibility
An upgrade to a system is backwards compatible if the upgrade does not render the old version of the system unusable.
Balance Sheet
A balance sheet is a document that details the assets, liabilities, and shareholders’ equity of an organization.
Bank of Canada
The Bank of Canada is Canada’s central bank and is owned by the British Crown, since Canada remains a Commonwealth country.
Bank of England
The Bank of England is the central bank of the United Kingdom of Great Britain and Northern Ireland which is responsible for managing government finances and regulating the production of banknotes.
Bank of Japan (BOJ)
The Bank of Japan is an independent financial institution, established in 1885 and since reorganized, which manages the Japanese economy and conducts monetary policy from its headquarters in Tokyo.
Bank Run
A bank run is when a large number of customers withdraw their deposits from a bank simultaneously due to fears that the bank might go out of business or become insolvent.
Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA) authorizes The Office of the Comptroller of Currency to evaluate bank activities and management processes for national banks, federal savings associations, federal branches, and agencies of foreign banks.
Bank Wire
A bank wire is a communication system used by financial institutions and individuals to facilitate and record transactions.
Banking Desert
A banking desert is a populated geographic area that lacks a physical banking branch within a 10-mile radius of its center.
Bankruptcy
Bankruptcy is a legal process that allows individuals or businesses to be absolved of their debt.
Base58
Base58 is an encoding scheme with an alphabet of 58 characters, including upper and lowercase letters A-Z and the digits 1-9.
Base64
Base64 is an encoding scheme used to encode Partially Signed Bitcoin Transactions (PSBTs).
Basic Earnings Per Share (EPS)
Basic Earnings Per Share (EPS) is a financial measurement of a company’s profit compared to its outstanding shares of common stock.
Basis of Lightning Technology (BOLT)
The Basis of Lightning Technology (BOLT) are specifications that describe the consensus rules and standards of the Lightning Network.
Basis Points
Basis points, also known as bps or bips, are simply one hundredth of a percent (0.01%).
Batching
Batching involves consolidating multiple payments into a single transaction with many outputs.
Bear Market
A bear market is characterized by declines in asset prices, investor pessimism, and negative news related to the market.
Bear Trap
A bear trap occurs when the performance of a stock, index, or other financial instrument quickly drops before immediately rising again.
Bearer-asset
A bearer asset is a type of financial asset where ownership is determined by physical possession, rather than by registration or the holder’s identity.
Bech32
Bech32 is an encoding scheme used to encode SegWit addresses and Lightning invoices.
Bech32m
Bech32m is a modified version of the Bech32 encoding scheme, which is used to encode SegWit addresses.
Beneficial Owner
A beneficial owner is the individual or company with a claim to the advantages of a particular account, asset, or business organization.
Beta
Beta is a measure of the volatility of a stock or portfolio compared to the market as a whole.
Bid
A bid is a standing offer to buy an asset.
Bid-Ask Spread
A Bid-Ask spread is the difference between the price to buy an asset and the price to sell that asset.
Binary
Binary is a number system that only uses two numbers: ones and zeros.
BIP 125 (Replace-by-Fee)
Bitcoin Improvement Proposal (BIP) 125 introduces Replace-by-Fee (RBF) to Bitcoin.
BIP 16 (P2SH)
Bitcoin Improvement Proposal (BIP) 16 introduced Pay-to-Script-Hash (P2SH) outputs.
BIP 174 (PSBT)
Bitcoin Improvement Proposal (BIP) 174 introduced Partially Signed Bitcoin Transactions (PSBT) as a community standard.
BIP 32 (Hierarchical Deterministic Wallets)
BIP 32 is the Bitcoin Improvement Proposal which introduced the standard of Hierarchical Deterministic (HD) wallets and extended keys to Bitcoin.
BIP 340 (Schnorr Signatures)
Bitcoin Improvement Proposal (BIP) 340 introduces Schnorr signatures to Bitcoin Core.
BIP 341 (Taproot)
Bitcoin Improvement Proposal (BIP) 341 defines Pay-to-Taproot (P2TR), a new way of sending bitcoin.
BIP 342 (Tapscript)
Bitcoin Improvement Proposal (BIP) 342 defines Tapscript, an update to Bitcoin’s scripting language.
BIP 39 (Mnemonic Phrases)
BIP 39 is the Bitcoin Improvement Proposal which introduced the standard of mnemonic phrases.
BIP 44 (Derivation Paths for P2PKH)
Bitcoin Improvement Proposal (BIP) 44 defines the standard derivation path for wallets which generate Pay-to-Public-Key-Hash (P2PKH) addresses.
BIP 49 (Derivation Paths for Wrapped Segwit)
Bitcoin Improvement Proposal (BIP) 49 defines the standard derivation path for wallets which generate wrapped SegWit (P2SH-P2WPKH) addresses.
BIP 8 (Soft Fork Activation)
Bitcoin Improvement Proposal (BIP) 8 proposed an alternative method to BIP 9 for activating soft forks.
BIP 84 (Derivation Paths for Native Segwit)
Bitcoin Improvement Proposal (BIP) 84 defines the standard derivation path for wallets which generate native SegWit (P2WPKH) addresses.
BIP 9 (Soft Fork Activation)
Bitcoin improvement proposal (BIP) 9 established a standard framework for activating soft fork upgrades to the Bitcoin protocol.
Bit
A bit is short for “binary digit”, and is either a one or a zero.
Bitcoin
Bitcoin is a peer-to-peer cryptocurrency based on a Proof-of-Work consensus mechanism and a decentralized ledger called a blockchain.
Bitcoin Core
Bitcoin Core provides software for both a node and a wallet, although most users prefer to use Bitcoin Core for its node and use third party software for their wallet.
Bitcoin Implementations
A Bitcoin implementation is a software program that is capable of running a Bitcoin node and interacting with the Bitcoin network.
Bitcoin Improvement Proposal (BIP)
A Bitcoin Improvement Proposal (BIP) is a formal proposal to change Bitcoin.
Bitcoin Knots
Bitcoin Knots is a specialized version of Bitcoin Core, modified and maintained by Luke Dashjr, a Bitcoin Core developer.
Bitcoin Node
A node is a discrete member of a network which interacts with other nodes to form the network.
Bitcoin Script
Bitcoin’s scripting language is simply called Script.
Bitcoin Transaction Fee
All Bitcoin transactions must pay a fee to be included in the blockchain.
Bitcoin-Qt
Bitcoin-Qt is the name of the graphical user interface or GUI which comes as part of the Bitcoin Core software package.
Bitcoind
Bitcoind is the name of the software service that runs a Bitcoin node and wallet.
BitLicense
A company or individual must obtain a Bitlicense to transmit, custody or perform exchange services, or issue a virtual currency in New York State.
Blind Signatures
A blind signature, invented by David Chaum, is a form of digital signature in which the contents of a message are hidden before it is signed, ensuring that the signer cannot see the message’s content.
Block
A block is a collection of transactions that occur on the Bitcoin network.
Block Explorer
A block explorer is a service that allows anyone to browse and query the blockchain.
Block Header
A block is a collection of transactions.
Block Height
A blockchain is a collection of blocks linked together in an immutable, chronological order.
Block Reward
The block reward is a combination of the block subsidy and all transaction fees paid by transactions in a specific block.
Block Size
The block size describes the amount of data which a block is allowed to take up, measured in bytes.
Block Subsidy
The block subsidy is the amount of new bitcoin minted in each block.
Block Weight
Block weight is a measure of the size of a block, measured in weight units.
Blockchain
A blockchain is the foundational data structure behind Bitcoin.
Bloom Filter
Bloom filters were a proposed scheme which would have allowed light clients to request transactions of interest in a private manner.
Bond
A bond is a predictable and structured repayment plan where the issuer receives an investment for a specified time in exchange for yield.
Brokerage
A brokerage is a financial institution which allows its customers to buy assets directly.
Brute Force Attack
A brute force attack is a method of attempting to crack a password or decrypt data simply by guessing every possible password or decryption key.
BTC
BTC is the ticker symbol for Bitcoin.
Bubble
A bubble is when there is a rapid increase in an asset’s price, driven by excessive demand, speculation, and market behavior.
Bull Market
A bull market is characterized by a sustained increase in asset prices, investor optimism, and positive news related to the market.
Bull Trap
A bull trap occurs when an asset quickly rises in price before falling again.
Business Continuity and Disaster Recovery (BCDR) Plan
A Business Continuity and Disaster Recovery (BCDR) plan is one essential step in achieving a BitLicense through The New York State Department of Financial Services (NYDFS).
Byte
A byte is a piece of data composed of eight binary digits or bits.
Byzantine Fault Tolerance (BFT)
Byzantine Fault Tolerance (BFT) is a trait of decentralized, permissionless systems which are capable of successfully identifying and rejecting dishonest or faulty information.
Byzantine Generals Problem
The Byzantine Generals Problem describes the difficulty decentralized parties have in arriving at consensus in a game theoretically safe manner.
Call Option
A call option is a specific type of option contract that gives the owner the right to buy an asset at a specified price.
Cantillon Effect
The Cantillon Effect describes the uneven effect inflation has on goods and assets in an economy.
Capital Asset Pricing Model (CAPM)
The Capital Asset Pricing Model (CAPM) helps investors calculate the expected return on investment while taking into account its risk.
Capital Controls
Capital controls are any regulations that restrict the way residents can move money in or out of a country.
Capital Expenditure
Capital expenditures are the costs of acquiring or upgrading physical and intangible assets necessary for a business.
Capital Gains
Capital gain is the realization of an increase in a capital asset’s value when the asset is sold.
Capital Losses
A capital loss is the difference between the purchase price and the sale price of an asset, where the sale price is lower than the purchase price.
Capital Markets
A capital market is any platform that brings together buyers and sellers of a given asset.
Cash
Cash is any asset used as a unit of account, medium of exchange, and store of value; most importantly, cash is a bearer instrument with no counterparty risk.
Cashu
Cashu is a free and open-source implementation of the eCash protocol tailored specifically for Bitcoin.
Censorship Resistance
Bitcoin is censorship resistant in the sense that no single entity has the ability to reverse a Bitcoin transaction or blacklist a wallet or address.
Chain Analysis
Chain analysis uses heuristics to analyse the blockchain and trace the ownership of bitcoin across transactions.
Change Output
Bitcoin does not use accounts and balances.
Chaumian Principles
Chaumian principles refer to concepts and cryptographic techniques primarily relating to cryptography and digital privacy.
Checksum
A checksum is a small string of bytes appended to a larger piece of data in order to easily verify its validity and protect against typos or tampering.
Child-Pays-for-Parent (CPFP)
Child-Pays-for-Parent is a transaction mechanism with a similar purpose as Replace-by-Fee (RBF).
Clearinghouse
A clearinghouse validates, finalizes, and settles transactions or trades between counterparties.
Clipboard Hijacking
A type of malware attack where malicious software monitors a user’s clipboard and replaces copied bitcoin addresses with the attacker’s own address during paste.
Coase Theorem
The Coase Theorem claims that parties may wish to bargain for a socially efficient outcome if one party’s property rights have been clearly violated by the actions of another party, so long as the bargain would not create an undue burden for either party.
Coin Clipping
Coin clipping is the practice of physically shaving down or clipping metal coins as a form of taxation.
Coin Selection
Coin selection is the process of choosing a subset of the UTXOs owned by a wallet in order to create and fund a transaction.
Coinbase Transaction
A coinbase transaction is the first transaction in each block.
CoinJoin
A CoinJoin is a large Bitcoin transaction which takes inputs from many different users and returns many outputs of identical amounts, so that an observer cannot easily determine which outputs belong to which of the participants.
CoinSwap
CoinSwap is a proposed method for making Bitcoin transactions more private.
Cold Storage
Cold storage describes any method of storing data which does not connect to the internet or any other devices.
Collaborative Custody
Collaborative Custody is a multisignature ( multisig) custody setup that allows for the distribution of key ownership across various entities.
Collateral
Collateral is a way to secure debt and provide recourse to lenders when a borrower defaults on a loan.
Commodity Trading Futures Commission (CFTC)
The Commodity Trading Futures Commission (CFTC) regulates the futures contracts and options industry.
Common Input Ownership Heuristic
The Common Input Ownership Heuristic is one of the core heuristics used by chain analysis companies to determine the owner of specific UTXOs.
Confirmation
A confirmation indicates that a Bitcoin transaction has been added to a block on the blockchain.
Consensus
Consensus is an ideal and the method of coordination between individuals in a decentralized system such as Bitcoin or other open source projects.
Consensus Mechanism
The consensus mechanism is a set of rules and processes used to maintain agreement across the Bitcoin network about the current state of the blockchain.
Consumer Price Index (CPI)
The consumer price index (CPI) is calculated by tracking a weighted average basket of several goods over time.
Contango
Contango is a market phenomenon which occurs when the futures price of a commodity is higher than the spot price because the asset price is expected to rise over time.
Core Inflation
Core inflation is a measure of the change in the prices of goods and services, excluding the volatile prices of food and energy products.
Correlation
A correlation measures the relationship between the returns of two assets.
Cost Basis
The cost basis of an asset is calculated as the purchase price of the asset, the total amount initially invested in the asset, or the value of the asset when it was received or earned.
Cost Basis Accounting
Tax lots are the shares purchased in a single transaction.
Cost of Capital
Cost of capital is the cost associated with deploying capital into a potentially productive investment.
Cost-Push Inflation
Cost-Push inflation is a type of inflation caused by increased production costs, which lead to higher prices for goods and services.
Counterparty
A counterparty refers to the other party in a financial, goods, or services transaction.
Counterparty Risk
Counterparty risk is the financial risk associated with another party failing to meet their contractual obligation.
Coupon
A coupon measures the annual rate of interest on a debt instrument such as a bond.
Covenants
Covenants refer to a mechanism that allows certain conditions to be placed on how Bitcoin can be spent in the future.
Credit
Credit is money lent as debt.
Credit Expansion
Credit expansion is the process of increasing the amount of debt within an economy.
Cryptography
Cryptography is a vast and varied field of study.
Cumulative Inflation
Cumulative inflation is the total increase in the price of goods and services over a period of time.
Currency Peg
A currency peg, also known as a fixed exchange rate, is when a government maintains its currency’s exchange rate at a fixed rate relative to a foreign currency, a basket of currencies, or another commodity.
Custodial
A wallet or service is custodial if the user is not in control of their own private keys.
Cyclical Stock
A cyclical stock will change in value depending on macroeconomic events.
Cypherpunk
Cypherpunks are an unofficial and loosely connected group of individuals focused on building hardware and software to protect privacy and individual sovereignty.
Dandelion
Dandelion is a proposed transaction relay protocol which would improve Bitcoin’s current method for relaying transactions across the peer-to-peer network.
Debasement
Debasement is the deliberate reduction in the value of a money.
Debt
Debt is a financial obligation from one party to another.
Decentralization
Decentralization is the process of distributing control away from a central authority to multiple, independent entities.
Decentralized Exchange (DEX)
A decentralized exchange (DEX) is meant to facilitate the exchange of bitcoin without forcing users to sacrifice privacy or custody to an exchange.
Decentralized Ledger
A decentralized ledger is a record of all transactions on a network.
Default
A default is when someone fails to meet the required payments on their debt.
Deflation
Deflation is a general decrease in the price of goods and services in an economy over time.
Delta
Delta is a ratio that compares the change in the price of an asset to the change in the price of its derivative.
Demand-Pull Inflation
Demand-pull inflation is a type of inflation that arises when the total demand for goods and services in an economy exceeds its supply, leading to an increase in overall price levels.
Denial of Service (DoS) Attack
A Denial of Service (DoS) attack is a type of digital attack on a system or individual which attempts to remove the victim from a network and make them unavailable to their peers.
Depth Chart
A depth chart is a visual representation of a market’s order book.
DER Format
The Distinguished Encoding Rules (DER) format is a defined standard which Bitcoin uses to encode ECDSA signatures.
Derivation Path
A derivation path is a piece of data which tells a Hierarchical Deterministic (HD) wallet how to derive a specific key within a tree of keys.
Derivatives
A derivative is a contract multiple parties enter into with a value that is determined by the price of an underlying asset.
Devaluation
Devaluation is the intentional downward adjustment of the value of a country’s money.
Diamond Hands
People with diamond hands are those who hold onto their assets, such as bitcoin, during highly volatile market conditions where they are pressured to sell.
Difficulty
The difficulty is a measure of how hard it is to mine a block.
Discounting
Discounting calculates the present value of money received in the future.
Discreet Log Contract (DLC)
A Discreet Log Contract (DLC) is a form of Bitcoin transaction which uses an oracle to execute a smart contract.
Discrete Log Problem (DLP)
The Discrete Log Problem (DLP) describes the fact that there is currently no known method for calculating point division on an elliptic curve.
Diversification
Diversification is an investment strategy that aims to minimize the overall risk of a portfolio.
Dividend
A dividend is a payout by a company to its shareholders.
Divisibility
Divisibility is the property of a good that can be broken into smaller amounts without losing value.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act is a law first enacted in the United States following the 2008 financial crisis.
Dollar Cost Averaging (DCA)
Dollar-cost averaging is an investment strategy where an investor purchases an asset over several trades which are spaced across time.
Double Spend
A double spend occurs when someone is able to spend the same money twice, fooling one or more parties into believing they have been paid.
Durability
Durability is the ability of a good to retain its original state overtime.
Dust
If a piece of bitcoin, called a UTXO, is small enough, it may cost more in fees to spend it than it is worth.
Dust Attack
Occasionally, attackers will send tiny fractions of bitcoin, around 500 sats, to random wallets.
Early Adopter
Early adopters try a new product, service, or asset before the majority of the market.
eCash
eCash was one of the earliest electronic cash systems developed by David Chaum and his company DigiCash in the late 1980s to 1990s.
ECDSA
The Elliptic Curve Digital Signature Algorithm or ECDSA is a cryptographic scheme for producing digital signatures using public and private keys.
Eclipse Attack
An eclipse attack targets particular nodes in a network by surrounding them and obscuring their view of the entire network.
Economic Expansion
An expansion is one of the two parts of a business cycle.
Elasticity
Elasticity is an economic measure of how sensitive one factor is to another.
Eltoo
Eltoo—pronounced as “L2”—is a proposed upgrade to Bitcoin whose main goal is to improve layer two solutions, most importantly, the Lightning Network.
Embezzlement
Embezzlement in the context of bitcoin exchanges refers to the misuse or theft of customer funds by insiders, such as executives, employees, or operators, who have privileged access to wallets, private keys, or internal accounting systems.
Encoding
The Bitcoin Protocol uses several different encoding schemes to represent data to users.
Encryption
Encryption is the process of converting data into secret, incomprehensible code such that only intended parties are capable of understanding the information.
End-to-End (E2E) Encryption
End-to-End (E2E) Encryption is a feature of communication networks whose messages are only decipherable by the sender and receiver.
Equilibrium
The equilibrium price of an asset is the price at which supply meets demand.
Equity
Equity is ownership of anything with value, representing both the assets and liabilities of that ownership.
Erlay
Erlay is an upgrade to Bitcoin Core’s peer-to-peer networking functionality, which decreases the bandwidth used to relay transactions between nodes.
Escrow
Assets held in escrow are temporarily managed by a third party in order to facilitate a transaction between two other parties.
European Central Bank (ECB)
The European Central Bank (ECB) is the intra-governmental monetary authority that oversees the Eurozone’s monetary supply, monitors the price index of goods and services within the European Union, and targets a 2% inflation rate.
Exchange
An exchange is an institution which acts as a market-maker between parties who wish to buy and those who wish to sell.
Exchange Traded Fund (ETF)
An exchange traded fund (ETF) is an individual security or basket of securities that trades on an exchange, in which the value of the ETF is based on the performance of underlying assets.
Executive Order 6102
The Emergency Banking Relief Act of 1933 and Executive Order 6102 authorized U.S.
Expected Return
The expected return of an investment is the average anticipated profit or loss an investor can expect from an investment.
Extended Private Key (Xprv)
An extended private key, or xprv, is a private key which can be used to derive child private keys as part of a Hierarchical Deterministic (HD) wallet.
Extended Public Key (Xpub)
An extended public key, or xpub, is a public key which can be used to derive child public keys as part of a Hierarchical Deterministic (HD) wallet.
Face Value
The face value of a bond is the value of that bond on its maturity date.
Fake Wallets
In the Bitcoin ecosystem, fake wallets pose a threat because they target newcomers who may not yet understand secure wallet practices.
Faucet
A Bitcoin faucet is a digital service that gives out bitcoin for free.
Federal Deposit Insurance Corporation (FDIC)
The Federal Deposit Insurance Corporation (FDIC) is an independant agency that exists to convince the public that FDIC-insured deposit accounts are a safe store of value.
Federal Open Market Committee (FOMC)
The Federal Open Market Committee (FOMC) is responsible for open market operations and thus controlling monetary policy.
Federal Reserve System
The U.S.
Fedimint
Fedimint, short for “Federated Mint”, is an open-source protocol for managing Bitcoin in a community setting.
Fiat Currency
Fiat currency is money that is declared to have value despite a lack of intrinsic value.
Fiduciary Duty
A fiduciary duty is a legal obligation to act in the best interest of another.
FIFO
First-in-first out cost basis method used to calculate capital gains and losses of Bitcoin sales.
Financial Action Task Force (FATF)
The Financial Action Task Force (FATF) is an inter-governmental watchdog organization that collaborates with policymakers to prevent money laundering and combat terrorism financing on a global scale.
Financial Crimes Enforcement Network (FinCEN)
The U.S.
Fiscal Policy
Fiscal policy is the use of government spending and tax policies to influence macroeconomic conditions.
Fisher Effect
The Fisher Effect describes how inflation impacts the real interest rate; inflation makes each unit of currency less valuable over time, which reduces the value of interest payments in the future.
Fixed Cost
A fixed cost is a business expense that does not change with each additional unit produced or sold; an increase or decrease in sales volume or production will not impact fixed costs.
Float
Float is money or assets that have been temporarily double-counted due to delays in settlement processing.
Foreign Exchange Risk
Foreign exchange risk is a risk posed by the dynamic nature of exchange rates during international trade, which can negatively impact the return on an investment or transaction.
Fork
A fork is a change to a protocol or a piece of code.
Forward Contract
A forward contract is a derivative which binds two parties to a transaction in the future.
Fractional Reserve Banking
Fractional-reserve banking is the most popular form of commercial banking, in which the bank is permitted to lend or invest nearly all of the capital that was deposited in the institution; this means that only a tiny, fractional amount of the total deposits are actually backed by cash and available for withdrawal at a given time.
Fungibility
Fungibility is a property of goods which are interchangeable and indistinguishable.
Futures Contract
A futures contract is a derivative which binds two parties to a transaction in the future.
Game Theory
Game theory is the mathematical study of the conflicts and strategies analyzed to make the most efficient decision, based on preordained rules.
Gamma
Gamma is the first derivative of delta and the second derivative of an option’s price with respect to the underlying assets price.
Generator Point
The generator point, known as _G_, is a defined point on Bitcoin’s elliptic curve, secp256k1, and has x and y coordinates.
Genesis Block
The Genesis block is the first block in the Bitcoin blockchain.
Glass-Steagall Act
The Glass-Steagall Act was created through the U.S.
Gossip Network
For nodes along the network to successfully send and receive payments from each other, they must first know where their counterparties are, and how to create paths to one another.
Graphical User Interface (GUI)
A Graphical User Interface (GUI) is a software application that allows users to interact visually with an underlying software which might otherwise only be accessible through the command line.
Graphics Processing Unit (GPU)
A graphics processing unit (GPU) is a circuit containing electrical components which control the memory, graphics manipulation, and output of a computer or mobile device.
Gresham's Law
Gresham’s law states that “bad money drives out good”.
Gross Domestic Product (GDP)
Gross domestic product (GDP) is a commonly cited metric indicating how much economic activity occurs annually in a region.
Hal Finney
Hal Finney was a renowned cryptographer who created the Reusable Proof of Work (RPoW) consensus mechanism in 2004, laying the groundwork for Bitcoin’s development.
Halving
The halving is an event which reduces the issuance rate of bitcoin by half every four years.
Hard Cap
Bitcoin total supply will never exceed 21 million bitcoin or 2.1 quadrillion satoshis.
Hard Commodity
A hard commodity is loosely defined as any natural resources that must be mined or extracted.
Hard Fork
A fork generally is a change to a project’s source code.
Hard Money
Hard money refers to a currency that is resistant to inflation and maintains its value over time.
Hardware Wallet
A hardware wallet is a digital device whose sole purpose is to generate and store public and private keys and sign transactions.
Hash Function
There are many instances of cryptographic hash functions, but all cryptographic hash functions share a few key properties.
Hash Rate
Hash rate is a measure of how many hashes miners cumulatively produce per second on the Bitcoin network.
Hashed Time Locked Contract (HTLC)
A Time Locked Contract is a Bitcoin transaction which includes a timelock.
Hedge Position
A hedge is an investment that is used to lower the risk of an overall portfolio.
Hexadecimal
Hexadecimal is an encoding scheme which uses a 16 character alphabet, including digits 0-9 and letters A-F.
Hierarchical Channel
Hierarchical channels are a structural innovation in Bitcoin, primarily used within the Lightning Network to enhance transaction efficiency and scalability.
Hierarchical Deterministic (HD) Wallet
A Hierarchical Deterministic (HD) wallet is the term used to describe a wallet which uses a seed to derive public and private keys.
HIFO
Highest-in-first out cost basis method used to calculate capital gains and losses of Bitcoin sales.
HODL
HODL is an adage native to the Bitcoin community, derived simply from a misspelling of the word “hold”.
Hot Wallet
The term hot describes a device with external connections, especially to the internet.
Howey Test
Courts use the Howey test from 1946 to assess which offerings qualify as securities.
Hyperinflation
Hyperinflation in an extreme form of inflation, characterized by extreme price increases in a short period of time.
Hypothecation
Hypothecation increases the incentive of the individual to pay back the loan, while raising the confidence of the loaner that the debt will be repaid.
Immutability
Bitcoin maintains a high level of immutability on two levels.
Inbound Liquidity
Within the context of a Lightning channel, inbound liquidity refers to funds inside a node’s payment channels which can be used to _receive_ payments.
Index Price
An index is a measurement of the price of multiple assets simultaneously.
Individual Retirement Account (IRA)
Individual retirement accounts (IRA) are beneficial for individuals who do not have access to an employer 401(k), who cannot save enough for retirement through a 401(k) alone, or who want to invest in assets unavailable in their employer 401(k).
Inflation
Inflation is a general increase in the prices in an economy over time.
Inflation Hedge
Inflation hedging is intended to protect the value of an investment against the decreased purchasing power of a currency, which typically results from inflation.
Initial Block Download (IBD)
Initial Block Download (IBD) is the process of building the full Bitcoin blockchain from scratch.
Input Sequence (nSequence)
An input sequence, or nSequence, is a field of a Bitcoin transaction input.
Insolvency
Insolvency is when an individual or organization can no longer afford to pay the debt on their liabilities.
Interest Rate
An interest rate represents the amount a lender charges a borrower as compensation for making a loan.
Issue Price
The issue price is the price an investor paid for a financial instrument.
Junk Bond
A junk bond, commonly referred to as a speculative grade bond, is a fixed income debt instrument issued by a corporation or government with an insufficient credit rating to render the bond investment grade.
Just-a-Bunch-of-Keys (JBOK)
A Just-a-Bunch-of-Keys (JBOK) wallet is a form of Bitcoin wallet which randomly generates new, unrelated keys as needed for the user.
Key Send
Key Send is a proposed feature for the Lightning Network which would allow payers to pay receivers over the Lightning Network, without needing an invoice from the receiver.
Know Your Customer (KYC)
Know Your Customer (KYC) laws are intended to prevent financial instutions from being used for illicit money transfers by mandating that all financial accounts be identifiable to individuals or organizations.
Layer
Bitcoin’s blockchain offers final settlement for bitcoin at the cost of relatively low throughput.
Lender of Last Resort
A lender of last resort is a central bank that provides emergency loans to commercial banks or other large financial institutions facing imminent collapse or bankruptcy.
LevelDB
LevelDB is a storage engine developed by Google in 2011, which Bitcoin uses to store and manage essential data and transactions.
Leverage
Leverage is the use of debt to increase returns, buying power, capital, or asset financing.
LIFO
Last-in-first out cost basis method used to calculate capital gains and losses of Bitcoin sales.
Light Client
A light client is a Bitcoin application, such as a wallet, that interacts with the Bitcoin network but does not store the blockchain.
Lightning Channel
A Lightning channel is a connection between two parties, and the Lightning Network is composed of thousands of channels.
Lightning Implementations
A Lightning Implementation is a software program capable of operating a Lightning Node and engaging with the Lightning Network.
Lightning Invoice
A Lightning invoice is similar to a normal invoice in that it serves as a request for payment.
Lightning Network
The Lightning Network (LN) is a protocol designed to allow instant and cheap Bitcoin transactions.
Lightning Network Penalty
The Lightning Network Penalty is a mechanism for discouraging attempts to double spend bitcoin using the Lightning Network (LN).
Lightning Node
A Lightning Node is a computer that participates in the Lightning Network’s peer-to-peer protocol, enabling instant payment channels.
Limit Order
A limit order is a common order execution strategy.
Liquid Network
The Liquid Network is a sidechain protocol built on top of the Bitcoin blockchain.
Liquidity
Liquidity is a measure of several features of a particular asset’s order book within a given market.
Liquidity Trap
A liquidity trap is an economic situation where a central bank’s traditional monetary policy tools, such as lowering interest rates to stimulate economic activity, become ineffective.
LNURL
LNURL makes communication between Lightning wallets and other applications easier through QR codes.
Long Position
A long position is the typical way in which an investor gains exposure to an asset.
M-of-N
The term _m-of-n_ describes the precise conditions of a multisig setup, with _m_ being the number of signatures required, and _n_ being the number of authorized keys from which the signatures can come.
Mainnet
Mainnet is the term for the real Bitcoin blockchain and network, and is used in contrast with testnet, signet, and regtest networks.
Maker
A maker order occurs when a trader places an order that rests on an exchange’s order book for some amount of time instead of executing immediately.
Malleability
What Is Transaction Malleability?
Malware
Malware in the Bitcoin ecosystem refers to malicious software designed to steal private keys, intercept transactions, hijack computing resources, or compromise wallet security.
Margin Trading
Margin is the money a trader borrows to execute an order when they are unwilling or unable to pay for the entire order up front.
Market Capitalization
Market capitalization is a measure of how much the total supply of an asset is worth.
Market Depth
Market depth refers to the quantity of an asset available on a market.
Market Impact
Market impact refers to the effect a trader has on the market when they trade an asset.
Market Maker
A market maker is a trader on an exchange who trades large quantities of the asset regularly.
Market Order
A market order is a common order execution strategy.
Maturity Date
The maturity date is the date on which the investor will receive the face value of a bond.
Medium of Exchange
A medium of exchange is a type of good that facilitates the exchange of other goods and services within an economy.
Mempool
The mempool (memory pool) is a smaller database of unconfirmed or pending transactions which every node keeps.
Mempool Explorer
A mempool explorer is a software application, often in the form of a website, which displays useful information about the current state of the mempool.
Merged Mining
Merged mining is a technique that allows bitcoin miners to mine Bitcoin and another blockchain simultaneously with the same hashing function.
Merkelized Alternative Script Tree (MAST)
A Merkelized Alternative Script Tree (MAST) is a proposal to encapsulate an arbitrary number of different scripts in a Bitcoin address.
Merkle Root
The Merkle root is the final node in a Merkle tree.
Merkle Tree
A Merkle tree is a data structure with unique properties which make it useful for Bitcoin.
Merkle-Sum Tree
A Merkle Sum Tree is a type of Merkle tree that makes it efficient to verify that there is no change in the cumulative value or distribution of the leaves of a Merkle Tree.
Metcalfe's Law
Metcalfe’s law states that the value of a network is proportional to the square of the number of nodes, or members, in the network.
Miner-Activated Soft Fork (MASF)
A soft fork is a change to a protocol which is backwards compatible and does not require all nodes to update.
Mining
Mining is the process of building the blockchain by adding new blocks one at a time.
Mining Pool
The mining industry has several economies of scale, due to energy costs, capital costs, regulatory capture, and intricacies of Proof-of-Work.
Miniscript
Miniscript is a language that makes it easier for developers to read, write, and reason about Bitcoin smart contracts.
Mixing
A mixing service, sometimes called a mixer or a tumbler, accepts bitcoin deposits and sends different pieces of bitcoin back to the user in the same amount.
Mnemonic
A mnemonic phrase is a list of 12-24 words used to back up a wallet.
Monetary Base
The monetary base of a currency is a measure of how much of the currency is in circulation.
Monetary Policy
Monetary Policy is a set of strategies used by central banks, like the Federal Reserve in the U.S., to control the money supply and influence overall economic conditions.
Money Multiplier
The money multiplier is a ratio that measures the potential increase in the money supply for a given cash injection.
Money Supply
The money supply is a measure of all the money that is available in an economy.
Moore's Law
Moore’s law observes that the number of transistors in electronic circuits doubles about every two years.
Moral Hazard
Moral hazard happens when an individual or organization has an incentive to take on more risk because they believe that another party will bear the consequences of their risk.
Multi-Path Payment (MPP)
A multipath payment (MPP) is a type of Lightning payment which is executed as an atomic set of smaller payments.
Multisig
A standard bitcoin transaction sends bitcoin to an address.
MuSig
MuSig is a protocol for creating Taproot multisig public keys and signatures.
Negative Interest Rates
Negative interest rates are an unusual phenomenon that occur during a deep economic recession when interest rates are at their nominal zero bound.
Neutrino
Neutrino is a proposed light client protocol which offers privacy and efficiency improvements over existing light client designs, notably Simplified Payment Verification (SPV).
Nominal Interest Rate
The nominal interest rate is the rate stated on a bond or loan.
Non-Custodial
A non-custodial solution, also known as a self-custodial solution, describes any method of storing bitcoin which does not give a third party access to a user’s private keys.
Nonce
Nonce is short for “number used once”, and a nonce is the number that allows miners to find a valid Proof-of-Work.
Nostr
Nostr is a decentralized and open-source communication protocol, which stands for ‘Notes and Other Stuff Transmitted by Relays.’ Unlike traditional social media platforms, Nostr offers an alternative by enabling users to access the same content across different apps without a single application or company owning their data.
Off-Chain
Off-chain is a term used to describe any data that is not registered on the Bitcoin blockchain.
Off-Ramp
Off-ramps are the methods and services that allow individuals to convert their bitcoin into fiat currency.
Office of Foreign Assets Control (OFAC)
The Office of Foreign Assets Control (OFAC) is a department of the Treasury that provides a framework for compliance with U.S.
On-Chain
On-chain is a term used to describe any data that is registered on the Bitcoin blockchain, in contrast with off-chain data, which is not stored on the blockchain.
On-Ramp
On-ramps are the methods and services that allow individuals to convert their fiat currency into bitcoin.
Onion Messages
Onion messages are a way to send private and secure messages over the internet.
OP\_CAT
OP\_CAT is an opcode in the original Bitcoin Script language that allows for the classification of different types of transactions, such as simple payments, multi-signature (multisig) transactions, and smart contracts.
OP\_RETURN
OP\_RETURN is an OPcode whose original behavior was disabled to patch a security vulnerability in Bitcoin’s Script.
Opcode
An operation code, or opcode, is a basic command of some computer languages.
Open Source
Open source describes a project whose source code is publicly available and licensed such that individuals can use and alter the source code freely.
Operating Expenditure
Operating expenditure is the recurring cost of operating a business day-to-day.
Opportunity Cost
Opportunity cost is what you ‘lose’ when you choose one thing over another.
Options Contract
An options contract is a type of derivative which gives the buyer the right but not the obligation to perform a specified trade.
Oracle Problem
The Oracle Problem describes the as of yet unsolved problem of integrating external data into smart contracts on the blockchain.
Order Book
An order book is a current list of all the open maker orders for an asset in a given market.
Order Execution
Order execution is the manual or electronic process of accepting and completing a buy or sell order in the market on behalf of a client.
Orphan Block
Bitcoin blocks are meant to be added every 10 minutes, but sometimes, two blocks can come in at similar times.
OTC Desk
An OTC Desks conducts over-the-counter (OTC) trades with its clients.
Outbound Liquidity
Within the context of a Lightning channel, outbound liquidity refers to funds inside a node’s payment channels which can be used to _send_ payments.
Partially Signed Bitcoin Transactions (PSBT)
A Partially Signed Bitcoin Transaction (PSBT) is a Bitcoin standard that facilitates portability of unsigned transactions, which allows multiple parties to easily sign the same transaction.
Pay-to-Public-Key (P2PK)
Pay-to-Public-Key (P2PK) is a type of ScriptPubKey which locks bitcoin to a public key.
Pay-to-Public-Key-Hash (P2PKH)
Pay-to-Public-Key-Hash (P2PKH) is a method used in Bitcoin transactions that allows bitcoin to be sent to the hash of the public key of another wallet’s public key, rather than directly to the public key.
Pay-to-Script-Hash (P2SH)
Pay-to-Script-Hash (P2SH) is a type of ScriptPubKey which allows for the spending of bitcoin based on the satisfaction of the script whose hash is specified within the transaction.
Pay-to-Taproot (P2TR)
Pay-to-Taproot (P2TR) is a type of ScriptPubKey which locks bitcoin to a script that can be unlocked by a public key or a Merkelized Alternative Script Tree (MAST), allowing the bitcoin to be spent in a variety of ways.
Pay-to-Witness-Public-Key-Hash (P2WPKH)
Pay-to-Witness-Public-Key-Hash (P2WPKH) is a type of ScriptPubKey which is used to lock bitcoin to a SegWit address.
Pay-to-Witness-Script-Hash (P2WSH)
A Pay-to-Witness-Script-Hash (P2WSH) is a type of transaction similar to a P2SH transaction in most ways, except that it uses SegWit.
PayJoin (P2EP)
PayJoin, also known as Pay-to-Endpoint (P2EP), is a special type of Bitcoin transaction where both the sender and receiver contribute inputs in order to break the common input ownership heuristic, an assumption used to strip privacy from bitcoin users.
Payment Rail
A payment rail is a network or platform that facilitates digital transactions.
Peer-to-Peer (P2P)
A peer-to-peer network is one in which members can interact directly with one another without relying on third parties for approval or support.
Peg
An asset is pegged when its value is directly tied to the value of another underlying asset.
Pegged-to-Market Order
A pegged-to-market order is a sophisticated order execution strategy.
Penalty Transaction
A penalty transaction allows an one party to a Lightning channel to reclaim funds that were stolen during the dishonest close of a Lightning channel.
Perpetual Swap
A perpetual swap is an increasingly popular way to trade bitcoin because it allows investors to buy and sell the value of bitcoin without having to own any bitcoin.
Personal Consumption Expenditures (PCE) Index
The PCE index, or Personal Consumption Expenditures Price Index, is a measure of the prices paid by consumers on goods and services in the U.S.
Phillips Curve
The Phillips Curve states that inflation and unemployment have a stable and inverse relationship.
Phishing Attack
A phishing attack attempts to take advantage of internet communication by sending an individual a familiar-looking email.
Physical Settlement
Physical settlement is the delivery of the underlying asset to the owner of an option or futures contract at the contract’s expiration date.
Pizza Day
Pizza Day marks the world’s first commercial Bitcoin transaction, where Laszlo Hanyecz paid 10,000 Bitcoin for two pizzas on the 22nd of May 2010.
Point Time Locked Contract (PTLC)
A Point Time Locked Contract (PTLC) is a Bitcoin transaction which locks bitcoin to a point on Bitcoin’s elliptic curve.
Portability
Portability is the ability of a good to be transported easily across space.
Preimage
A preimage is the data that is input into a hash function to calculate a hash.
Present Value
Present value is the current value of future cash flows.
Price Discovery
Price discovery is the process of setting a price for an asset.
Prime Broker
Prime brokers typically interact with hedge funds, providing custodial and financial services.
Principal
The principal is the original monetary contribution to the purchase of an asset, before earnings or interest; a principal is also an individual or business which has purchased a surety bond to guarantee the performance of an obligation.
Principal Model
The principal model of trading involves a brokerage acting as the counterparty to their customer’s desired trade using their own inventory of assets.
Private Key
A private key is used to send bitcoin which was received by the corresponding public key.
Private Sector
The private sector is a part of an economy that consists of for-profit businesses and enterprises that are owned and operated by individuals or companies rather than the government.
Probate
Probate is the first step in the legal process of executing a deceased person’s will.
Proof of Reserves
Proof of reserves is a process that shows an exchange or brokerage holds sufficient assets to cover all customer deposits, providing transparency and assurance to clients.
Proof-of-Work (PoW)
Proof-of-Work is a method for asserting the validity of data.
Protocol
A protocol is governed by a set of rules which define the behavior of a network.
Pseudonym
A pseudonym is a fake name used by individuals to protect their identity or build a reputation separate from their real identity.
Public Key
A public key is used to receive bitcoin.
Public Sector
The public sector is the part of the economy composed of all levels of government and government-controlled enterprises.
Purchasing Power
Purchasing power is the value of money in terms of the quantity of goods or services that one unit of that money can buy.
Put Option
A put option is a specific type of option contract that gives the owner the right to sell an asset at a specified price.
QR Code
A QR code is a graphical representation of arbitrary data similar to a barcode.
Quantitative Easing (QE)
Quantitative easing is a type of monetary policy designed to stimulate economies or prop up the prices of assets.
Quantitative Tightening
Quantitative Tightening (QT) refers to monetary policies employed by the Federal Reserve System (The Fed) to reduce the size of their balance sheet and contain inflationary pressure.
Real GDP
Real Gross Domestic Product ( Real GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.
Real Interest Rate
Real interest rate is the interest rate that has been adjusted for inflation.
Recession
A recession is one of the two parts of a business cycle.
Redeem Script
A RedeemScript is the script used to unlock bitcoin sent to a P2SH or P2WSH address.
Regtest
The Regression Test Network (regtest) is a parallel blockchain to the Bitcoin blockchain.
Rehypothecation
Rehypothecation is the practice where custodians, such as banks or brokerages, use assets that have been posted to them as collateral for their own financial gain, such as borrowing money or making other investments.
Reorganization
A reorganization, often shortened to reorg, occurs when a block is removed from the blockchain because a longer chain has been created.
Replace-By-Fee (RBF)
What Is Replace-By-Fee (RBF)?
Request-for-Quote (RFQ)
A request-for-quote (RFQ) is a first step in certain financial transactions.
Reserve Ratio
The reserve ratio is the portion of reservable liabilities (deposits) that commercial banks must keep on hand, rather than lend out or invest, at all times.
Resistance
Resistance is a price point where an asset is expected to have significant supply.
Risk Free Rate
The risk-free rate is the rate of return an investor can receive from an investment which is considered to be riskless.
Round Amounts Heuristic
The Round Amounts Heuristic, otherwise known as the Change Output Heuristic is used in chain analysis to attempt to determine which outputs of a transaction are sending to another party and which are returning bitcoin to the sender as change.
Saleability
Saleability is a mathematical formula used to compare different investments or trading strategies based on their profitability and success.
Satoshi
Satoshis, often abbreviated to “sats”, are the atomic unit of Bitcoin, named after Bitcoin’s creator, Satoshi Nakamoto.
Satoshi Nakamoto
Satoshi Nakamoto is the anonymous creator(s) of Bitcoin who published the whitepaper on October 31, 2008 and mined the first Bitcoin block on January 3, 2009.
Savings Account
A savings account is a type of bank account where you can deposit money and earn interest over time.
Scarcity
Scarcity is the property of a good which cannot be costlessly replicated.
Schnorr Signature
Schnorr is a type of digital signature scheme similar to the ECDSA scheme used by Bitcoin since its inception.
Script Type Heuristic
The Script Type Heuristic is utilized in chain analysis in order to determine which outputs of a transaction are sending to another party and which are returning bitcoin to the sender as change.
Script Witness
The Script Witness contains the signatures and public keys, which together unlock bitcoin sent in a SegWit transaction.
ScriptPubKey
The ScriptPubKey is a script which controls how bitcoin can be spent.
ScriptSig
The ScriptSig is the part of a transaction which contains the required signatures and the script which unlocks a UTXO for spending.
SEC Format
The Standards for Efficient Cryptography (SEC) is the standard method for encoding a Bitcoin public key.
Secp256k1
Secp256k1 is the name of the elliptic curve used by Bitcoin to implement its public key cryptography.
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) was designed to ensure transparent trading and to protect the financial safety of investors in the stock market.
Security
A security is an investment contract that creates a fiduciary duty.
Seed
A Bitcoin seed, otherwise known as a “mnemonic phrase”, “seed phrase”, or “seed words” is a way of representing a large, randomly generated number as a sequence of words that are more accessible to humans than binary outputs (e.g.
SegWit
Segregated Witness (SegWit) is a soft-fork upgrade to Bitcoin which was activated in 2017.
Seigniorage
Seigniorage is the profit a government makes from creating money.
Self-custody
Self-custody is the practice of managing and storing your bitcoin without relying on a third-party service or intermediary.
Settlement
Settlement is the transaction or exchange of securities between two or more parties.
SHA-256
SHA-256 is a cryptographic hash function.
Shamir Backup
The Shamir Backup is a security standard that divides a seed phrase into several parts to enhance security.
Sharpe Ratio
The Sharpe Ratio is one of many metrics used to assess the performance of an asset.
Short Selling
Short selling is an investment strategy that allows a trader gain a negative exposure to an asset.
Short Squeeze
A short squeeze is a trading phenomenon that occurs when investors with short positions are forced to close their positions.
Sidechain
A sidechain is a protocol that relies on the Bitcoin blockchain for data or security, but conducts its own operations on a separate blockchain.
Sighash Flag
A signature hash (sighash) flag is a small part of each input in a transaction that determines which parts of the transaction become immutable once a signature has been added to the transaction.
Signature
A digital signature is similar to a physical signature in theory, yet far more secure and trustworthy.
Signet
Signet is a proposed new test network parallel to the Bitcoin network.
Silent Payments
Silent payments are a BIP which enables users to maintain a static receive address for others to send payments while preserving privacy.
SIM Swap
A SIM swap is a type of identity theft in which attackers fraudulently transfer a victim’s mobile number to a SIM card they control.
Simplified Payment Verification (SPV)
Simplified Payment Verification (SPV) is a term used to describe software which queries other nodes for new blocks and transactions but does not store the blockchain itself, like a node.
Slippage
Slippage is the difference between the initial entry point of an order and the average price after it has been fully executed.
Smart Contract
A smart contract is a digitally created and enforced contract.
Social Enginnering
Social engineering occurs when a bad actor tricks or manipulates an individual to disclose confidential information or unintentionally install malicious software.
Soft Commodity
A soft commodity is loosely defined as any commodity that is grown and/or harvested.
Soft Fork
A soft fork is a fork, or a change to a project’s source code, which is backwards compatible, meaning that it is not imperative that all nodes adopt the upgrade.
Solvency
Solvency measures an entity’s ability to meet its financial obligations.
Sound Money
Sound money refers to money that maintains its value over time without suffering from significant debasement.
Sovereignty
Financial Sovereignty is the condition where individuals can manage their finances free from the oversight and interference of central authorities.
Sparse Merkle Tree
A Sparse Merkle Tree (SMT) is a data structure which allows for non-inclusion proofs.
Splicing
Splicing is a feature in the Lightning Network that allows users to add or withdraw bitcoin from their payment channels without closing them, reducing channel interruptions.
Spot Price
The spot price of an asset is the current price it is trading at.
Spread
A spread is the difference between two prices, rates, or yields.
Stablecoin
A stablecoin is a cryptocurrency intended and designed to be stable in price.
Stagflation
Stagflation is an economic situation characterized by the simultaneous occurrence of a shrinking economy, high rates of inflation, and rising unemployment.
Stagnation
Stagnation is an extended period of low or no growth in an economy or industry, such that total economic output is either declining, flat, or growing slowly.
Statechains
Statechains is a protocol facilitating the transfer of Bitcoin ownership without requiring on-chain transactions for every transfer.
Stock-to-Flow (S2F)
Stock-to-flow (S2F) is a measure of the new supply of an asset that is being created over time, relative to the existing supply.
Stop-Loss Order
A stop-loss order is a sophisticated order execution strategy.
Store of Value (SOV)
A store of value is an asset whose investment thesis is its ability to preserve value across time, with little to no depreciation.
Stratum V2
Stratum V2 is a new protocol that aims to improve how pooled mining works.
Stuckless Payments
Stuckless payments are an upcoming feature for the Lightning Network designed to ensure that payments can be made efficiently without the risk of funds being stuck due to network congestion or other issues.
Submarine Swaps
Submarine swaps allow for the direct exchange between on-chain and off-chain digital assets without counterparty risk.
Supply-Chain Attack
A supply-chain attack in the Bitcoin ecosystem occurs when cybercriminals compromise hardware wallets or other critical tools in order to distribute malicious code.
Support
Support is a price point where an asset is expected to have significant demand.
Surety Bond
A surety bond serves as support to further guarantee that a principal will perform on its fiduciary duty to an obligee.
SWIFT System
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) system is a digital messaging service alternative to telegraphic transfers and bank wires, which financial institutions across the world use to communicate critical information and transact.
Swiss National Bank
The Swiss National Bank is the central bank of Switzerland, known for its neutrality and national sovereignty.
Sybil Attack
A sybil attack targets a network of peer-to-peer nodes by flooding the network with nodes which are all controlled by the same entity.
Taint
Taint is the concept that certain bitcoin are riskier or less acceptable because of their previous owners or possible links to criminal activity.
Taker
A taker order occurs when a trader places an order that executes immediately by matching with an existing maker order on an exchange’s order book.
Taproot
Taproot is currently a proposed upgrade to Bitcoin which would introduce several new features.
Taproot Assets
Taproot Assets is a protocol that allows people to issue digital assets on the Bitcoin blockchain.
Tapscript
Tapscript is the scripting language used to enable a variety of new transaction types as part of the Taproot upgrade.
Taro Asset Universe
A Taro Asset Universe is a service that provides information about assets, as well as proofs for asset holders.
Tax Lot
Tax lots define the date, transaction size, and cost basis of a purchase or sale of an asset.
tBTC
tBTC is an abbreviation for testnet bitcoin.
Technical Analysis
Technical analysis is a strategy of predicting the future price of an asset based on market data, such a price, volume, and open orders.
Test Term
A test definition
Testnet
Testnet is a parallel blockchain to Bitcoin’s blockchain.
Thiers' Law
Thiers’ law states that good money will drive out bad money.
Tick Size
A tick size is the minimum price movement of an asset on a given market.
Time Preference
Time preference refers to an individual’s preference to own an asset at an earlier date as opposed to a later one.
Time-Weighted Average Price (TWAP)
An asset’s time-weighted average price (TWAP) is the measure of an asset’s average price over a predetermined period of time.
Timechain
A “timechain”, more commonly known as a blockchain, is a series of blocks that records transactions in chronological order, ensuring data integrity and transparency.
Timelock
A timelock allows a Bitcoin transaction to be created such that the recipient of the outputs cannot spend them for a specified time.
Too Big to Fail
“Too Big to Fail” (TBTF) is a term used to describe entities that are vital to a nation’s economy, as their failure could lead to severe economic damage.
Tor Network
The Onion Router (Tor) network is a decentralized protocol which uses onion routing to enable private and censorship-resistant digital interaction.
Toxicity
Toxicity, when referring to loans, means that the debt has a low chance of being repaid with interest.
Transaction
A transaction exists as a record of the transfer of bitcoin.
Transaction ID (txid)
A txid or Transaction ID is a string of letters and numbers that identifies a specific transaction on the blockchain.
Treasury Bill (T-Bill)
The U.S.
Trust
A trust is a fiduciary relationship in which a trustor gives the trustee the right to hold title to property or assets for the benefit of a third party, the beneficiary.
Trustee
A trustee is an entity or individual responsible for managing a trustor’s assets; the responsibilities of a trustee include filing taxes, distributing trust assets, and storing the assets until a distribution.
Trustless
A trustless system is one where participants do not need to place their trust in a third party.
Turing Completeness
Turing completeness is a feature of a programming language or instruction set that can compute any computable algorithm.
U.S. Treasury
The Department of the Treasury is the U.S.
Unbanked
Unbanked is a term for individuals who do not use or have access to traditional financial services such as bank accounts.
Underbanked
Underbanked individuals are individuals with bank accounts who frequently rely on alternative financial services such as check-cashing services and payday loans instead of traditional banking products like loans and credit cards.
Uniform Commercial Code (UCC)
The Uniform Commercial Code (UCC) is the framework used by state governments to develop commercial transaction laws.
Unit of Account
A unit of account is the standard denomination of money used by investors, economists, and accountants to measure value.
Unix Timestamp
A Unix timestamp is the number of seconds since January 1, 1970 UTC.
Unspent Transaction Output (UTXO)
An Unspent Transaction Output (UTXO) is a discrete piece of bitcoin.
Uptime
Generally, uptime measures a system’s reliability and is expressed as a percentage of time that a system has been operational over the period of potential operating time.
User-Activated Soft Fork (UASF)
A User-Activated Soft Fork (UASF) is an update or change to the Bitcoin network’s protocol initiated by users or nodes, who integrate new code into their Bitcoin implementations and demonstrate their acceptance of the change so that miners and other users can implement the same changes knowing they will maintain consensus.
UTC
Universal Time Coordinated (UTC) is a specific timezone and is used as a standard for international timekeeping.
Utreexo
Utreexo is a proposed hash-based accumulator that would consolidate the UTXO set into a Merkle Tree, allowing users to maintain only the desired UTXO set and very little other data.
UTXO Set
The UTXO set is the comprehensive set of all UTXOs existing at a given point in time.
Vanity Address
A Vanity Address is a type of Bitcoin address that is customized to include a recognizable pattern or sequence of characters chosen by the user, making it more personalized and identifiable.
Variable Cost
A variable cost is a business expense that changes proportionally with each additional unit produced or sold; increased production will increase variable costs, whereas a decline in production will decrease variable costs.
Vaults
Vaults are secure storage solutions designed to protect your bitcoin from online threats and unauthorized access.
vByte
A vByte is a unit of measure for the weight of blocks and transactions.
Verifiability
Verifiability is a property of a good which can be easily differentiated from impostors and counterfeits.
Virtual Currency
Virtual currency is a term of reference for a digital representation of value that can operate as a unit of account, medium of exchange, and store of value.
Volatility
Volatility is a measure of the degree of variation in an asset’s price over time.
Volume
Volume is a measure of how many times an asset has been traded.
Volume-Weighted Average Price (VWAP)
An asset’s volume-weighted average price (VWAP) is calculated by taking the average of every trade in a specified time period.
vSize
The term vSize is equivalent to block weight.
Wage-Price Spiral
The wage-price spiral is a phenomenon where rising wages lead to increased demand for goods and services, which in turn causes prices to rise.
Wallet
A wallet is a piece of software which generates and stores public and private keys, allowing users to send, receive, and store bitcoin.
Wallet Import Format (WIF)
Wallet Import Format (WIF) is a standardized method for displaying Bitcoin private keys using the Base58Check encoding scheme.
Watch-Only Wallet
Watch-only is a term used to describe Bitcoin wallets that allow you to keep track of your bitcoin in cold storage while disabling the ability to spend funds.
Watchtower
A watchtower is a service that surveils a particular Lightning channel to guard against fraud.
Wealth
Wealth is the value of assets held by a person or company at a given point in time.
Weekly Moving Average (WMA)
Calculating the weekly moving average of a stock smooths out price data over a given period of time, while helping investors understand the trend direction of stock as well as support and resistance levels.
Weight Unit
A weight unit is the unit used to measure the size of transactions and blocks as of the SegWit upgrade.
Whale
Within the context of Bitcoin, a whale is someone who holds a large amount of bitcoin.
Whitepaper
A whitepaper introduces a new idea or topic for discussion.
Window Guidance
Window guidance is an unofficial tool of monetary policy, in which the Bank of Japan (BOJ) and Prime Minister agency request commercial banks to finance a specific company, industry, good or service, usually to finance the nation’s military industrial complex.
Witness
The witness of a transaction is a section of SegWit transactions not included when a transaction is hashed and signed.
Witness Script
The Witness Script is the script which outlines the requirements to spend a Pay-to-Witness-Script-Hash (P2WSH) output.
Wrapped SegWit
Wrapped SegWit is a design implementation included in the SegWit upgrade meant to enable wallets and other Bitcoin software to more easily support SegWit.
wtxid
The witness transaction ID (wtxid) of a transaction is calculated by taking the double SHA-256 hash of a serialized transaction, including its SegWit marker, version, and witness.
Yield
Yield is the return associated with an investment.
Yield Curve
A yield curve is a line that plots the interest rates of bonds with similar credit quality but different maturity dates.
Yield Curve Control
Yield Curve Control (YCC) is a monetary policy tool used by central banks to set interest rates within a specific range across different maturities of government bonds.
Ypub (Extended Public Key)
A ypub is a form of extended public key (xpub) which follows an additional standard defined in BIP 49.
Zero Confirmation Channels
A zero-confirmation channel, also known as a “zero-conf” channel, is a Lightning Network payment channel.
Zero Knowledge Proof (ZKP)
A zero-knowledge proof (ZKP) is a method in cryptography where one party (the prover) can prove to another party (the verifier) that they know a value or have a specific piece of information without revealing any details about the information itself.
Zpub (Extended Public Key)
A zpub is a form of extended public key (xpub) which follows an additional standard defined in BIP 84.