Bitcoin (BTC)BTC
Bitcoin (BTC) is the first and largest cryptocurrency, launched in 2009, with a supply capped at 21 million coins and secured by proof-of-work mining.
Bitcoin was the first working digital money that does not need a bank or company to run it. Its fixed supply, open network and long history make it the reference asset of the crypto market — and its large price swings make it one of the riskiest things many traders hold. This article explains how it works, not what it will be worth.
- Category
- Cryptocurrency and Blockchain
- Reading time
- 4 min
- Also called
- BTC, XBT, Digital gold
- Updated
Bitcoin in plain words
Bitcoin is a digital currency run by a network of computers rather than a central bank. Its first specification was published in 2009 by Satoshi Nakamoto.1
New coins are created on a schedule that halves over time, until issuance stops at a total of 21 million bitcoins.1
Transactions are confirmed when they are included in a block with a proof of work.1 Like other crypto assets, bitcoin is traded on crypto trading platforms and can be highly volatile.2 See Market Capitalisation and Volatility.
How bitcoin works, step by step
Wallets and keys
You control bitcoin with a private key; securing bitcoin mainly means securing that key.2
Send a transaction
You sign a payment and broadcast it to the network.
Mining
Miners bundle transactions into blocks with a proof of work.1
Block reward
The miner earns new bitcoins plus fees; the reward halves roughly every four years.1
Confirmations
Each new block on top makes a transaction harder to reverse.
Trading
Bitcoin is bought and sold on exchanges, as spot or through Perpetual Futures.
Worked examples
Example 1 — Satoshis
500,000 sats1 BTC = 100,000,000 satoshis (sats). You buy $250 of bitcoin at a hypothetical $50,000 per BTC.
| BTC bought | $250 ÷ $50,000 = 0.005 BTC |
| In sats | 0.005 × 100,000,000 = 500,000 sats |
Bitcoin is divisible, so you can buy a small fraction; the total supply still stops at 21 million coins.1
Example 2 — The halving schedule
New supply keeps shrinkingThe block reward started at 50 BTC and halves at each halving.
| Rewards | 50 → 25 → 12.5 → 6.25 → 3.125 BTC |
| After the next halving | 3.125 ÷ 2 = 1.5625 BTC |
Issuance is automatically halved over time until it stops at 21 million bitcoins.1
Example 3 — Volatility
−$3,600You hold 0.2 BTC bought at a hypothetical $60,000. The price falls 30%.
| Value before | 0.2 × $60,000 = $12,000 |
| New price | $60,000 × 0.70 = $42,000 |
| Value after | 0.2 × $42,000 = $8,400 (−$3,600) |
Large falls happen. If the coins sit on an exchange you also carry counterparty risk.1
Bitcoin vs. traditional currency
| Aspect | Bitcoin | Government currency |
|---|---|---|
| Issuer | No central issuer | Central bank |
| Supply | Capped at 21 million | Set by policy |
| Transaction record | Public blockchain | Banks’ private ledgers |
| Price stability | Highly volatile | Relatively stable |
Why people use bitcoin
Trading
Speculating on price moves, spot or with derivatives.
Long-term holding
Holding as an asset with a fixed supply.
Payments
Sending value across borders without a bank.
Collateral
Using BTC as margin on crypto platforms.
Advantages and disadvantages
Advantages
- Fixed, transparent supply schedule.
- Runs without a central operator.
- Trades 24/7 with deep liquidity.
- The most established crypto network.
Disadvantages
- Very volatile prices.
- Lost keys usually mean lost coins.
- Exchange holdings carry counterparty risk.
- Rules and tax treatment differ by country.
Going deeper
Read as far as you need. Each level builds on the one before it.
Mining and security
Intermediate
Transactions are confirmed in blocks with a proof of work.1 Rewriting history would require redoing that work, which is what secures the chain.
Custody and risk
Advanced
On an exchange you depend on its security and solvency — counterparty risk.1 In your own wallet you depend on your key management.2 Combine this with Leverage and a sharp move can mean Liquidation.
Common mistakes
Thinking you must buy a whole coin
You can buy a fraction, down to one satoshi.
Leaving everything on an exchange
Ignoring counterparty risk.
Losing the key
No password reset exists for a lost private key.
Over-leveraging
Using high leverage on a volatile asset.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Bitcoin is the first cryptocurrency, launched in 2009.
- Supply is capped at 21 million coins.
- Proof-of-work mining confirms transactions.
- Rewards halve over time.
- It is highly volatile; custody choices matter.
Frequently asked questions
Who controls bitcoin?
Can bitcoin’s supply be increased?
Is bitcoin legal?
Further learning
- Volatility
Why bitcoin’s price swings so much.
- Counterparty Risk
The risk of holding coins on a platform.
- Perpetual Futures
How bitcoin is often traded with leverage.
- Market Capitalisation
How bitcoin’s size is measured.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Bitcoin.org. Frequently Asked Questions (opens in a new tab) Checked .
- FINRA. Crypto Assets (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.