What is Bitcoin?
Bitcoin is a digital currency that people can send to each other over the internet without a bank or payment company in the middle. It was described in a 2008 paper by a person or group using the name Satoshi Nakamoto, whose real identity is still unknown.
The word Bitcoin refers both to the network and to its coin, BTC. No company or government runs it. Instead, thousands of computers around the world keep copies of the same record of transactions.
How does it work?
Every Bitcoin transaction is grouped into a block and added to a shared public record called the blockchain. Once a block is buried under later blocks, changing it becomes extremely hard.
New blocks are added through mining, a process called proof of work. Miners use specialised computers to compete at solving a maths puzzle. The winner adds the next block and earns newly created bitcoin plus transaction fees. The reward for each block is cut in half roughly every four years, an event known as the halving.
You hold bitcoin through a wallet, which stores the private keys that prove you own your coins. Whoever controls the keys controls the coins.
What is it used for?
Most people use Bitcoin in a few common ways:
- As a long-term holding that some people compare to digital gold
- Sending value across borders without a bank account
- As a base asset for investment products such as exchange-traded funds in some countries
- Paying for goods and services where merchants accept it
Bitcoin itself does little beyond sending and storing value. That simplicity is deliberate: changes to its rules are rare and need broad agreement among users, miners and developers.
Key facts
- Launched: 2009
- Creator: Satoshi Nakamoto (pseudonymous)
- Consensus: proof of work (mining)
- Blockchain: its own network, Bitcoin
- Supply: capped at 21 million BTC by the protocol
Explainer written by Finvane from official project documentation. It is not investment advice.