Bitcoin (BTC) — the first cryptocurrency

Bitcoin in plain words

How digital money without a bank works in general is explained in what is cryptocurrency.

It helps to picture bitcoin as gold, of which the world has only a limited amount. You cannot touch it, yet you can send it over the internet to any country in minutes, and that earned bitcoin the nickname "digital gold". Its creator meant bitcoin as electronic cash for payments, and the comparison with gold took hold later, when people began holding the coins more often than paying with them.

Bitcoin can be useful to you in a few situations. It is handy for sending money to another country without a bank (remittances to family), you can keep part of your savings in it outside your local currency while remembering the price swings (protection from inflation), or you can take your first step into crypto with it (getting started).

How Bitcoin works

How many bitcoins there are and why new ones appear more and more slowly

The limit of 21 million coins has been part of the network's rules from the very start. Nobody prints new bitcoins. They go to miners as a reward for adding the next block, and roughly every four years this reward is cut in half, an event called a halving¹. It is as if every four years you were paid half as much for the same work.

Because of halvings, new coins come out ever more slowly, and the last of them will be issued around 2140¹. You do not need to buy a whole coin, though, because a bitcoin splits into very small parts, and the smallest of them, one satoshi, equals 0.00000001 BTC. Nobody can change the limit alone, because new rules have to be accepted by most of the network's participants, and that has never happened. Some coins are also lost forever along with their wallet keys; nobody knows exactly how many, and estimates vary widely. How issuance works for coins in general is covered in what is issuance.

How miners protect the Bitcoin network without a bank

Records on the Bitcoin network are protected by a competition among miners, who spend electricity and computing power to win the right to add the next block. This mechanism is called proof of work. It is like a lottery where every ticket costs electricity. To forge the history, someone would have to win more draws in a row than all the honest participants together. As a result, rewriting the history of transfers after the fact costs more than taking part honestly, and that is the whole of the protection. The role of miners and the way the network agrees on the correct record are explained in miners and validators and what is consensus.

A new block of transfers is added roughly every ten minutes, and each block that follows makes your transfer more secure. That is why large payments usually wait for several confirmations, meaning new blocks on top of the block with the transfer. How the chain of blocks itself works is explained in what is a blockchain.

Who created Bitcoin and how it developed

Bitcoin was invented by a person or a group of people using the name Satoshi Nakamoto, and who that really is remains unknown.

1. On 31 October 2008 the first description of the Bitcoin idea came out, a short technical document known as the whitepaper².
2. On 3 January 2009 the network's first block appeared, and Bitcoin started working³.
3. On 22 May 2010 the first known purchase with bitcoins took place: 10,000 BTC for two pizzas. The day is now remembered as Bitcoin Pizza Day⁴⁵.
4. On 1 August 2017, after a dispute over how to develop the network, a separate coin, Bitcoin Cash, split off from bitcoin⁶. What such a network split means is explained in hard fork.
5. On 10 January 2024 the US securities regulator (SEC) approved exchange-traded funds (ETFs) that hold bitcoins themselves. A share of such a fund is bought through an ordinary broker, like a stock, and its price follows the price of bitcoin⁷.
6. On 20 April 2024 the fourth halving took place, and the block reward dropped to 3.125 BTC¹.

Why Bitcoin addresses start with 1, 3 or bc1

A Bitcoin address is the number of your "account" on the network, where people send you coins. A start of "1", "3" or "bc1" marks different address formats, and all of them work. Your wallet checks format compatibility itself. How to send coins without mistakes and what a wallet key is are explained in how to send crypto and what is a private key.

The Lightning network for fast, small payments

A separate layer for fast, cheap payments runs on top of bitcoin, and it is called the Lightning network. Think of a tab at a café. You order many times and pay once when you leave. On Lightning, likewise, only the opening and the closing of such a "tab" between two participants go into the network's shared record, while the small payments between them go through almost instantly and almost free. This makes bitcoin handier for small everyday spending, where an ordinary transfer every ten minutes would be too slow.

How Bitcoin differs from gold, the dollar and Ethereum

	Bitcoin	Gold	Dollar	Ethereum
Is the supply limited?	yes	yes1	no	no2
Is issuance run by one organization?	no	no	yes	no
Can you send it online in minutes?	yes	no	varies	yes
Can a transfer be reversed?	no	no	varies	no
Can the price drop sharply in a day?	yes	varies	no3	yes
Can it run programs?	no4	no	no	yes

1. Gold is still being mined, and the exact amount is unknown. ↩
2. Ethereum has no hard cap on the number of coins (Ethereum). ↩
3. The dollar is the measure of price, yet over time it loses value as prices rise. ↩
4. Only simple transfer conditions (smart contract). ↩

Pros and cons of Bitcoin, gold, the US dollar and Ethereum

Some people prefer a scarce asset like gold, others familiar money for everyday spending, others a network for programs and tokens.

Where you can legally pay with bitcoin

In many countries bitcoin is treated as property or a digital asset, and holding or buying it is usually allowed. It does not count as state money, so no shop is obliged to accept it as payment. Only two countries have ever declared bitcoin legal tender, and both later stepped back from that decision.

• El Salvador made bitcoin legal tender in 2021. On 29 January 2025 the law was amended. Private businesses no longer have to accept bitcoin, and taxes can be paid only in dollars⁸. This was one of the conditions of an agreement with the International Monetary Fund⁹.
• The Central African Republic recognized bitcoin in 2022 and reversed that decision as early as 2023¹⁰.

How to work out tax on your transactions and which rules apply in a given country are covered by the tax guide (how to handle crypto taxes) and by separate country pages. ⚖️

Bitcoin risks and three common myths

• The price can change sharply, sometimes within a single day, so only put in an amount whose value you are ready to lose.
• A sent transfer cannot be cancelled, so the address and the network have to be checked before sending.
• You alone are responsible for your wallet key. If you lose it, you lose access to the coins, and it cannot be restored through "support" the way a bank password can (what is a seed phrase, how to store crypto).
• There is a lot of fraud around bitcoin, for example fake exchanges and "doublers" that promise to send back twice what you send them. How to recognize such schemes is explained in phishing and scams.

Where to check current Bitcoin data

The current price, the fee size and the number of confirmations of a transfer, as well as data on spot ETFs, are on an aggregator site that collects data from different exchanges and with specialist sources.

How many coins have already been issued and when the next halving is expected are shown by a block explorer.

Frequently asked questions

More detail on Bitcoin

Bitcoin had no coins handed out before launch. The Bitcoin network is secured by Proof of Work, it offers no way to lock coins up as a deposit for income (staking), and it does not run complex programs.

On 14 November 2021 the network received the Taproot upgrade, which made complex transfers neater and cheaper¹²¹³.

An address starting with "1…" uses the first format, one starting with "3…" a format with extra transfer conditions, and one starting with "bc1…" the modern format, which also covers Taproot addresses starting with "bc1p…".