Glossary

Bitcoin and bitcoin: With a capital B, Bitcoin is the network: the rules and the computers that follow them. With a small b, bitcoin is the money that moves on that network.
Cantillon effect: The idea that people who get newly created money first gain the most, because they can spend it before prices rise. People who get it last pay the higher prices. It is named after Richard Cantillon, an 18th-century economist.
Central bank: The institution that manages a country’s money and sets key interest rates. In the U.S. it is the Federal Reserve, created in 1913.
CPI (Consumer Price Index): A government measure of how much a typical basket of goods and services costs. In the U.S., the Bureau of Labor Statistics tracks it every month. When CPI goes up, your dollar buys less.
Exchange: A company where you buy and sell bitcoin with dollars. While your bitcoin sits there, the company holds it for you.
Fiat money: Money that has value because a government says it must be accepted, not because it is tied to something scarce like gold. The U.S. dollar’s last link to gold ended in 1971.
GDP (gross domestic product): The total value of everything a country produces in a year. Comparing debt to GDP is like comparing a household’s debt to its yearly income.
Halving: A built-in event, about every four years, that cuts the number of new bitcoin made with each batch of transactions in half. It is why new supply keeps shrinking until it stops.
Inflation: When prices across the economy rise over time, so each dollar buys less. A main cause is the supply of money growing faster than the amount of goods and services.
Mining: The work of adding new batches of transactions to Bitcoin’s shared record. Miners spend electricity to do it and earn new bitcoin plus fees in return. This is how new bitcoin enters the world.
Money supply: The total amount of money people can easily spend: cash plus money in checking and savings accounts. The Federal Reserve measures it and calls the broad measure M2. When it grows faster than the economy, each dollar tends to buy less.
Node: A computer running Bitcoin software that checks every transaction against the rules. Anyone can run one. Thousands of them, run by different people, keep the rules from being changed quietly.
Private key: A secret number that lets you spend your bitcoin. Whoever has the private key controls the bitcoin. Your wallet creates and guards it for you.
Purchasing power: How much a unit of money can buy. If a dollar bought a loaf of bread before and now buys half a loaf, its purchasing power has fallen by half.
Recovery words (seed phrase): A list of 12 or 24 ordinary words that can rebuild your wallet if your phone or device is lost. Anyone who sees them can take your bitcoin. Write them on paper and never share them.
Sat: The smallest unit of bitcoin. One bitcoin is 100 million sats, so you can own a small amount without buying a whole coin. It is short for satoshi.
Self-custody: Holding your own bitcoin keys instead of leaving your bitcoin with a company. No one else can freeze, lose, or lend out your bitcoin. It also means you are responsible for keeping your backup safe.
Sound money: Money that holds its value over time because its supply cannot be easily increased. Gold has long been the classic example.
Store of value: Something that keeps its buying power over time, so you can save it now and use it later. Good money should be a good store of value. Money that loses value every year is a poor one.
Time preference: How much you value having something now compared with later. When money loses value, waiting costs you, so people lean toward spending now. Economists call that a higher time preference.
Wallet: An app or device that holds the keys to your bitcoin and lets you send and receive it. The bitcoin itself lives on the network; the wallet holds what proves it is yours.