What is Bitcoin (BTC)? A Plain-Language Explainer
Bitcoin is the first cryptocurrency, a decentralized digital money system. Learn how it works, what BTC is used for, its history, risks, and alternatives.
In this article9 sections
Key points
- Bitcoin is a decentralized digital currency that lets people send value without a central authority.
- It runs on a public blockchain secured by proof-of-work mining, with a capped supply of 21 million coins.
- BTC is used for payments, savings, and as a speculative asset, but it faces volatility and regulatory risks.
What is Bitcoin?
Bitcoin is a digital currency and a payment network that operates without a central bank or single administrator. It was introduced on 31 October 2008 in a nine-page white paper by a person or group using the pseudonym Satoshi Nakamoto, and the network launched on 3 January 2009. Bitcoin allows anyone with an internet connection to send and receive value directly, with transactions recorded on a public ledger called the blockchain.
There are 20,111,618 BTC in circulation. Bitcoin is the largest cryptocurrency by market capitalization, ranking first.
How Bitcoin works in plain language
Think of Bitcoin as a shared digital ledger that everyone can see but no one can secretly change. This ledger is maintained by a network of computers around the world. Here’s how it works:
- Transactions: When you send BTC, you broadcast a message to the network saying, in effect, “I’m sending this amount to this address.” The transaction is signed with your private key to prove it’s really you.
- Blocks: Transactions are grouped into blocks. Each block contains a reference to the previous block, forming a chain—hence “blockchain.”
- Mining: Miners compete to add the next block by solving a computational puzzle. The winner gets to add the block and receives newly created BTC as a reward. This process is called proof-of-work; our mining guide covers it step by step.
- Consensus: Once a block is added, other nodes verify it. If everything checks out, they accept it and move on to the next block. The longest chain represents the agreed-upon history.
This design makes Bitcoin resistant to censorship and tampering. To alter past transactions, an attacker would need to control more than half of the network’s computing power, which is extremely difficult and costly.
Bitcoin by the numbers
These figures are read from the network itself and from the issuance rules in Bitcoin’s code. They refresh automatically.
| Figure | Now | How it is set |
|---|---|---|
| Block height | 975,725 | One block about every 10 minutes |
| New BTC per block | 3.125 BTC | Halves every 210,000 blocks; last cut at block 840,000 (April 2024) |
| New BTC per day | About 450 BTC | 144 blocks a day × 3.125 BTC |
| Share of the 21 million issued | 95.77% | Sum of all block rewards so far |
| Yearly supply growth | About 0.82% | New coins per year ÷ coins already issued |
| Next halving | Block 1,050,000, 74,275 blocks away (around April 2028) | Reward falls to 1.5625 BTC |
| Network hashrate | About 919 EH/s | 3-day average, mempool.space |
| Typical payment fee | $0.38 (4 sat/vB) | typical 140-vbyte SegWit payment, confirmed in about 30 minutes |
The circulating supply shown by market-data sites is slightly below the issuance total because some early block rewards were never claimed or can never be spent (the genesis block reward is one). Fees change by the minute; the network fees page shows all speed levels. The halving schedule is explained in our halving guide.
What is BTC used for?
BTC is the native token of the Bitcoin network. It serves several purposes:
- Payments: BTC can be sent peer-to-peer for goods and services, though it is not widely used for everyday purchases due to price volatility and limited merchant adoption.
- Store of value: Some people treat BTC as “digital gold”—a way to hold wealth outside traditional financial systems.
- Speculation: Many buy and sell BTC hoping to profit from price changes.
- Collateral and DeFi: On some platforms, BTC can be used as collateral for loans or in decentralized finance applications, though these uses are less common than with other cryptocurrencies.
Notable history
Bitcoin’s history is marked by several well-documented milestones:
- 2008: The Bitcoin white paper is published.
- 2009: The first Bitcoin block, known as the genesis block, is mined on 3 January.
- 2010: The first known commercial transaction using Bitcoin takes place on 22 May, when Laszlo Hanyecz pays 10,000 BTC for two pizzas. In August, a software bug lets someone create 184 billion BTC in one transaction; developers release a fix within hours and the network moves on from the bad block.
- 2013: Bitcoin’s price surges past $1,000 for the first time, drawing mainstream attention.
- 2017: A major bull run pushes Bitcoin’s price near $20,000, followed by a sharp correction.
- 2020–2021: Institutional interest grows, and Bitcoin reaches new all-time highs.
- 2024: On 10 January the US SEC approves the first spot bitcoin exchange-traded products (see our ETF guide). In April the fourth halving, at block 840,000, reduces the block reward to 3.125 BTC.
Main risks and criticisms
The main concerns:
- Volatility: Bitcoin’s price can swing dramatically over short periods, making it risky as a short-term store of value.
- Regulatory uncertainty: Governments worldwide are still deciding how to regulate cryptocurrencies, which could impact Bitcoin’s use and value.
- Environmental impact: Proof-of-work mining consumes significant electricity, raising environmental concerns. The University of Cambridge publishes a running estimate of Bitcoin’s electricity use.
- Security risks: Losing your private key means losing your funds (see hot vs cold wallets). Exchanges can be hacked, and scams are common.
- Limited scalability: The network can only process a limited number of transactions per second, leading to high fees during peak times.
How Bitcoin compares with alternatives
Bitcoin is often compared to other cryptocurrencies, each with different goals:
| Cryptocurrency | Primary use case | Consensus | Supply cap |
|---|---|---|---|
| Bitcoin (BTC) | Digital money, store of value | Proof-of-work | 21 million |
| Ether (ETH) | Smart contracts, dApps | Proof-of-stake | No hard cap |
| Litecoin (LTC) | Faster payments | Proof-of-work | 84 million |
| Bitcoin Cash (BCH) | Payments with larger blocks | Proof-of-work | 21 million |
Ether powers the Ethereum network, which focuses on programmable smart contracts. Litecoin, created in 2011, offers faster block times and a larger supply. Bitcoin Cash forked from Bitcoin in 2017 to increase block size for cheaper transactions. Each has trade-offs in decentralization, security, and scalability.
Frequently asked questions
Is Bitcoin anonymous?
No, Bitcoin is pseudonymous. Transactions are recorded on a public ledger, and while addresses don’t directly reveal identities, they can be linked to real-world identities through analysis.
Can Bitcoin be hacked?
No one has taken control of the network or reversed confirmed history by force. The software has had serious bugs, such as the 2010 value-overflow bug noted above, which developers fixed quickly. Most losses come from hacked exchanges, wallets and stolen keys rather than from the protocol.
What gives Bitcoin value?
Bitcoin’s value comes from its scarcity (capped at 21 million), utility as a payment network, and the trust of its users. Like any asset, its price is determined by supply and demand.
Live: how much 1 Bitcoin is worth today, with its market cap, supply and a USD converter.
Disclaimer: This article is for information only and is not investment, financial or trading advice. Cryptocurrency prices are highly volatile. Always do your own research.
