Bitcoin (BTC) is the first cryptocurrency and still the largest by market value. It was described in a nine-page paper published on October 31, 2008 by the pseudonymous Satoshi Nakamoto, and the network went live on January 3, 2009. It runs on a peer-to-peer network of computers with no company, bank or government in control. You can read the original design in the Bitcoin whitepaper, which is short and still the best primary source on how the system is meant to work.
How Bitcoin Works
Every Bitcoin transaction is broadcast to the network, checked by nodes, and recorded on a public ledger called the blockchain. Transactions are grouped into blocks. Miners compete to add the next block by spending computing power on a puzzle based on the SHA-256 hash function, a process called Proof of Work. The winner earns newly created bitcoin plus the fees paid by the transactions in that block.
A new block arrives about every 10 minutes. The network keeps that pace by adjusting the mining difficulty every 2,016 blocks, roughly every two weeks. If miners join and blocks come faster, the puzzle gets harder. If miners leave, it gets easier.
Each block references the one before it, so changing an old transaction would mean redoing the work for that block and every block after it. This is why confirmed Bitcoin transactions are treated as final after a few blocks. Anyone can run a node and verify the full history independently. The Bitcoin developer guide documents these mechanics in detail.
Supply, Scarcity and the Halving
Bitcoin has a fixed maximum supply of 21 million coins. New coins enter circulation only through the block reward, and that reward is cut in half every 210,000 blocks, about every four years.
- 2009: 50 BTC per block
- 2012: 25 BTC
- 2016: 12.5 BTC
- 2020: 6.25 BTC
- April 2024: 3.125 BTC
The next halving is expected in 2028. More than 19.8 million BTC have already been mined, and the last fraction of a coin is not expected until around the year 2140. Each bitcoin divides into 100 million units called satoshis, so a fixed supply does not limit small payments.
Past halvings were followed by strong price runs, but there have only been four of them. That is a small sample, and each cycle happened under different market conditions. Treat the halving as a known supply change, not a price forecast.
Wallets, Keys and Custody
Owning bitcoin means controlling a private key. A wallet stores that key and signs transactions with it. Most wallets back the key up as a seed phrase of 12 or 24 words. Anyone who has the seed phrase can spend the coins, and nobody can restore it if it is lost.
- Custodial: an exchange or app holds the keys for you. Simple, but you depend on that company staying solvent and honest.
- Self-custody: you hold the keys, usually on a hardware wallet. No counterparty, but all the responsibility is yours.
The failures of Mt. Gox in 2014 and FTX in 2022 are the standard examples of custodial risk. Customers who kept coins on those platforms waited years for partial recovery.
Why Bitcoin Matters
Bitcoin was the first working system for digital scarcity without a central issuer. That property is why it is often compared to gold as a store of value. Both have limited supply and sit outside the banking system. The differences are large too. Gold has thousands of years of history and industrial uses. Bitcoin is under two decades old and its value depends entirely on its network and adoption. Bitcoin can be sent anywhere in minutes and verified by anyone with a laptop.
Institutional access changed in January 2024, when the US Securities and Exchange Commission approved the first spot Bitcoin exchange-traded funds. Funds from issuers such as BlackRock and Fidelity let investors hold bitcoin exposure in ordinary brokerage and retirement accounts.
For payments, the base chain is slow and fees rise when blocks are full. The Lightning Network, a second layer built on top of Bitcoin, handles small and fast payments by settling many transfers off the main chain.
Risks to Understand
Bitcoin is one of the most volatile major assets. Drawdowns of 50% to 80% from a peak have happened in several cycles, including 2014, 2018 and 2022. Other risks are more specific:
- Custody: lost keys and failed custodians are permanent losses.
- Regulation: rules on taxes, exchanges and self-custody differ by country and keep changing.
- Scams: fake giveaways, phishing sites and impersonators target new holders constantly.
- Concentration: a small number of wallets, funds and miners hold or produce a large share of supply.
Nothing in this article is financial advice. Position sizes should assume that a deep drawdown can happen at any time.
Key Bitcoin Facts
- Whitepaper: October 31, 2008
- First block: January 3, 2009
- Maximum supply: 21,000,000 BTC
- Consensus: Proof of Work (SHA-256)
- Block time: about 10 minutes
- Current block reward: 3.125 BTC
- Smallest unit: 1 satoshi (0.00000001 BTC)
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