Glossary
The words, in plain language
No jargon left undefined. Every key term used across the articles, explained simply — in the order a newcomer meets them.
- Medium of exchange
- The thing you trade through rather than the thing you ultimately want. You accept money for your work and hand it to a shop, so no one needs to want exactly what you have.
- Store of value
- Money's ability to carry buying power across time. Earn today, spend next year, and expect roughly the same value to be waiting.
- Unit of account
- The common ruler we measure worth with. Prices, wages, and debts are all quoted in the same units so they can be compared.
- Coincidence of wants
- The unlikely situation barter requires: two people who each have exactly what the other wants, in the right amounts, at the same time. Money exists to remove this obstacle.
- Commodity money
- Money that is itself a useful or desirable good — salt, cattle, metal — rather than a token or claim issued by an authority.
- Gold standard
- A system in which paper currency is redeemable for a fixed amount of gold, anchoring the money supply to metal held in reserve.
- Fiat money
- Money that has value because a government declares it legal tender and people accept it, not because it is backed by a commodity. "Fiat" is Latin for "let it be done."
- Inflation
- A general rise in prices over time — the same thing as a fall in the purchasing power of each unit of money.
- Hyperinflation
- Extremely rapid, out-of-control inflation, sometimes exceeding 50% per month, which can destroy a currency's value within months.
- Deflation
- A general fall in prices over time. Mild deflation rewards saving, but a deflationary spiral — where people delay spending because money keeps gaining value — can choke economic activity.
- Sound money
- Money whose supply cannot be easily expanded, so it holds value over time and is governed by fixed rules rather than discretionary decisions.
- Lender of last resort
- A central bank's ability to supply emergency money to halt a banking panic. A fixed-supply money cannot perform this role.
- Fungibility
- The quality of one unit being interchangeable with any other. A weakness for Bitcoin, whose public ledger gives coins a traceable history.
- Double-spend problem
- The risk that digital money could be copied and spent more than once. Solving it without a trusted middleman was Bitcoin's key innovation.
- Blockchain
- A shared transaction ledger, grouped into "blocks" chained together in order and copied across many computers, so no single party controls it.
- Mining
- The process where computers compete to add the next block of transactions by expending energy on a hard puzzle (proof of work). The winner earns newly issued bitcoin plus fees, which both issues new supply and secures the ledger.
- Proof of work
- The requirement that miners spend real computing effort and energy to add blocks, making it prohibitively expensive to rewrite Bitcoin's history.
- Halving
- The roughly every-four-years event that cuts the bitcoin mining reward in half, steadily reducing new supply until issuance ends near the 21-million cap.
- Satoshi
- The smallest unit of bitcoin, one hundred-millionth of a coin, named after Bitcoin's pseudonymous creator.
- Private & public keys
- A public key (or address) is what others use to send you bitcoin; a private key is the secret that authorizes spending. Controlling the private key is ownership — lose it and the funds are unrecoverable.
- Self-custody
- Holding your own private keys rather than letting an exchange hold them. Grants full control and full responsibility — no one can seize your bitcoin, but no one can recover it for you either.
- Lightning Network
- A payment network built on top of Bitcoin that enables instant, very low-cost transactions by settling most activity off-chain and recording only the final results on the base blockchain.