Three things to take away
- Bitcoin is a digital currency run by a network of computers, with no company or central bank in charge.
- Its supply is capped at 21 million, and new issuance halves roughly every four years; the last halving was in April 2024.
- The price is highly volatile, and anyone who holds the private key controls the coins.
What is Bitcoin? It is the first cryptocurrency: a digital currency that works without a bank, company or government running it. It was described in a 2008 paper under the name Satoshi Nakamoto, and the network started in January 2009. Since then, the same basic rules have kept running on computers around the world, recording who owns which bitcoin on a public ledger that anyone can inspect.
How the Bitcoin network runs
The Bitcoin network is made up of nodes, computers that keep a copy of the full ledger and check that every transaction follows the rules, and miners, who compete to add the next block of transactions.
- A new block is added roughly every 10 minutes.
- Miners use specialised hardware to find a valid block through repeated guessing, a process called proof of work.
- Every 2,016 blocks, about two weeks, the network adjusts the difficulty so that blocks keep arriving at roughly the same pace whatever the total computing power.
- The winning miner receives newly created bitcoin (the block subsidy) plus the fees paid by the transactions in the block.
What is Bitcoin's supply cap, and what is a halving?
Bitcoin's rules limit the total supply to 21 million coins. New coins enter circulation only through the block subsidy, and that subsidy halves every 210,000 blocks, roughly every four years. Halvings took place in 2012, 2016, 2020 and April 2024, which cut the reward to 3.125 BTC per block. The next is expected around 2028.
A quick illustration of what that means: at about 6 blocks an hour, the network produces about 144 blocks a day, so new issuance is roughly 144 × 3.125 = 450 BTC a day. After the next halving, that daily figure would fall to about 225.
A fixed schedule does not guarantee a rising price. Price depends on demand, and demand can fall as well as rise.
Units, addresses and transactions
A bitcoin can be split into 100 million units called satoshis, or sats. You do not need to buy a whole coin. As an illustration, spending $50 when the price is $62,500 buys $50 ÷ $62,500 = 0.0008 BTC, which is 80,000 sats.
Bitcoin is sent to an address, a string of letters and numbers derived from a public key. Only the matching private key can spend what the address holds. Transactions pay a fee to miners; when many people want to transact at once, fees rise and cheaper transactions wait longer.
What happens when you send bitcoin
A Bitcoin transaction is a signed message saying that coins held at one address should move to another. Your wallet signs it with your private key and broadcasts it to the network. Nodes check the signature and confirm the coins have not already been spent, then hold the transaction in a waiting area until a miner includes it in a block.
Once it is in a block, the transaction has one confirmation. Each later block adds another. Exchanges and merchants often wait for several confirmations before treating a deposit as final, because each additional block makes the record harder to reverse. There is no customer service desk in this process: if you send coins to the wrong address, the network will faithfully carry out the mistake.
Some payments now travel over the Lightning Network, a system built on top of Bitcoin that settles small, fast payments off the main chain and records only the opening and closing balances on it. It is useful for small amounts but adds its own technical complexity.
Holding bitcoin safely
You can leave bitcoin with an exchange (custodial) or hold the keys yourself (self-custody). Each has a different failure point.
- On an exchange: check its registration, withdrawal terms and security record, and switch on strong two-factor authentication.
- In self-custody: write the seed phrase on paper or metal, store it offline, and never type it into a website or share it.
- For larger amounts, a hardware wallet keeps keys off an internet-connected phone or computer.
- Test your backup with a small amount before relying on it.
Bitcoin's energy use and why it is debated
Proof of work uses a lot of electricity by design: the cost of computing power is what makes rewriting the ledger expensive for an attacker. Supporters argue this cost buys security and that miners increasingly use surplus or renewable power. Critics argue the energy could be put to better use. Whatever your view, the debate affects regulation and public opinion in some countries, which in turn can affect the market.
Why the price moves so much
Bitcoin has no earnings or interest payments to anchor its value. Its price reflects what buyers will pay at a given moment, shaped by adoption, regulation, interest rates, the flow of money into investment products and plain sentiment. Falls of more than half from a peak have happened several times in its history. If you do buy, our crypto profit calculator shows what a price change means after fees.
Bitcoin compared with other crypto
Bitcoin is primarily designed as a scarce digital currency. Other blockchains, such as Ethereum, focus on running programs called smart contracts. Stablecoins such as USDT aim for a fixed dollar value instead of a floating price. Thousands of other tokens exist, most with far smaller markets; see new crypto coins for the questions to ask about them. For the wider picture, start with how crypto works.
Reader questions
Who controls Bitcoin?
No single person or company. The rules are enforced by the thousands of nodes that run the software; changes only take effect if the network broadly adopts them.
What happens when all 21 million bitcoin are mined?
Based on the halving schedule, the last fractions are expected to be issued around the year 2140. After that, miners would be paid by transaction fees alone.
Can bitcoin be hacked?
The ledger itself has proved very hard to attack. Losses usually come from hacked exchanges, stolen keys, fake apps and scams rather than from the Bitcoin network.
Sources
- Bitcoin white paper, Satoshi Nakamoto (2008)
- Bitcoin Core developer documentation on difficulty adjustment and block subsidy