Glossary

The words that come up when you hold digital dollars or bitcoin, in plain terms.

Guides

Address poisoningA scam that plants a look-alike address in your transaction history, with a transfer of zero, a tiny amount or a fake token, so that the next time you copy an address from there, you copy the attacker's.
Bitcoin addressThe string of letters and numbers someone needs to send you bitcoin. It's made from a public key or a script, and its first characters tell you its format.
Bridged tokenA token on one blockchain that stands for a coin locked on another, made by whoever runs the bridge rather than by the coin's issuer. It's worth what the bridge holds.
Cold storageKeeping a wallet's private keys on something that never connects to the internet, such as a hardware wallet, an offline computer or paper, so no one can copy them remotely. It protects the keys from hackers, not from being misused when they're brought out to sign.
Collaborative custodyA multisig wallet in which a company holds one of the keys and you hold the others, so the company can't move the money on its own.
Counterparty riskThe risk that whoever holds your money, or owes it to you, doesn't pay when you ask.
Dead man's switchA mechanism that acts on its own when its owner stops checking in. In bitcoin, it can be built into a wallet as a backup path that opens once the coins have sat unmoved for a set time.
DepegA stablecoin trading away from the price it's meant to hold, usually one dollar. It happens when holders doubt that a token can be turned back into that dollar, or when it can't.
HalvingThe point, every 210,000 blocks or about four years, at which the new bitcoin each block creates is cut in half. The fourth, in April 2024, took it from 6.25 to 3.125 bitcoin per block; the fifth is expected around April 2028.
Hardware walletA small device that creates a wallet's private keys, keeps them offline and signs transactions inside itself, so the keys never touch a computer or a phone connected to the internet.
Hot walletA wallet whose private keys are kept on a device connected to the internet, such as a phone app, a browser extension or an exchange's servers. It's quick to use, and anything that reaches the device can reach the keys.
KYC (know your customer)The checks a financial company runs to confirm who you are before it serves you, such as your name, your address and an identity document. Exchanges run them before you can buy crypto or turn it back into money in your bank.
Layer 2A blockchain that runs on top of another, usually Ethereum: it handles transactions itself and records them on Ethereum in bundles, which makes transfers cheaper while relying on Ethereum for its security. Base and Arbitrum are layer 2s.
MempoolThe transactions that have been sent but not yet included in a block, held in each node's memory while they wait. When more are waiting than blocks can hold, those paying higher fees go first.
MultisigA wallet that needs signatures from more than one key to move money, so that no single key can do it alone.
Network feeWhat a transaction pays to be included in a block, collected by the miner who includes it. On bitcoin it depends on the transaction's size and on how many others are waiting, not on the amount sent.
PasskeyA pair of keys your device creates for one website or app, used to sign in instead of a password. The site keeps the public key; the private key stays with you, usually synced through your Apple or Google account.
PassphraseAn optional extra word or phrase added to a seed phrase. The same 12 or 24 words with a different passphrase make a different wallet, so found words aren't enough on their own, and a forgotten passphrase can lock you out.
Payment for order flowWhat a trading firm pays an app for sending it the app's customers' orders. The app can then charge no fee, and the money comes out of the price its customers get.
PhishingA message, call or website that pretends to come from someone you trust, to get you to hand over a password, a login code, your recovery words or a signature.
Private keyThe secret number that lets someone move a particular balance of bitcoin or digital dollars. A signature made with it is all the network checks.
ProbateThe legal process that confirms who may deal with a dead person's money and possessions, so they can collect what the estate holds and pass it on. It can get heirs into an exchange account; it can't produce a private key.
Public keyThe half of a key pair you can share. It's made from the private key, and it lets anyone check a signature without being able to make one.
RehypothecationWhen a company that holds your assets pledges them as collateral for its own borrowing. If it fails, they may not come back to you.
SatoshiOne hundred-millionth of a bitcoin, or 0.00000001 BTC. Bitcoin's software counts every amount in whole satoshis, so nothing smaller can be sent.
Seed phraseA list of 12 or 24 ordinary words that can rebuild a wallet's keys on any device. Whoever has the words has the money.
Self-custodyHolding the keys to your bitcoin or digital dollars yourself, instead of leaving them with a company that holds them for you.
SIM swapA takeover of your phone number: someone gets your mobile carrier to move it to a SIM card they hold, and from then on your calls and texts, login codes included, go to them.
Single point of failureAny one thing whose loss or theft is enough, on its own, to lose your money.
SlippageThe difference between the price you're quoted when you place an order and the price at which it actually fills. It grows with the size of the order and with how fast the market moves.
Smart contract walletA wallet that is a program on a network like Ethereum: its code, not a single private key, decides who can move the money and under what rules.
SpreadThe gap between the price at which you can buy something and the price at which you can sell it at the same moment. In an app that advertises no fees, it's often how you pay.
StablecoinA token built to keep a steady price, usually one US dollar, so it can move like crypto without its price moving like crypto.
TimelockA condition, enforced by the bitcoin network itself, that keeps coins from moving until a set date or block, or until they've sat unmoved for a set time.
USDCA digital dollar issued by Circle, a US company, on many blockchains at once. Circle holds cash and short-term US government debt for every token, and pays a dollar for each one its direct customers hand back.
Wallet descriptorA line of text that tells a wallet exactly which addresses are its own: which keys, how they combine and what kind of script. For a multisig wallet, it needs a backup as much as the keys do.
Wrench attackUsing violence, or the threat of it, to make someone hand over their crypto or unlock their wallet. The name comes from a 2009 comic: no encryption stops a 5-dollar wrench.