Bitcoin in general

Address

A Bitcoin invoice address commits to a public key or script which defines who can spend the coin. It is specified in the output of a transaction, and it should only be used once. Wasabi uses the bech32 and bech32m format to encode native segregated witness addresses. Read more: Bitcoin addresses

Bitcoin

Bitcoin is a peer-to-peer electronic cash system. An innovative payment network and a new kind of money. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin blockchain network without the need for intermediaries.

Bitcoin Core

Bitcoin Core is an open-source project which maintains and releases Bitcoin client software called Bitcoin Core, considered to be Bitcoin's reference implementation. It is a direct descendant of the original Bitcoin software client released by Satoshi Nakamoto after he published the famous Bitcoin whitepaper.

Bitcoin Core consists of both full-node software for fully validating the blockchain as well as a Bitcoin wallet. The project also currently maintains related software such as the cryptography library libsecp256k1 and others located at GitHub. Read more: Bitcoin Core Websiteopen in new window

Bitcoin Improvement Proposal (BIP)

Bitcoin Improvement Proposal. A design document for introducing features or information to Bitcoin. Read more: Wasabi Supported BIPs

Bitcoin Knots

Bitcoin Knots is a derivative of Bitcoin Core with a collection of improvements backported from and sometimes maintained outside of Core's master git tree. Since version 1.1.11, Wasabi has partial Bitcoin Knots integration. This means that it is possible (but not mandatory) to start Bitcoin Knots during the launch of Wasabi, without having to install or configure anything. Read more: Bitcoin Knots Websiteopen in new window

Block

A block is a batch of valid Bitcoin transactions and its hash must be a value below a certain difficulty target to prove the work of the miner. Each block references the hash of the previous block, thus creating a hash chain of blocks. On average a new block is mined every 10 minutes.

Blockchain

The blockchain is the one chain of valid Bitcoin blocks with the most accumulated proof of work. It is an append-only data structure with new blocks being added on average every 10 minutes. Because of its uniquely verifiable and global consensus, it is a revolutionary standard for time, thus some call it timechain.

Change

In a transaction where the provided input coins are larger than the value sent to the destination address, then the leftover change is sent to a new address of the same wallet. Read more: Change coins

Child Pays For Parent (CPFP)

Child Pays For Parent (CPFP) is a fee bumping technique where a user spends an output from a low fee rate unconfirmed transaction in a child transaction with a high fee rate in order to encourage miners to include both transactions in a block.

Coinbase

A special field used as the sole input for coinbase transactions. The coinbase allows claiming the block reward and provides up to 100 bytes for arbitrary data.

Coinbase Transaction

The first transaction in a block. Always created by a miner, it includes a single coinbase.

Cold Storage

Refers to keeping a reserve of important Bitcoin secrets offline. Cold storage is achieved when Bitcoin private keys are created and stored in a secure offline environment. Cold storage is important for anyone with bitcoin holdings. Online computers are vulnerable to hackers and should not be used to store a significant amount of bitcoin. Read more: Cold Wasabi Protocol

Confirmations

Once a transaction is included in a block, it has one confirmation. As soon as another block is mined on the same blockchain, the transaction has two confirmations, and so on. Six or more confirmations is considered sufficient proof that a transaction cannot be reversed.

Consensus

When several nodes, usually most nodes on the network, all have the same blocks in their locally-validated best blockchain.

Consensus Rules

The block validation rules that full nodes follow to stay in consensus with other nodes.

Custodial (Wallet or Mixer)

A custodial wallet is any wallet where the private keys of your coins are in the hands of a third party. In essence, they operate similarly to traditional banks.

A custodial mixer needs you to send your bitcoins to a central part before mixing. This means that you are at risk of being stolen from.

Difficulty

A network-wide setting that controls how much computation is required to produce a proof of work.

Difficulty Retargeting (Difficulty Adjustment)

A network-wide recalculation of the difficulty that occurs once every 2,016 blocks and considers the hashing power of the previous 2,016 blocks.

Difficulty Target

A difficulty at which all the computation in the network will find blocks approximately every 10 minutes. It specifies the numeric value the hash of a block must not be above to be considered a valid block.

ECDSA

ECDSA (Elliptic Curve Digital Signature Algorithm) is one of the digital signature algorithms used by Bitcoin to ensure that funds can only be spent by their rightful owners.

Fork

Fork, also known as accidental fork, occurs when two or more blocks have the same block height, forking the blockchain. Typically occurs when two or more miners find blocks at nearly the same time. Can also happen as part of an attack.

Full node

Any computer that connects to the Bitcoin network is called a node. Nodes that fully verify all of the rules of Bitcoin are called full nodes. Full nodes download every block and transaction and check them against Bitcoin's consensus rules.

Fungibility

Fungibility is a desirable property of Bitcoin UTXOs that are indistinguishable from each other. Read more: Transaction surveillance companies attempting to destroy fungibility

Genesis Block

The first block in the blockchain, used to initialize the cryptocurrency.

Hard Fork

Hard fork, also known as hard-forking change, is a permanent divergence in the blockchain, it occurs when non-upgraded nodes can not validate blocks created by upgraded nodes that follow newer consensus rules. The upgraded nodes break the rules of the legacy nodes. Not to be confused with fork, soft fork, software fork or Git fork.

Hardware Wallet (HWW)

A hardware wallet is a special type of Bitcoin wallet which generates and stores the user's private keys on a dedicated hardware device. Read more: Hardware Wallet FAQs

Hash

A cryptographic hash function takes any input of arbitrary size [the message] and computes a value of fixed size that is unique to the input, which is called a hash or a digest. If one bit of the input changes, the output will be completely different [avalanche effect]. And there are no two messages that result in the same hash [collision resistance]. The only way to get any given input, is by computing all possible inputs, it is a one-way function [pre-image resistance]. Bitcoin uses the SHA256 in many parts of the protocol.

Hierarchical Deterministic (HD) Protocol

The Hierarchical Deterministic key creation and transfer protocol (BIP32), which allows creating child keys from parent keys in a hierarchy.

Hierarchical Deterministic (HD) Wallet

Wallets using the Hierarchical Deterministic Protocol key creation and transfer protocol (BIP32).

Hot Wallet

A hot wallet is a software wallet that runs on a device which is connected to the Internet. Wasabi is a hot wallet by default.

Input

Input, transaction input, or TxIn is an input in a Bitcoin transaction which contains two fields: a unique transaction hash and an index number, which references one utxo of a previous transaction which is spent in this transaction.

Lightning Network (LN)

Lightning Network is a proposed implementation of Hashed Timelock Contracts (HTLCs) with bi-directional payment channels which allows payments to be securely routed across multiple peer-to-peer payment channels. This allows the formation of a network where any peer on the network can pay any other peer even if they don't directly have a channel open between each other.

Mainnet

The original and main network for Bitcoin transactions, where satoshis have real economic value.

Mempool

The Bitcoin Mempool (memory pool) is a collection of all transaction data in a block that have been verified by Bitcoin nodes, but are not yet confirmed. Read more: How does Wasabi know of incoming transactions to the mempool?

Merkle Root

The root node of a merkle tree, a descendant of all the hashed pairs in the tree. Block headers must include a valid merkle root descended from all transactions in that block.

Merkle Tree

A tree constructed by hashing paired data (the leaves), then pairing and hashing the results until a single hash remains, the merkle root. In Bitcoin, the leaves are almost always transactions from a single block.

Miner

A Bitcoin user that attempts to find valid proof of work for new candidate blocks, by repeated hashing until the difficulty target is met.

Mining Reward

An amount of satoshis included in each new block as a reward by the network to the miner who found the proof of work solution. Initially it was 50 bitcoin per block, which is halved every 210 000 blocks, or roughly 4 years. This leads to a total money supply of just below 21 million bitcoin.

Multisignature (multisig)

Multisignature (m-of-n multisig) refers to requiring more than one key to authorize a Bitcoin transaction. Only with m signatures of n public keys can the bitcoin be spent. Read more: Can I generate a multi signature script?

Non-Custodial (Wallet or Mixer)

A non-custodial wallet is any wallet where the private keys of your coins are in your hands. Non-custodial wallets give you full control over your bitcoins.

A non-custodial mixer like Wasabi eliminates the risk that the coordinator can steal your bitcoin. Each participant verifies the proposed transaction, and signs it only if it is valid. This signature is only valid for this transaction, so any attempt to change the transaction after the fact is futile. The funds will always be in a Bitcoin address that you control.

Nonce

The nonce in a Bitcoin block is a 32-bit (4-byte) field whose value is set so that the hash of the block will contain a run of leading zeros. The rest of the fields may not be changed, as they have a defined meaning.

Off-chain Transaction

An off-chain transaction is the movement of value outside of the blockchain. While an on-chain transaction - usually referred to as simply a transaction - modifies the blockchain and depends on the blockchain to determine its validity. An off-chain transaction relies on other methods to record and validate the transaction.

Output

Output, transaction output, or TxOut is an output in a Bitcoin transaction which contains two fields: a value field for transferring zero or more satoshis and a pubkey script for indicating what conditions must be fulfilled for those satoshis to be further spent.

P2PKH

Many transactions processed on the Bitcoin network spend outputs locked with a Pay-to-Public-Key-Hash or P2PKH script. These outputs contain a locking script that locks the output to a public key hash, more commonly known as a Bitcoin address. An output locked by a P2PKH script can be unlocked (spent) by presenting a public key and a digital signature created by the corresponding private key.

P2SH

P2SH or Pay-to-Script-Hash is a type of transaction that simplifies the use of complex transaction scripts. With P2SH the complex script that details the spending conditions (redeem script) is committed to with a hash in the locking script.

P2TR

A pay-to-taproot (P2TR), also known as a Taproot or Bech32m address, is the most recent and advanced bitcoin address format. Taproot introduces more advanced security, privacy, flexibility and scaling to bitcoin.

P2WPKH

The signature of a P2WPKH (Pay-to-Witness-Public-Key-Hash) contains the same information as a P2PKH spending, but is located in the witness field instead of the scriptSig field.

Paper Wallet

In the most specific sense, a paper wallet is a document containing all the secrets to spend a Bitcoin UTXO. It is a way of storing bitcoin offline as a physical document.

Partially Signed Bitcoin Transaction (PSBT)

PSBT is a binary transaction format which contains the information necessary for a signer to produce signatures for the transaction and holds the signatures for an input while the input does not have a complete set of signatures. The signer can be offline as all necessary information will be provided in the transaction. Read more: BIP 174 Partially Signed Bitcoin Transaction Formatopen in new window

Pay-to-Witness-Public-Key-Hash (P2WPKH)

The signature of a P2WPKH contains the same information as a Pay-to-Public-Key-Hash (P2PKH) spending, but is located in the witness field instead of the scriptSig field. The scriptPubKey is also modified. Read more: BIP 84 derivation scheme for P2WPKH based accountsopen in new window

Payment Channels

A payment channel is class of techniques designed to allow users to make multiple Bitcoin transactions without committing all of the transactions to the Bitcoin blockchain. In a typical payment channel, only two transactions are added to the blockchain, one funding and one closing transaction, but a nearly unlimited number of payments can be made between the participants.

Plausible deniability

Plausible deniability is the ability to deny knowledge of or responsibility for any damnable actions committed by others in an organizational hierarchy because of a lack of evidence that can confirm their participation, even if they were personally involved in or at least willfully ignorant of the actions.

Private Key

A private key is a large number that must be chosen at random, it is thus a very secure password and should be kept secret. With knowledge of this number, anyone can easily compute the public key, and a signature over any message. It can also be used to decrypt any message that was encrypted to the public key corresponding to the private key. In Bitcoin, a signature over a valid transaction message gives the right to spend a coin, thus knowledge of the private key corresponds to ownership of the bitcoin. Read more: Bitcoin private keys

Proof of Work (POW)

One of the requirements for a Bitcoin block to be valid is its hash should be below a certain difficulty target. In order to create a valid block, a miner must repeatedly hash a candidate block with a changing nonce until by sheer luck he finds a hash with low value. By providing this pre-image block, anyone can verify the amount of computational energy that a miner on average should have invested in order to find this block, and this is what is known as Proof of Work.

Public Key

A public key is calculated by multiplying the private key to the generator point of an elliptic curve. Given only the public key, the private key cannot be calculated. Anyone can encrypt a message using a public key. This encrypted message (cyphertext) can only be decrypted through the related private key. Given a public key and a signature over a message, anyone can verify that the signer had the private key and the message. In Bitcoin, the public key is the pseudonymous identity of the owner of a coin. Read more: Bitcoin private keys

Regtest

A local testing environment in which developers can instantly generate blocks on demand for testing events, and can create private satoshis with no real-world value.

Replace by Fee (RBF)

Replacing one version of an unconfirmed transaction with a different version of the transaction that pays a higher transaction fee.

satoshi (sat)

A satoshi is the smallest denomination of bitcoin that can be recorded on the blockchain. It is the equivalent of 0.00000001 bitcoin and is named after the creator of Bitcoin, Satoshi Nakamoto.

Satoshi Nakamoto

Satoshi Nakamoto is the name used by the person or group of people who designed Bitcoin and created its original reference implementation. As a part of the implementation, they also devised the first blockchain database. In the process they were the first to solve the double-spending problem for digital currency in a decentralized and self verifying nature. Their real identity remains unknown.

Schnorr Digital Signature Scheme

Schnorr Digital Signature Scheme is one of the digital signature algorithms used by Bitcoin to ensure that funds can only be spent by their rightful owners. Schnorr signatures and public keys can be aggregated, meaning that multiple parties with unique private keys can sign the same message, which can be verified in batches instead of individually.

Script

Bitcoin uses a scripting system for transactions. Forth-like, Script is simple, stack-based and processed from left to right. It is purposefully not Turing-complete, with no loops.

ScriptPubKey

ScriptPubKey or pubkey script, is a script included in outputs which sets the conditions that must be fulfilled for those satoshis to be spent. Data for fulfilling the conditions can be provided in a signature script.

ScriptSig

ScriptSig or signature script, is the data generated by a spender which is almost always used as variables to satisfy a pubkey script.

Segregated Witness (SegWit)

Segregated Witness is a structure where the witness [signature or redeem script] is stored separately from the transaction Merkle tree. This is separated because the witness contains only data concerning transaction validity, but not about transaction effect. Read more: Why Wasabi uses only SegWit

Simplified Payment Verification (SPV)

SPV is a method for verifying particular transactions were included in a block without downloading the entire block. The method is used by some lightweight Bitcoin clients.

Soft Fork

A soft fork is a change to the Bitcoin consensus rules that is backwards compatible. Users of this update do not break the rules of legacy users, but rather restrict themselves to a more narrow rule set.

Taproot

Taproot is an upgrade to Bitcoin which introduces several new features. Taproot integrates the Schnorr digital signature scheme into Bitcoin, upgrading Bitcoin’s core cryptography. Taproot builds on the SegWit upgrade to improve Bitcoin’s privacy and lower transaction fees. Taproot makes future Bitcoin upgrades easier by reforming Bitcoin’s scripting language.

Testnet

A testing environment in which users can obtain and spend satoshis that have no real-world value on a global network that is very similar to the Bitcoin mainnet.

Timechain

Timechain is a synonym of blockchain. It emphasizes the achievement of the Bitcoin protocol to establish consensus on the temporal order of transactions so to prevent double-spends.

Transaction

In simple terms, a transfer of bitcoin. More precisely, a transaction is a signed data structure expressing a transfer of value and consisting mainly of inputs and outputs. Transactions are transmitted over the Bitcoin network, collected by miners, and included into blocks, made permanent on the blockchain.