What Is Bitcoin?

What is Bitcoin? It is the first cryptocurrency, described in a 2008 paper by a person or group using the name Satoshi Nakamoto and launched in January 2009. It lets people send value to each other over the internet without a bank in the middle. Instead of a company keeping the accounts, a worldwide network of computers holds a shared record of every transaction and agrees, by following strict rules, on which new transactions to add.

How a Bitcoin payment actually happens

1. You create a transaction in your wallet saying "send this amount from my address to that address" and sign it with your private key.
2. The wallet broadcasts it to the network, where nodes check the signature and confirm you have the coins.
3. Valid transactions wait in a queue. Miners pick transactions, usually favouring those paying higher fees, and try to package them into the next block.
4. Once a block containing your transaction is added, it has one confirmation. Each later block adds another, making reversal ever less practical.

Blocks arrive about every ten minutes on average. Many platforms wait for several confirmations before crediting a deposit, so a transfer can take anywhere from a few minutes to an hour or more when the network is busy.

Mining, in plain terms

Mining is the competition to add the next block. Miners run specialised machines that make trillions of guesses per second at a number which, combined with the block's contents, produces a fingerprint meeting a difficulty target. The first to find one publishes the block and collects the reward. Every 2,016 blocks, roughly two weeks, the network adjusts the difficulty so that blocks keep arriving about every ten minutes, however much computing power joins or leaves.

This process, called proof of work, costs real electricity and hardware. That cost is the point: to rewrite history an attacker would need to outspend the honest network.

The 21 million cap and the halving

New bitcoins enter circulation only as block rewards. The rules cut the reward in half every 210,000 blocks, which is roughly every four years:

With about 144 blocks a day (24 hours × 6 blocks per hour), the current reward adds roughly 144 × 3.125 = 450 new bitcoins a day. The next halving is expected around 2028. Because each halving cuts issuance, total supply approaches but never exceeds 21 million, and most of that total has already been mined.

Halvings are widely discussed as price events. The honest summary is that they are predictable, so markets know about them years ahead, and past price rises after halvings also coincided with many other factors. They do not guarantee anything.

Satoshis: you don't need a whole bitcoin

A bitcoin divides into 100 million units called satoshis, or sats. As an illustration, if one bitcoin cost $60,000, then $50 would buy 50 ÷ 60,000 ≈ 0.00083333 BTC, which is about 83,333 sats, before fees. Seeing a high price per coin is no reason to think Bitcoin is out of reach, and a low price per coin elsewhere does not make a token "cheaper" in any useful sense.

Storing bitcoin

Bitcoin sits at addresses controlled by private keys. You can leave it with a platform, which holds the keys for you, or keep it in your own wallet:

• Software wallets on a phone or computer are convenient for small amounts.
• Hardware wallets keep keys on a separate device that signs transactions offline, reducing exposure to malware.
• Seed phrase backups of 12 or 24 words restore a wallet. Write them down offline and never share them.

Our guide to how crypto works compares custodial and self-custody options in more detail.

Why the price is so volatile

Bitcoin pays no interest or dividends, and its supply is fixed by rules rather than adjusted to demand. So price depends almost entirely on how much people want to hold it at any moment. Interest rates, regulation, large holders buying or selling, flows into exchange-traded products in some countries and simple fear or excitement all push it around. Falls of more than 50% from a high have happened several times, and weekends can bring sharp moves because Bitcoin trades while stock markets are shut.

If you want to see how fees and price changes combine on a purchase, the Bitcoin profit and loss calculator takes a buy price, a sell price and a fee rate and shows the result.

How Bitcoin differs from other cryptocurrencies

Thousands of coins have launched since 2009, and many borrow Bitcoin's vocabulary. The differences usually lie in three places. The first is supply: Bitcoin's cap and issuance schedule are fixed in its rules, while many other tokens have supplies that insiders can change or that unlock gradually to founders and investors. The second is purpose: Bitcoin concentrates on transferring and storing value, while networks such as Ethereum are built to run programs and host other tokens. The third is history: Bitcoin has run for well over a decade, through several severe crashes, without its core rules being changed by a central party. None of this makes Bitcoin safe; it simply means it should be judged differently from a newer token. Our guide to comparing coins explains the checks.

Risks worth writing down before you buy

• Price risk: you may sell for much less than you paid.
• Custody risk: a platform can fail or freeze withdrawals; a lost seed phrase cannot be reset.
• Irreversibility: a mistaken or stolen transfer cannot be recalled.
• Scams: fake Bitcoin "investment" sites promising fixed daily returns are common; read how to spot trading scams.
• Tax: selling or spending bitcoin can be a taxable event in many countries.

Sources

• Bitcoin whitepaper (Satoshi Nakamoto, 2008)
• Bitcoin Core developer documentation on block rewards and difficulty adjustment