What is Bitcoin (BTC)?

Pre-history: the Cypherpunks and early ideas

Bitcoin didn't appear out of nowhere. Through the 1990s and 2000s, the Cypherpunks mailing list brought together cryptographers and privacy advocates who explored digital cash, proof-of-work, and open, censorship-resistant money. Ideas like Hashcash (Adam Back), b-money (Wei Dai), Bit Gold (Nick Szabo), and Reusable Proof-of-Work (Hal Finney) helped set the stage for a decentralized currency.

Bitcoin.org and the public launch

In August 2008, the domain Bitcoin.org was registered to host the project's code and documentation. It became the home base for early releases, FAQs, and the community's first touchpoint with the new system.

White paper & Satoshi Nakamoto

In October 2008, a pseudonymous author (or group) known as Satoshi Nakamoto posted "Bitcoin: A Peer-to-Peer Electronic Cash System" to the cryptography community. The nine-page white paper outlined a way to solve double-spending without a bank or payment processor, combining a public ledger (blockchain), proof-of-work security, and economic incentives. Satoshi's real identity remains unknown; what matters is the design: a permissionless, censorship-resistant monetary network with no central point of control.

Genesis block and early milestones

On January 3, 2009, Satoshi mined the genesis block (Block 0), embedding the newspaper headline "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." From there, the network bootstrapped in the open:

• • 2009: The first Bitcoin transaction took place on January 12, 2009 when Satoshi Nakamoto sent 10 BTC to early cryptographer Hal Finney in Block 170, marking the beginning of peer-to-peer digital money in practice.
• • 2010: On May 22, 2010, developer Laszlo Hanyecz made the first real-world Bitcoin purchase, paying 10,000 BTC for two pizzas, an event now celebrated annually as Bitcoin Pizza Day.
• • 2011: Satoshi stopped communicating publicly and handed over control of the code repository to the open-source community, making Bitcoin a fully community-driven project.
• • 2013–2017: Bitcoin saw rapid global expansion with the rise of major exchanges, improved wallets, and increasing merchant adoption from small online retailers to large companies.
• • 2024: The U.S. Securities and Exchange Commission (SEC) approved the first spot Bitcoin Exchange-Traded Funds (ETFs), allowing mainstream investors to gain exposure to Bitcoin through traditional financial markets.

This timeline shows how a research conversation among cypherpunks evolved into the first widely adopted cryptocurrency, maintained today by a global, decentralized community of developers, miners, node operators, and users.

Blockchain and Distributed Ledger

Bitcoin uses a blockchain, which is a chronological chain of blocks that contain transaction data. Each block includes a header with a SHA-256 hash of the previous block, creating an immutable record all the way back to the 2009 genesis block. A Merkle root summarizes all transactions in a block so nodes can verify inclusion efficiently.

The ledger is replicated across thousands of nodes worldwide. Every node enforces the same consensus rules and independently validates new blocks. No single company or government controls the blockchain because it is maintained by the collective network.

Keys, Addresses, and Transactions

Ownership in Bitcoin is controlled by cryptographic key pairs.

• • Private key: a secret number that authorizes spending.
• • Public key: derived from the private key and used to generate a receiving address.
• • Address: an alphanumeric string (for example, bc1q...) where others can send BTC.

When you send BTC, your wallet signs the transaction with ECDSA. Nodes verify the signature against your public key and confirm that inputs are unspent. Transactions are pseudonymous because addresses are not inherently linked to real-world identities.

Mining and Proof of Work

Mining bundles pending transactions into blocks and secures them with Proof of Work. Specialized hardware (ASICs) searches for a block header that produces a SHA-256 hash below a target value.

• • Approximately every 10 minutes, one miner finds a valid block.
• • The winning miner earns the block reward plus transaction fees.
• • Network difficulty adjusts automatically so the average block time remains close to 10 minutes.

Proof of Work makes it computationally expensive to rewrite history, which helps protect Bitcoin against censorship and double spending.

Halving Timeline & Fixed Supply

Bitcoin's supply schedule is programmed into its code. Every 210,000 blocks (approximately four years), the block reward paid to miners is cut in half-an event known as a halving. This ensures that Bitcoin's total supply will never exceed 21 million BTC.

After the final halving around 2140, all 21 million bitcoins will have been mined, and miners will rely entirely on transaction fees for compensation.

Supply, Scarcity, and Denominations (Satoshis)

Bitcoin has a fixed maximum supply of 21,000,000 BTC. New coins enter circulation through the block reward, which halves roughly every four years until issuance approaches zero. Bitcoin is divisible to eight decimal places. The smallest unit is a satoshi.

• • 1 BTC = 100,000,000 satoshis
• • 1 satoshi = 0.00000001 BTC

High divisibility supports microtransactions and everyday pricing even if the BTC price rises significantly.

What is Bitcoin mining?

Bitcoin mining is the process that validates transactions and adds new blocks to the blockchain. Miners run specialized computers that compete to solve a proof-of-work puzzle; the first to find a valid solution earns the block reward in newly issued bitcoin plus the transaction fees contained in that block.

Mining protects the network by making attacks computationally expensive and it releases new coins on a predictable schedule. The protocol adjusts difficulty roughly every 2,016 blocks to target a block time near 10 minutes regardless of how many miners are participating.

Mining hardware (ASICs vs GPUs)

Modern Bitcoin mining is almost entirely performed with ASICs, short for application-specific integrated circuits. These machines are built for the SHA-256 algorithm and deliver far higher hashrate per watt than general-purpose hardware.

Current models such as the Antminer S21, Whatsminer M50S, and Avalon A1466 dominate industrial farms, and units can cost from a few thousand dollars to well over ten thousand depending on efficiency and output. GPUs, which once mined Bitcoin in the early years, are no longer competitive for BTC due to network difficulty and ASIC efficiency.

Many GPU miners focus on other coins where algorithms still favor graphics cards.

Mining pools and solo mining

Most miners join mining pools to smooth income. A pool aggregates the hashrate of many participants and shares rewards based on each miner's contributed work, typically charging a fee in the 1 to 3 percent range. Payout methods vary, with common options including PPS and PPLNS, and well known pools include Foundry USA, AntPool, F2Pool, ViaBTC, and Braiins Pool.

Solo mining means operating without a pool and keeping the entire reward if you find a block, but for small setups this could take months or years and is generally pursued only by hobbyists or very large operators.

Profitability considerations

Mining profitability depends on several inputs that move over time. Electricity cost is usually the largest factor and many miners target power prices around five to eight cents per kilowatt-hour or less. Hardware efficiency, measured in joules per terahash, directly affects how much energy you spend to produce a given hashrate.

Revenue is tied to the bitcoin price and to network difficulty, which rises when more hashrate joins and lowers when hashrate leaves. Upfront capital for ASICs, racks, cooling, and networking must be amortized, and ongoing operating costs include maintenance, downtime, and labor. Small changes in any of these variables can swing results from profitable to unprofitable.

Energy use and environmental factors

Bitcoin mining uses significant energy and has grown into an industrial-scale activity. Many operators seek low-cost and lower-carbon power by colocating near hydro, wind, or solar resources, tapping stranded or curtailed energy, or using flared natural gas that would otherwise be wasted.

In some markets, miners participate in demand response programs, powering down during peak demand to help stabilize the grid. The industry continues to trend toward more efficient hardware and cleaner energy mixes, although results vary by region and operator.

Is it still profitable to mine Bitcoin?

It can be, but profitability is highly situational. Operators with efficient ASICs, inexpensive electricity, and good uptime can generate positive cash flow, especially during stronger market conditions. Home miners paying typical residential rates often struggle unless they have unusually low power costs, access to waste heat reuse, or treat mining as a hobby rather than a business.

Before buying hardware, model different scenarios for BTC price, difficulty, power price, and machine efficiency, include pool fees and expected downtime, and compare the outcome to simply buying bitcoin.

For many newcomers, accumulating BTC through regular purchases may be simpler, while mining can make sense for those with favorable power contracts, technical expertise, or access to uniquely cheap energy.

1Compare providers

Before you buy, it's worth seeing how prices differ across platforms. Look at centralized exchanges, broker/on-ramps (web or mobile), peer-to-peer marketplaces, Bitcoin ATMs, and non-custodial apps. Compare how much BTC you actually receive after factoring in the spot price, fees, spread, and any deposit or withdrawal costs.

2Create an account

Once you've chosen where to buy, you'll either register for an account or connect an existing wallet.

• • Exchanges / on-ramps: Sign up and complete basic ID verification (KYC).
• • P2P / ATM / non-custodial: Use a self-custody wallet-no exchange account needed.

Before depositing, enable two-factor authentication (2FA) to keep your funds secure.

3Fund your account

Next, pick a way to pay that fits your budget and speed preferences. Common global options include bank transfer, debit or credit card, and digital wallets or mobile pay. Bank transfers are usually cheaper but slower, while cards and e-wallets are faster with slightly higher fees. You can also buy with cash through Bitcoin ATMs, though they often charge more for convenience.

4Buy Bitcoin: order types and strategies

Now you're ready to place your first order. Most platforms offer different ways to buy:

• • Market order: Buy instantly at the current price.
• • Limit order: Set a price target; your trade executes when the market reaches it.
• • Recurring buys (DCA): Schedule small, regular purchases to average your entry price over time.

Start with a small test transaction, then increase your amount as you get comfortable.

Custodial vs self-custody

You can keep Bitcoin in a custodial wallet or a self-custody wallet. With a custodial wallet, an exchange or app holds the private keys for you. This is the easiest option for beginners because you only need a login, but you must trust the platform's security and terms. Examples include keeping BTC on Coinbase, Kraken, or Binance.

With self-custody, you control the private keys in your own wallet. That gives you full control and removes platform risk, but it also makes you responsible for backups and safe habits. A common saying is "not your keys, not your coins." Many people start custodial for convenience and move savings to self-custody as they learn.

Hardware vs software wallets

If you choose self-custody, you can use a hardware wallet or a software wallet. Hardware wallets (for example, Ledger, Trezor, Coldcard) are small devices that keep your keys offline. They are a strong choice for long-term savings because they are isolated from most online attacks. Software wallets are apps on your phone or computer (for example, BlueWallet, Electrum, Base app, Trust Wallet). They are great for everyday spending because they are quick and convenient, but they depend on the security of your device, so keep that device updated and locked.

Seed phrase, backups, and 2FA

When you set up a self-custody wallet you will be shown a seed phrase, which is 12 or 24 words that can restore your wallet if your device is lost. Write the seed phrase on paper or another offline medium and store it in one or two safe places. Never type your seed phrase into a website, share it with anyone, or save it in cloud notes or email. Anyone who has it can spend your coins.

For accounts on exchanges, turn on two-factor authentication (2FA) using an authenticator app rather than SMS to reduce the risk of SIM-swap attacks. It is a good idea to practice a wallet test restore before you deposit larger amounts so you know your backup works.

Practical setup tips

Keep a small "spending" balance in a mobile software wallet and move larger savings to a hardware wallet. Start with a tiny test transaction first, then send the rest once you see it arrive. Protect your phone and computer with a strong passcode, automatic updates, and a password manager.

As you advance, you can explore extra protections like a passphrase on your hardware wallet or multisig wallets that require more than one key to spend.

Payments & Remittances

Bitcoin is a decentralized digital currency that lets you send money peer-to-peer without banks or payment processors. Individuals and businesses can transfer BTC globally 24/7 with no bank holidays, often at lower fees than international wire services.

For everyday spending and micro-transactions, the Lightning Network enables near-instant, low-cost payments, and merchant acceptance continues to expand via ecommerce plugins and payment gateways.

Store of Value

Many users treat Bitcoin as "digital gold." With a fixed supply capped at 21 million coins, strong network security, and easy portability, BTC is used as a hedge or long-term savings asset. Its divisibility (down to one satoshi) makes it practical to accumulate over time, and self-custody gives holders direct control of their funds without relying on a central intermediary.

Investing and Speculating

Common approaches include dollar-cost averaging (buying a fixed amount on a schedule to smooth volatility) and long-term holding based on the scarcity thesis. Some investors allocate a small slice of their portfolio (e.g., 1%-10%) to BTC alongside traditional assets. When converting BTC to local currency, you can sell on the exchange where you bought it, move to a venue with better CAD/USD/EUR withdrawal options, use reputable peer-to-peer platforms, or cash out small amounts at Bitcoin ATMs, bearing in mind that fees and spreads vary. Always track cost basis and understand local tax rules for capital gains.

Risks

BTC is highly volatile and can experience large drawdowns; prices are influenced by liquidity, macroeconomic conditions, regulation, and market sentiment. Security risks include exchange hacks, phishing, and user error when managing private keys; consider hardware wallets and two-factor authentication for stronger protection.

Regulatory and tax treatment differs by country and may change over time, affecting accessibility and reporting obligations. Finally, not all venues quote the same price. Spreads, payment-method fees, and slippage can impact realized returns. Do your own research, compare providers, and consider professional advice before investing.

Satoshi Nakamoto

Pseudonymous creator of Bitcoin who published the white paper in 2008 and mined the genesis block in 2009. Their identity remains unknown; public communications stopped in 2011.

Hal Finney

Legendary cryptographer who received the first ever BTC transaction from Satoshi and helped test early Bitcoin software. Earlier pioneered Reusable Proof-of-Work, informing Bitcoin's security model.

Nick Szabo

Computer scientist behind Bit Gold, a direct conceptual precursor to Bitcoin, and the originator of "smart contracts." His writings on digital scarcity and cryptographic money heavily influenced Bitcoin's design.

Adam Back

Inventor of Hashcash, the proof-of-work system foundational to Bitcoin mining. Later co-founded Blockstream and has been a long-time contributor and advocate for Bitcoin infrastructure.

Michael Saylor

Executive Chairman of Strategy (previously MicroStrategy), which adopted Bitcoin as a corporate treasury asset and catalyzed institutional interest. Prominent public advocate for BTC's "digital gold" narrative.

Jack Dorsey

Co-founder of Twitter and Block, championing Bitcoin as the internet's native money. Funds developer tooling and ecosystem projects and promotes BTC payments through Block's products.

Andreas M. Antonopoulos

Author of Mastering Bitcoin and a leading educator explaining Bitcoin's mechanics and implications. Known for accessible talks emphasizing open finance and individual sovereignty.

AML and KYC

Most countries that allow crypto trading require exchanges to follow Anti-Money Laundering (AML) and Know Your Customer (KYC) rules. New users are usually asked to verify their identity with government-issued ID and sometimes a selfie or proof of address. Platforms use transaction monitoring tools and must report suspicious activity to financial authorities. Many jurisdictions apply a "Travel Rule" for larger transfers, which means sharing sender and recipient details between service providers. Exchanges also need the right license or registration before operating, and compliance reviews are common. These measures are designed to reduce fraud and financial crime while keeping access open for legitimate users.

Country differences

Crypto rules are not the same everywhere. Most jurisdictions that permit trading require exchanges to follow AML and KYC checks, and many treat Bitcoin as property for tax reporting. Licensing, consumer protections, and payment options vary by market, which affects where you can open an account, how you fund it, and what fees you pay.

Use the snapshots below as a starting point, then confirm the latest guidance with local regulators or tax authorities before you buy or sell.

United States: Bitcoin is legal and treated as property for tax purposes. Oversight involves multiple agencies, including SEC, CFTC, and FinCEN, and compliance expectations are strict.

Canada: Bitcoin is legal and subject to capital gains tax. Exchanges must register with FINTRAC and follow AML and KYC rules.

European Union: Bitcoin is legal under the MiCA framework, which brings unified licensing and consumer protection standards across member states, and spot crypto transactions are typically VAT-exempt.

Australia: Legal and treated as property for tax. Exchanges must register and meet AML and KYC obligations.

China: Trading and mining are banned, so retail access is restricted.

Regulations continue to evolve, and details can change quickly. Always verify the latest local rules before buying or selling. For country-specific guidance, see How to buy Bitcoin in Canada, How to buy Bitcoin in the USA, and How to buy Bitcoin in Australia.