Address Gap Limit
The number of consecutive unused addresses a wallet scans before stopping, affecting fund discovery in HD wallets.
Algorithmic Stablecoin
A stablecoin that maintains its peg through automated supply adjustments rather than collateral reserves.
Anchor Outputs
Special outputs in Lightning commitment transactions that enable dynamic fee bumping during force closes, solving fee volatility issues in channel disputes.
Asset-Referenced Tokens (ARTs)
A MiCA-defined category of crypto-assets that maintain stable value by referencing multiple currencies, commodities, or other assets, subject to strict EU reserve and governance requirements.
Atomic Multipath Payments (AMP)
A Lightning Network payment protocol that splits large payments across multiple paths using cryptographic secret sharing, ensuring all parts arrive or none do.
Atomic Swap
A trustless exchange of cryptocurrencies between two parties where either both transfers complete or neither does.
Autoloop
An automated liquidity management system that uses rules-based submarine swaps to maintain optimal channel balances on Lightning Network nodes.
Bitcoin Script
A stack-based programming language used to define spending conditions for Bitcoin outputs.
Blinded Paths
A privacy feature that hides the final destination of a payment by providing an encrypted route from an introduction point.
Block Subsidy
The newly minted Bitcoin awarded to miners for successfully mining a block, halving approximately every four years.
BOLT Specifications
The Basis of Lightning Technology documents that define the Lightning Network protocol standards.
BOLT-12 Offers
A new Lightning invoice format that enables reusable payment requests, subscriptions, and enhanced privacy through blinded paths.
BRC-20
An experimental fungible token standard on Bitcoin using Ordinals inscriptions to track token deployments, mints, and transfers.
Channel Capacity
The total amount of Bitcoin locked in a Lightning channel, representing the maximum that can be transferred in either direction.
Channel Factory
A proposed multi-party channel setup that enables efficient batch opening and closing of Lightning payment channels, significantly reducing on-chain footprint and improving scalability.
Channel Reserve
The minimum balance that must be maintained in a Lightning Network channel to ensure both parties can cover potential closure fees and prevent gaming the system.
Chantools
A command-line toolkit for Lightning Network channel recovery and troubleshooting, used to rescue funds from stuck, force-closed, or corrupted channels.
Child-Pays-for-Parent (CPFP)
A fee-bumping technique where spending an unconfirmed output with a high-fee transaction incentivizes miners to include both.
Circular Rebalance
A Lightning Network liquidity management technique where node operators send payments to themselves through external routes to shift channel balances.
Coinbase Transaction
The first transaction in every Bitcoin block that creates new coins as the mining reward and collects transaction fees.
Cold Storage
Storing cryptocurrency private keys on devices that are never connected to the internet, maximizing security against remote attacks.
Commodity-Linked Synthetics
Digital assets that track the price of physical commodities like gold, silver, or oil through derivative mechanisms rather than direct physical backing.
Covenant
A proposed Bitcoin feature that would allow outputs to restrict how they can be spent in future transactions.
Cross-Chain Bridge
A protocol enabling asset or data transfer between different blockchains, with varying trust assumptions.
Death Spiral
A self-reinforcing collapse mechanism in algorithmic stablecoins where falling prices trigger panic redemptions, further crashing the price until the peg breaks irreversibly.
Depeg Event
When a stablecoin's market price diverges significantly from its target peg, often triggering panic and further instability.
Derivation Path
A hierarchical path specifying how to derive a specific key from a master seed in an HD wallet.
Difficulty Adjustment
Bitcoin's automatic mechanism to maintain approximately 10-minute block intervals by adjusting the mining difficulty every 2016 blocks.
Double Spend
An attack where the same Bitcoin is spent in two conflicting transactions, attempting to defraud a recipient.
Dust Attack
Sending tiny amounts of Bitcoin to many addresses to track spending patterns and deanonymize users when dust is consolidated.
E-Money Tokens (EMTs)
A type of stablecoin under MiCA regulation that is pegged to a single fiat currency and backed by reserves, functioning as a digital representation of electronic money.
Eclipse Attack
An attack isolating a node by controlling all its peer connections, enabling double spends or selfish mining against that node.
Eltoo
A proposed Lightning Network channel update mechanism using SIGHASH_ANYPREVOUT that simplifies state management by allowing any later state to replace any earlier state.
Ephemeral Dust
Temporary dust outputs in Lightning commitment transactions that allow channels to use their full balance without reserving funds for on-chain fees.
Fee Sniping
A theoretical mining attack where miners re-mine recent blocks to capture high-fee transactions, threatening finality.
Fiat-Backed Stablecoin
A stablecoin maintaining its peg through reserves of fiat currency or fiat-equivalent assets held by a centralized custodian.
Finality
The point at which a transaction becomes irreversible and cannot be undone, varying by system design.
Force Close
Unilaterally closing a Lightning channel by broadcasting the latest commitment transaction when the counterparty is unresponsive or malicious.
Front-Running
Exploiting advance knowledge of pending transactions to place profitable trades before them, common in DeFi and DEXs.
HD Wallet (Hierarchical Deterministic Wallet)
A wallet that derives all keys from a single master seed, enabling backup with just a seed phrase and organized key hierarchies.
Hodl Invoice
A Lightning invoice where the receiver can delay settlement, enabling escrow-like functionality and conditional payments on the Lightning Network.
Hot Wallet
A cryptocurrency wallet connected to the internet for convenient access and transactions, accepting higher security risk.
HTLC (Hash Time-Locked Contract)
A conditional payment mechanism using hash locks and time locks for trustless atomic transactions across payment channels.
Hybrid Collateral Ratio
A stablecoin design mechanism that dynamically adjusts the mix of asset-backed collateral and algorithmic stabilization to maintain price peg.
Layer 2
A protocol built on top of a base blockchain that processes transactions off-chain while inheriting the security of the underlying layer.
Lightning Channel
A two-party payment channel funded by an on-chain Bitcoin transaction that enables unlimited off-chain transactions between participants.
Lightning Invoice
A payment request containing the amount, destination, payment hash, and routing hints needed to send a Lightning payment.
Liquidation Cascade
A chain reaction of forced collateral liquidations triggered when market crashes push multiple DeFi vaults below their minimum collateralization thresholds simultaneously.
Loop In/Out
Submarine swap mechanisms for moving funds between on-chain Bitcoin and Lightning Network without custody, enabling non-custodial liquidity management.
Merkle Tree
A binary tree of hashes used in Bitcoin blocks to efficiently prove transaction inclusion with minimal data.
Miniscript
A structured subset of Bitcoin Script that enables analysis, composition, and generic signing of spending conditions.
Mint/Burn Mechanism
The process of creating new stablecoin tokens when assets are deposited and destroying them upon redemption.
MPC Wallet
A wallet using multi-party computation to distribute key material across multiple parties, eliminating single points of failure.
MPP (Multipath Payments)
A Lightning payment split across multiple routes that recombines atomically at the destination for improved reliability.
Multi-Path Payments (MPP)
A Lightning feature that splits a single payment across multiple routes to improve success rates and enable larger payments.
Onion Routing
A layered encryption technique where each routing node can only decrypt its own instructions, preserving sender and receiver privacy.
OP_RETURN
A Bitcoin script opcode that marks an output as provably unspendable, commonly used to embed arbitrary data in transactions.
Oracle Manipulation
An attack vector where malicious actors distort price feeds used by smart contracts, often to trigger unjust liquidations or exploit arbitrage in collateralized protocols.
Ordinals
A protocol for inscribing arbitrary data to individual satoshis, creating Bitcoin-native digital artifacts and NFTs.
Overcollateralization
Requiring collateral worth more than the borrowed or minted amount to provide a safety buffer against price volatility.
Passphrase (25th Word)
An optional password added to a seed phrase that derives an entirely different set of keys, enabling plausible deniability.
Payment Hash
A SHA-256 hash of the preimage that serves as the conditional lock for an HTLC payment in Lightning.
Payment Probe
A technique to discover channel balances and route viability by sending payments designed to fail at the destination.
Peg Mechanism
The system of incentives, arbitrage, and backing that maintains a stablecoin's price at its target value.
Precision Decay
Cumulative rounding errors in fixed-point arithmetic during multi-hop swaps that can be exploited to drain liquidity pools; a vulnerability class flagged in numerous DeFi security audits.
Preimage
The secret value that, when hashed, produces the payment hash and unlocks an HTLC to claim a Lightning payment.
Probing
A technique used to discover Lightning Network channel balances and network topology by sending fake payments that reveal routing information.
PSBT (Partially Signed Bitcoin Transaction)
A standardized format for constructing and signing Bitcoin transactions across multiple parties or devices.
PTLC (Point Time-Locked Contract)
An improved conditional payment mechanism using Schnorr signatures and adaptor signatures instead of hash locks.
Replace-By-Fee (RBF)
A Bitcoin mempool policy allowing unconfirmed transactions to be replaced with higher-fee versions.
Replay Attack
Reusing a valid transaction or signature on a different chain or context where it wasn't intended.
Reserve Proof
Cryptographic or audit-based evidence that a stablecoin issuer holds sufficient assets to back all outstanding tokens.
Revocation Key
A cryptographic key derived during Lightning Network channel updates that allows a counterparty to claim all channel funds if an old, revoked commitment transaction is broadcast.
Rollup
A Layer 2 scaling solution that executes transactions off-chain and posts compressed data or proofs to the base layer for security.
Route Hints
Routing information embedded in Lightning invoices that enable payments to nodes with private or unannounced channels.
Routing Attack
Attacks targeting Lightning Network payment routing, including fee manipulation, channel jamming, and balance probing.
Routing Fees
The fees charged by Lightning nodes to forward payments through their channels, consisting of a base fee and a proportional fee.
Runes
A UTXO-based fungible token protocol on Bitcoin designed to be more efficient than BRC-20 by using OP_RETURN instead of inscriptions.
Schnorr Signatures
A digital signature scheme enabled by Taproot that offers smaller signatures, native multisig aggregation, and improved privacy.
Seed Phrase
A human-readable list of words (typically 12 or 24) that encodes the master seed for an HD wallet.
SegWit (Segregated Witness)
A Bitcoin protocol upgrade that separates signature data from transaction data, fixing malleability and increasing effective block capacity.
Self-Custody
Holding your own private keys rather than trusting a third party, embracing the principle of not your keys, not your coins.
Settlement
The final, irrevocable transfer of value that completes a transaction, often requiring on-chain confirmation.
Shor's Algorithm Vulnerability
A quantum computing threat to elliptic curve cryptography (ECC) that could theoretically break the digital signatures securing Bitcoin and stablecoin transactions.
Sidechain
A separate blockchain pegged to a parent chain, enabling different features or tradeoffs while maintaining asset transferability.
Signing Device
A dedicated hardware device that stores private keys and signs transactions, isolating keys from general-purpose computers.
Specified Stablecoins
A regulatory classification in Hong Kong for fiat-referenced stablecoins with official currency ties, subject to mandatory licensing requirements.
Splicing
A technique to add or remove funds from a Lightning channel without closing it, maintaining channel uptime and routing capabilities.
State Channel
A Layer 2 construct where participants exchange signed state updates off-chain, with on-chain settlement only for disputes.
Sybil Attack
An attack where a single adversary creates many fake identities to gain disproportionate influence over a network.
Synthetic Asset
A token that tracks the price of an external asset through oracles and collateralization rather than direct backing.
Taproot
A Bitcoin upgrade activating Schnorr signatures, MAST, and Tapscript for improved privacy, efficiency, and smart contract capabilities.
Threshold Signature
A cryptographic scheme where t-of-n parties must cooperate to produce a valid signature, without any party holding the complete key.
Time-Bandit Attack
A theoretical attack where miners with sufficient hashrate reorg past blocks to steal high-value transactions or manipulate history.
Timelock
A Bitcoin script condition that prevents spending until a specified block height or timestamp is reached.
Token Standard
A specification defining how tokens are created, transferred, and managed on a blockchain platform.
Trampoline Payments
A Lightning Network routing technique where lightweight clients delegate pathfinding to intermediate nodes, enabling mobile wallets to send payments without maintaining full network state.
Trustless
Systems that operate through cryptographic verification rather than relying on trusted third parties.
Watchtower
An outsourced monitoring service that watches for channel breaches on the Lightning Network and broadcasts penalty transactions to protect users who are offline.
Witness Data
The segregated signature and script data in SegWit transactions, stored separately from the main transaction structure.
Wrapped Asset
A token on one blockchain that represents an asset from another chain, typically held by a custodian or smart contract.