What Is Bitcoin?

What is Bitcoin? It is two things with one name. Bitcoin is a network of computers that keeps a shared ledger of payments without a central operator. Bitcoin (or BTC) is the asset recorded on that ledger. The network launched in January 2009, following a 2008 paper published under the pseudonym Satoshi Nakamoto, whose real identity has never been confirmed.

How the ledger stays honest

Every ten minutes or so, a new block of transactions is added. To add a block, a miner must find a number that, combined with the block's contents, produces a hash below a target value. The only way to find it is by trying enormous numbers of guesses, which uses computing power and electricity. That cost is the security model: rewriting past blocks would mean redoing all that work faster than the rest of the network.

The network adjusts the difficulty every 2,016 blocks, roughly every two weeks, so that blocks keep arriving about ten minutes apart whether more or fewer miners join. Independent nodes check every block against the rules and reject any that break them, such as a block paying a miner too much.

What is Bitcoin's supply limit?

New bitcoin enter circulation only as the block subsidy paid to miners. That subsidy halves every 210,000 blocks, roughly every four years:

Halvings took place in 2012, 2016, 2020 and April 2024, and the next is expected around 2028. The subsidy keeps halving until it becomes too small to divide, which is why total supply approaches but never exceeds 21 million.

At 3.125 BTC per block and about 144 blocks a day, the network currently issues roughly 3.125 × 144 = 450 BTC a day. Miners also collect the fees attached to transactions, and in the long run those fees are meant to replace the subsidy as their main income.

Mining, energy and security

Mining today is carried out by specialised machines built only to compute Bitcoin's hash function, usually grouped in large facilities where electricity is cheap. Most miners join pools that combine their computing power and share rewards, which smooths income but concentrates block production in fewer hands. The energy use of proof of work is a long-running debate; supporters see it as the cost of security, critics as waste. Either way, the combined computing power pointed at the network is what makes rewriting its history impractically expensive.

Satoshis: the small units

One bitcoin divides into 100,000,000 units called satoshis, or sats. You never need to buy a whole coin. For example, 0.0025 BTC is 0.0025 × 100,000,000 = 250,000 sats. Many wallets let you display balances in sats, which can make small amounts easier to read.

Wallets, addresses and fees

Bitcoin addresses usually begin with 1, 3 or bc1. The last type, called native SegWit or Taproot depending on the version, is common in modern wallets and tends to use less block space, so it can be cheaper to spend from.

Fees are not fixed. Block space is limited, so users bid for it: when many transactions are waiting, fees rise; when the network is quiet, they fall. The fee depends on the size of the transaction in data terms, not on how much bitcoin it moves. Sending 0.001 BTC can cost the same as sending 10 BTC.

A practical tip: when fees are high, a transaction with a low fee may wait for hours. Some wallets let you raise the fee afterwards to speed it up.

Holding options mirror other crypto: on a platform (convenient, but you rely on the company), in a software wallet on your phone (you control the key), or on a hardware wallet that keeps the key offline. Whatever you choose, the seed phrase is the master key. Keep it offline and never type it into a website.

Why the price moves so much

Bitcoin pays no dividend and no interest by default, and there is no issuer to support its price. Its value is set entirely by what buyers will pay. Supply is predictable, so price swings come mostly from demand: changes in interest rates and liquidity, flows into and out of investment products, leveraged positions being forced shut, regulatory news and headlines about platform failures. Large drawdowns have happened repeatedly in its history, and nothing in the protocol prevents another.

Our crypto profit calculator shows how fees on both sides of a trade change the result, and how crypto works covers the wider context.

Practical points when buying and holding

If you buy bitcoin on a platform, you usually see a balance but do not hold the key. Withdrawing to your own wallet means paying a network fee and, often, a platform withdrawal fee, so it makes more sense for larger, long-term holdings than for small amounts you plan to sell soon. When you withdraw, double-check the address type your wallet expects and send a small test first. For a new wallet, write down the seed phrase before sending any funds, then confirm you can restore it.

Common misunderstandings

• "Bitcoin is anonymous." Every transaction is public. Addresses are not labelled with names, but analysis firms and authorities can often link them to people, especially once coins touch a platform that verified the user's identity.
• "The halving makes the price go up." A halving reduces new supply; it does not guarantee anything about demand or price.
• "Lost coins can be recovered." Without the private key or seed phrase, no one can move them. Recovery services that promise otherwise are a well-known scam.
• "Bitcoin and blockchain are the same thing." Bitcoin is one blockchain. Ethereum, Tron and many others run their own, with different rules.

Risks to accept before owning bitcoin

Rules on buying, holding and taxing bitcoin differ by country. If you buy through a platform, check how it is registered or licensed where you live, using our broker and exchange checklist, and read how to spot trading scams before responding to any unsolicited offer.

Sources

• Bitcoin whitepaper, 2008
• Bitcoin Core documentation on difficulty adjustment and block subsidy