What is Bitcoin? A plain-English guide

Bitcoin is a digital currency that lets people send value to each other over the internet without a bank in the middle. It was described in a nine-page white paper published in October 2008 under the pseudonym Satoshi Nakamoto, and the network went live in January 2009. Satoshi’s real identity is still unknown.

The problem Bitcoin solves

Digital files are easy to copy. Before Bitcoin, the only way to stop someone spending the same digital dollar twice was to have a trusted company — a bank or payment processor — keep the ledger. Bitcoin replaced that company with a public ledger that thousands of independent computers keep in sync.

How the blockchain works

Every Bitcoin transaction is broadcast to the network and collected into a block. Roughly every ten minutes a new block is added to the chain, and each block contains a cryptographic fingerprint of the one before it. Changing an old transaction would mean redoing every block that came after it, faster than the rest of the network — which is practically impossible.

The computers that build blocks are called miners. They compete to solve a computational puzzle (this is called proof of work), and the winner earns newly created bitcoin plus the fees attached to the transactions in the block. That reward is what pays for the network’s security.

A fixed supply of 21 million

Bitcoin’s rules cap the total supply at 21 million coins. New coins enter circulation only through mining rewards, and that reward is cut in half roughly every four years in an event known as the halving. The last fraction of a bitcoin is expected to be mined around the year 2140.

Each bitcoin can be split into 100 million units called satoshis, so you never need to buy a whole coin.

Wallets and keys

You don’t store bitcoin in a wallet the way you store cash in a purse. The coins live on the blockchain; what your wallet holds is a private key — a secret number that proves you are allowed to spend them. Whoever has the key controls the coins. That is why the crypto saying goes: “not your keys, not your coins.” Our guide to keeping your crypto safe covers this in detail.

Why people use it

• Censorship resistance — no single company can freeze the network or block a valid transaction.
• Predictable supply — the issuance schedule is set in code and very hard to change.
• Global and open — anyone with an internet connection can use it, around the clock.

The risks

Bitcoin’s price is famously volatile: falls of 50% or more have happened several times in its history. Transactions are irreversible, so mistakes and scams are hard to undo. And the rules around buying, holding and taxing crypto vary a lot between countries. Understand those trade-offs before you invest — and never put in money you can’t afford to lose.