What is Bitcoin?
Bitcoin is digital money that no single person, company, or government controls.
It was created in 2009 by an anonymous person (or group) using the name Satoshi Nakamoto. Unlike traditional money, Bitcoin runs on a global network of computers that anyone can join. No central authority can print more, freeze accounts, or reverse transactions.
How is Bitcoin Different from Regular Money?
| Traditional Money | Bitcoin |
|---|---|
| Created by central banks | Created by mathematical rules |
| Can be printed infinitely | Maximum 21 million coins ever |
| Controlled by institutions | Controlled by no one |
| Requires banks to transfer | Transfers peer-to-peer |
| Can be censored or frozen | Cannot be stopped |
| Transactions can be reversed | Transactions are final |
How Does Bitcoin Work?
Bitcoin uses a technology called a blockchain—a public ledger that records every transaction ever made.
HOW A BITCOIN TRANSACTION WORKS:
─────────────────────────────────────────────────────────
1. Alice wants to send 0.1 BTC to Bob
2. Alice creates a transaction and signs it with her private key
(proof she owns the bitcoin)
3. The transaction broadcasts to the Bitcoin network
(thousands of computers worldwide)
4. Miners verify the transaction and include it in a block
5. The block is added to the blockchain
(permanent, public record)
6. Bob now owns 0.1 BTC
(he can verify this himself)
The key innovation: no bank or intermediary is needed. The network itself verifies and records transactions.
Key Concepts
The Blockchain
The blockchain is a chain of blocks, each containing transactions. Once a block is added, it cannot be changed without changing every block after it—making the record effectively permanent.
Every participant can verify the entire history. No trust required.
Mining
Miners are specialized computers that:
- Verify transactions follow the rules
- Bundle transactions into blocks
- Compete to add the next block (using computational work)
- Receive newly created bitcoin as a reward
This process secures the network and creates new bitcoin according to a fixed schedule.
Fixed Supply
Bitcoin has a hard cap of 21 million coins. This limit is enforced by the software and cannot be changed.
Currently, about 19.5 million bitcoin exist. The final bitcoin will be mined around the year 2140. This scarcity is why some people call Bitcoin "digital gold."
Decentralization
No single entity controls Bitcoin:
- Thousands of nodes verify transactions independently
- Anyone can run a node
- No company can change the rules unilaterally
- No government can shut it down
This makes Bitcoin censorship-resistant—no one can stop you from using it.
Why Does Bitcoin Matter?
1. Financial Freedom
With Bitcoin, you can:
- Send money anywhere in the world
- Hold savings outside the banking system
- Transact without permission from anyone
2. Protection from Inflation
When governments print more money, the money you hold loses value. Bitcoin's fixed supply means no one can dilute your holdings.
3. Ownership Without Intermediaries
Traditional assets (bank accounts, stocks, even property) can be frozen, seized, or restricted. With Bitcoin, if you hold your own keys, you truly own it.
4. Borderless Money
Bitcoin works the same whether you're in New York, Lagos, or Buenos Aires. No exchange rates between Bitcoin users, no international wire fees, no bank holidays.
What Bitcoin is NOT
"Bitcoin is anonymous"
Actually, Bitcoin is pseudonymous. Transactions are public and can be traced. Privacy requires deliberate effort. See our privacy section.
"Bitcoin is only for criminals"
Cash is used for far more crime than Bitcoin. The blockchain's transparency actually makes it poor for illegal activity compared to physical cash.
"Bitcoin has no real value"
Value comes from utility and scarcity. Bitcoin enables permissionless global transactions and has a fixed supply. Whether that's valuable is for each person to decide.
"Bitcoin is too volatile to be useful"
Volatility has decreased over time as Bitcoin has grown. Many use Bitcoin for long-term savings rather than daily spending.
Bitcoin Units
Bitcoin is divisible to 8 decimal places:
| Unit | Bitcoin | Symbol |
|---|---|---|
| 1 Bitcoin | 1.0 | BTC |
| 1 millibitcoin | 0.001 | mBTC |
| 1 microbitcoin | 0.000001 | μBTC |
| 1 satoshi | 0.00000001 | sat |
The smallest unit, a satoshi (or "sat"), is named after Bitcoin's creator. There are 100 million satoshis in one bitcoin.
At current prices, a single satoshi is worth a fraction of a cent, making Bitcoin practical for any transaction size.
How to Get Bitcoin
There are several ways to acquire bitcoin:
- Buy from an exchange — Platforms where you can purchase bitcoin with traditional currency
- Receive as payment — Accept bitcoin for goods or services
- Peer-to-peer — Buy directly from another person
- Earn it — Work for employers who pay in bitcoin
- Mine it — Run mining hardware (requires significant investment)
For most people, buying from an exchange is the simplest starting point.
When you buy bitcoin on an exchange, they hold your bitcoin for you. This is called custodial storage. If the exchange is hacked, goes bankrupt, or freezes your account, you could lose access to your bitcoin.
This is why self-custody—holding your own keys—is so important.
The Self-Custody Imperative
Bitcoin's true power comes from self-custody: holding your own private keys.
When you self-custody:
- No one can freeze your funds
- No one can stop your transactions
- No exchange hack can steal your bitcoin
- You have true ownership
This is what "not your keys, not your coins" means.
Learning self-custody is the next step in your Bitcoin journey. It requires some knowledge and responsibility, but the freedom it provides is worth the effort.
Key Takeaways
- Bitcoin is digital money that no one controls
- It has a fixed supply of 21 million coins
- The blockchain is a public record of all transactions
- Decentralization means no single point of failure or control
- Bitcoin enables financial freedom and censorship resistance
- Self-custody is essential for true ownership
Continue Learning
You now understand what Bitcoin is. The next step is learning how to actually own it securely.
→ Next: What is Bitcoin Self-Custody? — Why holding your own keys matters
→ Dive Deeper: Private Keys Explained — How ownership actually works