Bitcoin lexicon

This page will list all technical terms I might use in my Bitcoin related articles. I will link to it when I use a term that might need a definition from the reader.


Bitcoin, with a capital B, is a decentralized digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: transaction management and money issuance are carried out collectively by the network. (Definition from the Bitcoin wiki). Alternatively you could what this introduction video referred by

An alternative definition that I like is that Bitcoin is in fact just a huge database where it’s impossible to delete any data and with specific rules that dictate who and how you can add data in the database. Your bitcoins are in fact just a link in the database that said that this address own this quantity of bitcoins.

bitcoin or BTC

Without capital b, it’s the unit of account of the digital currency used on the Bitcoin network. It has also a commonly used ISO style short name, BTC (formely XBT, which was more or less abandonned as less popular). When written in full, bitcoin is often in plural, bitcoins, when you said “your bitcoins” as you assume no-one as exactly one bitcoin in his wallet. Note that the plural is also valid if you have fractions of a bitcoin, like “I have 0.005 bitcoins in my wallet”.

Satoshis or sats or SAT

It’s the cent equivalent in the Bitcoin world. Except that it’s not cent but 100’000’000th of bitcoin. 1 BTC = 100’000’000 satoshis and 1 satoshi = 0.00000001 BTC.
The term “satoshi” is a reference to the Bitcoin creator, Satoshi Nakamoto. It is often used in plural like bitcoin and even more in its short form, sats or SAT to match the ISO style like BTC.


The definition as I use it in my articles is: any piece of software or hardware and software that allows you to sign transactions, broadcast them to the Bitcoin network and possibly store your private keys. Official definitions might vary.

Bitcoin address

A wallet will generate (from a given random input) a master private key, which will generate several private keys which in turn will each generate a matching public key for each private keys. The wallet generate also a master public keys which can (re-)generate all the public keys without knowing the private keys. The individual public keys are the one you must share to receive bitcoins, you should use a new one for each new recipient to increase your privacy.

Private key

Coming back to the Bitcoin is a big database analogy, your private key is the only thing that can allow to add a new data (transaction) and will tell everyone that you are the owner of this address and you choose to send these bitcoins to these other addresses. This is called doing a transaction.

The Bitcoin Blockchain

It’s the ledger of all transactions that happened on the Bitcoin network since the very beginning. Every Bitcoin user is free and encourage to have a copy, at least a partial one, on his device, to allow its wallet to check himself its transactions.


A transaction added to the Bitcoin blockchain tells everyone that a certain amount of bitcoins is moved from one address to another. Not that a transaction can be signed but not broadcasted, which mean it’s not yet confirmed as nobody knows about it and it can be broadcasted but not confirmed, as you need to pay enough fee to be included in a block.


A transaction is confirmed when added to the Bitcoin blockchain. We often talk about the number of confirmation needed to trust a new transaction. Usually 6 confirmations is admitted as very safe, it means it has been confirmed in a block and 5 more blocks confirm that it’s still valid by confirming all the blocks since the first confirmation. For small amounts and when you trust the receiver, 1 confirmation is already safe enough.

Fee or network fee

It’s the cost that you need to pay to have your transaction added to the blockchain. As the number of memory is limited in each block, there is a limit in the number of transactions that can be added in one block. This results in a competition where the ones paying the most fee will be added first in the next block. When the network is very loaded because a lot of people want to pass transactions at the same time, the fees might become very high, resulting in fee worth 5, 10, 20 even close to 100 of CHF/USD/EUR. When the network is not load and blocks are not full, a transaction could cost only a couple of cents, but it’s never sure that such situation will happen again in the future, depending how fast Bitcoin grows and the way people are using it.
This limitation in the size of each block is not to steal money from Bitcoin users but to maintain the highest security in decentralization in the Bitcoin network. It’s the cost to pay for a fully secured, decentralized and permission-less system.

Software wallet or hot wallet

A wallet that is running as a software on a computer or smartphone which is usually connected to internet. The name hot wallet mean that it has everything to sign the transaction, including access to the private keys, without any additional device. It’s the most common and convenient way to interact with the Bitcoin Blockchain but it has a certain risk if the device used get somehow compromised (virus, unwanted access, malicious code introduced by an update, …).
Some software wallet support only Bitcoin on-chain, some support also Bitcoin over the Lightning Network.

Hardware wallet

A device that generate and store your private keys without direct access to internet. It can interact with a computer or smartphone over a wired connection (USB), Bluetooth or in a fully air-gapped way by reading SD card or scanning and then generating back a series of QR codes.

Single signature wallet

A standard Bitcoin wallet will use your private key to generate Bitcoin wallets and this key will allow you to sign Bitcoin transaction that will be broadcast to the Bitcoin Network and confirmed on the blockchain.

Multi signatures or MultiSign wallet

A MultiSign wallet will combine several wallets, with some special requirement to sign transaction before they can be broadcasted to the network. Typically you can have 2 out of 2 wallet, where two wallets must sign the transaction to be valid and accepted by the network to be added to the blockchain. Other scenarios like 2 out of 3 or 3 out of 5 can cover other use cases, like for fallback on backups (in case a key is lost) or to match signatures rules in a corporate environment.

The Lightning Network

A second layer on top of the Bitcoin blockchain that allows to pass transaction nearly instantly and with a very low fee (much lower than on-chain transactions). The principle is that 2 users open a payment channel with one on-chain transaction. Then there are free to send back and forth the bitcoins (or satoshis) as many time as wished without any addition on-chain transaction. Opening a channel is also referring as allocating liquidity. If you open a 1’000’000 sats channel, you are able to send any amount of sats to the other users, as often as you wish, as long as you don’t consume all the 1’000’000 sats from the initial channel opening. Once you send these sats, the other users can send them back to you. By connecting all the users and all their channels together, we get a network that could potentially connect any pair of users as long as their is a path between them with enough liquidity to transact. For this reason you might only need to open one or a few channels to selected users (or node) to be able to transaction with anyone on the network.


A transaction that happen on-chain, on the Bitcoin Blockchain, which after some new block should be confirmed, visible and verifiable by anyone. The term is often used in opposition to a transaction that doesn’t happen on-chain, like a transaction on the Lightning Network or in a full custodial way like between two user of the same custodial wallet, typically an exchange wallet. Moving fund from Lightning to on-chain and vice-versa, will involve a swap fee in some case (when using a third-party swap service) and an on-chain transaction fee in all cases.


A node is a computer running Bitcoin which is able to connect to other nodes, other computer running Bitcoin. You can run a Bitcoin node on any computer and smartphone and it doesn’t necessarily need to store the entire blockchain, see full node below.

Full node

A node that sync the entire Bitcoin blockchain containing all transaction history. As of today (end of 2023) the Bitcoin blockchain has a size of more than 500GB. A 1TB SSD drive (almost twice the blockchain size of today), which cost around 50 CHF/USD/EUR, is enough to store the entire blockchain from the last decade and for at least a few more years. The limitation in the size of the Bitcoin block, limit the growing of the total size of the Bitcoin blockchain, which make running a full node very affordable, at least by most people using computers regularly.

Lightning node

A node (not necessarily a full node) which has the software to connect and interact with the Lightning Network, to pass transaction off-chain. Several mobile wallet are able to run their own node on the user smartphone, which create the meme “The node is in the phone”.

Lightning channel

A payment channel between two lightning nodes. A multisignature, 2 out of 2, transaction, will settle a channel opening as soon as it’s confirmed on-chain.

Custodial wallet

Custodial means that someone else is holding your satoshis for you. It could be because you use a wallet controlled by an exchanged, which is linked to your account on the exchanged but the company can still place order to buy and sell as you place order in their system.
There are also some custodial Lightning wallet, which make thing easier and faster to start with, especially with small amounts like a few satoshis for tips on social network like Nostr and for on-boarding and testing purpose.
One could also run a Bitcoin node with special software (like LNbits or BTCPay server) and offer Bitcoin Lightning wallet under his custodial. If it’s someone you trust, like a family member or a friend, it might be a good solution as well.
Example of custodial wallets for Lightning Network usage with small amounts (which are more or less trusted by the community): Wallet of Satoshi, Lightningtips bot on Telegram, Alby, Mt Pelerin (the Lightning wallet is the only one custodial, all other are non-custodial), Swiss Bitcoin Pay cards, CoinCorner cards.

Not your keys, not your bitcoins

Just remember that whatever custodial solution you use, you depend on someone else to keep access to your bitcoins, that’s what means: Not your keys, not your bitcoins. Use these solutions only temporarily or with small amounts. In case of exchanges it is recommanded to withdraw your bitcoins to your own non-custodial wallet as soon as you have finish trading, to avoid the risk of loosing fund if the exchange close (like MtGox, BTC-e, Quadrigacx, FTX and many others did in the past).

Non-custodial wallet

In opposition to a custodial wallet, a non-custodial wallet lets you full control of your bitcoins and your signing keys. Which also mean you are responsible to backup your keys as nobody will be able to recover them for you in case you lost them. For Lightning wallet, you will also need to open lightning channel to get some liquidity before you can send and receive satoshis on the Bitcoin Lightning network. Fortunately some wallets offer to manage the channel opening automatically for you, but in any case it comes with the cost of the on-chain transaction that will open the channel. Depending on the network fee at the time of opening, it might cost you between a few cents to some dozen of CHF/USD/EUR worth of bitcoins.

Lightning Address

A Lightning Address or lnaddress, is a human readable address that looks like an email address (for example one of mine is: to send bitcoins to someone over the Lightning Network. It’s convenient to use as it can be added to an email signature, as a QR code, on a business card or on social media profiles. However it has some requirements to host his own Lightning Address. You need to run a Lightning node that is always online and reachable over clearnet (not over Tor only as many private node are), you need a registered domain name and the appropriate IP forwarding to the app providing the Lightning Address (like LNbits or BTCPay server) and its corresponding wallet. The result is that most users, even advanced ones for privacy reasons, use a Lightning Address provided by a custodial wallet like Wallet of Satoshi, LightningTips bot on Telegram, Alby on desktop or many others. Note that Zeus wallet is providing in its latest beta version 8 an experimental non-custodial Lightning Address that allows user to receive sats directly on their Zeus modile wallet with a node in their own phone. This comes with limitations, like the need to open the wallet within 24h after receiving (a notification should popup) and a fee cut on all sats received (10%, min 10 sats, max 250 sats).


Coinjoin is a feature that allow you to mix your bitcoins with other people randomly to increase the anonymity of your transactions in the network. This could be useful if you need to pay someone and don’t want the receiver to be able to guess how many bitcoins you own. Be aware that this kind of transactions might not be appreciated by regulated companies like cryptocurrency exchanges, so use it only with wallets that are not linked to your real identity in any way (non-KYC wallets). There are several method to do a Coinjoin, which connect to their Coinjoin service, most popular are Whirlpool (used by Samourai wallet and Sparrow wallet) and Wasabi (used by Wasabi wallet), they have their pros and cons, do you own research.


Nostr is a protocol and its name means: “Notes and other stuff transmitted by relays”. It has many use cases the main one being a kind of decentralized censorship resistant Twitter alternative, but it’s also an Reddit-like, Instagram-like, marketplace, Yelp-like, and much more every day. It’s not directly related to Bitcoin and it’s not sharing the same private keys but it’s well used in the Bitcoin community as it shares similar values than Bitcoin.

I will continue to add definitions in this article when needed and link to the relevant paragraph when I use one of these term in an article. Leave a comment below if you want to add or correct something or if something is not clear enough and you still have a question. I’m also able to support you, or your company, in your Bitcoin journey, with coaching service, on demand training and customized support.