Glossary

Smart Contract

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A smart contract is a digitally created and enforced contract. As with regular contracts, these contracts can become as complex as the language in which they are written allows. Bitcoin’s contract language, called Script, is intentionally limited, giving Bitcoin security and simplicity. However, other layers or applications built on top of Bitcoin make use of more complex smart contracts. Smart contracts can be used to design loans, timelocked transactions, and even derivative products.

Related Terms
Bitcoin Script
Script is the language Bitcoin uses to determine who can spend a given piece of bitcoin (a UTXO). Script is intentionally limited in order to maintain Bitcoin's simplicity and ensure that any individual can run a node and validate the blockchain.
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Lightning Network
The Lightning Network (LN) is a protocol designed to allow instant and cheap Bitcoin transactions. While it is still experimental, it shows great promise for Bitcoin’s ability to scale.
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Hashed Time Locked Contract (HTLC)
A Hashed Time Locked Contract is a timelocked Bitcoin transaction used on the Lightning Network to route payments between parties who do not share a Lightning Channel.
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Transaction
A transaction exists as a record of the transfer of bitcoin from one address to another. All transactions are recorded in blocks on the blockchain.
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