Update protocol.md

Co-authored-by: nopara73 <[email protected]>

protocol.md

@@ -196,8 +196,8 @@ specific UTXO, possibly spanning multiple rounds.
 ## Network Identity State Diagram
 
 The following diagram shows the client's state transitions for a specific
-circuit. Once a circuit reaches the terminal state the identity must no longer
-be used. If a connection is broken a new circuit may be used to submit
+identity. Once an identity reaches the terminal state the identity must no longer
+be used. If a connection is broken a new identity may be used to submit
 subsequent requests related to the same input (connection confirmations,
 signature). Therefore at most one input or output should be associated with a
 single network identity to avoid privacy leaks, but multiple network identities