A Beginner’s Guide to Bitcoin Vocabulary - Part 1

This blog introduces the foundational concepts and language used in Bitcoin circles, explained in simple words, without jargon.

1. Sound Money

Sound money is money that reliably preserves value over long periods of time.
Bitcoin maximalists see Bitcoin as sound money because:

• Its supply is capped at 21 million
• No government or central bank can create more
• It cannot be debased through inflation

Sound money is the opposite of money that loses value due to discretionary money printing.

2. Properties of Money

Classically, good money has certain properties:

• Scarcity – limited supply
• Durability – cannot be easily destroyed
• Portability – easy to carry and transfer
• Divisibility – can be broken into smaller units
• Fungibility – every unit is equal
• Verifiability – easy to check authenticity

Bitcoiners believe Bitcoin perfects these properties better than any money before it.

3. Functions of Money

Money serves three classic functions:

• Store of Value – holds purchasing power over time
• Medium of Exchange – used to buy and sell goods
• Unit of Account – used for pricing and measuring value

Bitcoin maximalists argue that Bitcoin excels as a store of value first, and the other functions naturally follow with adoption.

4. Self-Custody

Self-custody means you hold your Bitcoin, not a bank or exchange.
You control the private keys.
You remove counterparty risk.
This is summarized in the phrase:
“Not your keys, not your coins.”

5. Security

Bitcoiners speak about security in two contexts:

1. Network security – the Bitcoin network is protected by mining, proof-of-work, and global decentralization.
2. Personal security – keeping your private keys safe through multisig, hardware wallets, backups, and redundancy.

Security is viewed as a process, not a product.

6. Privacy

Bitcoin maximalists emphasize privacy as a human right.
In the context of Bitcoin, privacy means:

• Minimizing how much of your financial activity is linkable
• Using good wallet practices
• Avoiding unnecessary KYC exposure
• Understanding that Bitcoin’s base layer is pseudonymous, not anonymous

7. Transparency

This refers to Bitcoin’s open and auditable ledger.
Anyone can verify:

• Total supply
• Every transaction
• Every block
• The rules of the network

Transparency ensures trust without relying on institutions.

8. Decentralization

Decentralization means there is no single point of control or failure.
In Bitcoin:

• No individual controls the network
• No government can shut it down
• Nodes enforce the rules
• Miners compete openly
  Decentralization is what makes Bitcoin censorship-resistant.

9. Censorship Resistance

Bitcoin maximalists value a money that no authority can block, seize, or reverse.
This makes Bitcoin uniquely powerful for:

• Saving
• Transacting across borders
• Escaping capital controls
• Protecting wealth under authoritarian regimes

10. Layer 1 (Base Layer)

This refers to the Bitcoin blockchain — the foundational settlement layer.
Characteristics:

• Extremely secure
• Highly decentralized
• Slow by design
• Optimized for final settlement

Anything built on top must preserve the trust-minimized nature of the base layer.

(Continued in part 2)