Getting started with Bitcoin is easier when you understand the language. Bitcoin terms explained in plain English can make the difference between feeling confident and feeling completely lost. Whether you have just heard the word "blockchain" for the first time or you are trying to work out what a private key actually does, this glossary covers the core concepts in straightforward language, without the technical overload.
The foundational terms
Bitcoin (BTC)
Bitcoin is the world's first decentralised digital currency. It operates without a central bank or government and runs on a global network of computers. The ticker symbol used on exchanges is BTC. If you want a deeper look at how the whole system hangs together, our guide on what Bitcoin is and how it works is a solid starting point.
Blockchain
The blockchain is the public ledger that records every Bitcoin transaction ever made. Think of it as a shared spreadsheet that thousands of computers around the world each hold a copy of. Every new batch of transactions is bundled into a "block" and added to the chain in chronological order. Once a record is written, it cannot be changed or deleted.
Decentralisation
Decentralisation means no single person, company, or government controls Bitcoin. Decisions about the network are made collectively by the participants running the software. This is what makes Bitcoin resistant to censorship and seizure in ways that traditional bank accounts are not.
Node
A node is a computer that participates in the Bitcoin network by downloading a full copy of the blockchain and checking that all transactions follow the rules. Anyone can run a node, and the more nodes there are, the more robust the network becomes.
Keys, wallets, and addresses
Private key
A private key is a long string of letters and numbers that gives you the authority to spend Bitcoin stored at a particular address. It functions like an ultra-secure password. If someone else gets your private key, they can take your Bitcoin. If you lose it, your Bitcoin is gone forever. Keeping your private key safe is one of the most critical aspects of owning Bitcoin.
Public key and Bitcoin address
Your public key is derived mathematically from your private key, and your Bitcoin address is derived from your public key. You share your Bitcoin address (similar to a bank account number) with anyone who wants to send you Bitcoin. You never share your private key.
Wallet
A Bitcoin wallet is a tool that stores your private keys and lets you send and receive Bitcoin. Despite the name, a wallet does not actually "hold" Bitcoin the way a physical wallet holds cash. The Bitcoin always lives on the blockchain; the wallet just holds the keys that prove ownership. There are several types, including software wallets (apps), hardware wallets (physical devices), and paper wallets. For a full breakdown, read our guide on what a Bitcoin wallet is and how it works.
Seed phrase (recovery phrase)
A seed phrase is a list of 12 or 24 common English words generated when you set up a wallet. It is a human-readable backup of your private key. If your device is lost or damaged, you can use the seed phrase to restore your wallet on a new device. Store it offline, in a secure physical location, and never share it with anyone.
Hot wallet vs cold wallet
A hot wallet is connected to the internet (a phone app, for example). It is convenient for everyday use but more exposed to hacks. A cold wallet is kept offline, typically on a hardware device. Cold storage is considered the safest option for holding larger amounts of Bitcoin over the long term.
Mining and the network
Mining
Bitcoin mining is the process by which new transactions are verified and added to the blockchain. Miners use specialised computers to solve complex mathematical puzzles. The first miner to solve the puzzle gets to add the next block of transactions and earns a reward in newly created Bitcoin. Mining is what secures the network and is also how new Bitcoin enters circulation.
Proof of work
Proof of work is the consensus mechanism Bitcoin uses. It requires miners to demonstrate that they have expended real computational energy (and therefore cost) to propose a new block. This makes it extremely expensive to attack or rewrite the blockchain, because doing so would require outpacing the combined computing power of the entire honest network.
Hash rate
Hash rate measures the total computational power being used by the Bitcoin network at any given moment. A higher hash rate means the network is more secure, because more computing power would be needed to attempt a malicious attack.
Block reward and halving
The block reward is the amount of newly created Bitcoin given to the miner who successfully adds a block. Bitcoin is programmed to halve this reward roughly every four years in an event called "the halving." This built-in scarcity mechanism means the total supply of Bitcoin will never exceed 21 million coins.
Transactions and fees
Transaction fee
When you send Bitcoin, you pay a small transaction fee to the miner who includes your transaction in a block. Fees are not fixed; they fluctuate based on how busy the network is. During periods of high demand, fees rise as users compete to have their transactions confirmed quickly.
Confirmation
A confirmation happens each time a new block is added to the blockchain on top of the block containing your transaction. One confirmation means your transaction has been included in one block. Six confirmations is generally considered highly secure and irreversible. Understanding how Bitcoin transactions work gives you a clearer picture of why confirmations matter.
Mempool
The mempool (short for memory pool) is a waiting area for unconfirmed transactions. When you send Bitcoin, it enters the mempool first. Miners pick transactions from the mempool to include in the next block, usually prioritising those with higher fees.
Market and trading terms
Exchange
A Bitcoin exchange is a platform where you can buy and sell Bitcoin. Exchanges match buyers with sellers and typically charge a fee per transaction. Regulated exchanges in Australia must be registered with AUSTRAC as a Digital Currency Exchange Provider.
Spot price
The spot price is the current market price of Bitcoin at any given moment. It reflects what buyers are willing to pay and sellers are willing to accept right now, as opposed to a future or contract price.
Volatility
Volatility refers to how dramatically and quickly an asset's price moves. Bitcoin is known for high volatility: its price can rise or fall significantly in a single day. Volatility creates both opportunity and risk, which is why many investors approach Bitcoin with a long-term perspective.
Liquidity
Liquidity describes how easily an asset can be bought or sold without significantly affecting its price. A highly liquid market has many buyers and sellers at any given time. Bitcoin is one of the most liquid cryptocurrency markets in the world, though liquidity can vary between exchanges.
Bull market and bear market
A bull market is a period of rising prices and generally positive investor sentiment. A bear market is a period of falling prices and pessimism. Bitcoin has gone through several significant bull and bear cycles since its creation in 2009.
Dollar-cost averaging (DCA)
Dollar-cost averaging is a strategy where you invest a fixed amount into Bitcoin at regular intervals, regardless of the current price. It reduces the impact of short-term volatility and removes the pressure of trying to time the market perfectly.
Security and risk terms
Two-factor authentication (2FA)
Two-factor authentication adds a second layer of security to your exchange account. In addition to a password, you also need a one-time code from an app or SMS to log in. Enabling 2FA is one of the simplest steps you can take to protect your account.
Phishing
Phishing is a scam technique where attackers impersonate a legitimate service (such as an exchange) to trick you into handing over your login credentials or private keys. Always verify URLs carefully and never click on links in unsolicited emails or messages.
Not your keys, not your coins
This widely-used phrase sums up the risk of leaving Bitcoin on an exchange. If the exchange holds the private keys on your behalf, you are trusting them to keep your Bitcoin safe. If the exchange is hacked or goes under, you may lose your funds. Self-custody, where you control your own private keys, is considered the gold standard for serious Bitcoin holders.