What is Bitcoin and how does it work? A plain-English guide

Bitcoin is digital money that does not depend on any bank or government. No one can print more at will, freeze your account, or decide who you are allowed to pay. That sounds strange at first, so let's take it step by step.

The problem it solves

Digital money has a basic problem: files can be copied. If I send you a photo, I still have the photo and so do you. Money cannot work that way: if I send you 10, I must stop having them. For decades the only fix was a middleman — a bank — keeping the record of who owns what.

In 2008 someone using the pseudonym Satoshi Nakamoto published a paper that solved this without a middleman. In January 2009 the network went live. To this day nobody knows for sure who Satoshi is.

The blockchain: a record no one can rewrite

Instead of a bank, thousands of computers around the world keep a copy of the same ledger: the blockchain. Every few minutes a new page (a block) is added with recent transactions, and each page is mathematically "sealed" to the previous one.

To change an old transaction you would have to redo every page after it faster than the rest of the network combined, which in practice is impossible. That is why the record can be trusted even though nobody in particular is in charge.

Mining

Who writes the new pages? Miners: specialized computers competing to solve a very expensive math problem. The first to solve it adds the block and earns a reward in newly created bitcoin, plus transaction fees. That cost in electricity and hardware is exactly what makes attacking the network so expensive. This system is called proof of work.

21 million and the halving

Bitcoin's best-known rule: there will never be more than 21 million. It is written into the code and every participant checks it.

The miners' reward is cut in half every 210,000 blocks, roughly every four years. That event is the halving. It started at 50 bitcoin per block and has dropped to 25, 12.5, 6.25 and 3.125. Fewer and fewer new coins are created, until issuance ends around the year 2140. See how long until the next one on our halving countdown.

How bitcoin is stored

Your bitcoin are not "inside" an app: they are recorded on the blockchain under an address. What you keep is the private key that lets you move them. Whoever holds the key controls the coins. We cover this in detail in the wallets and security guide.

What to keep in mind

• It is volatile: its price can rise or fall sharply within days. It is not the place for money you will need soon.
• Transactions cannot be reversed: if you send to the wrong address or to a scammer, there is no bank to call.
• It is transparent, not anonymous: anyone can see every transaction and amount; what is not directly visible is who is behind each address.

You can follow its live price, in your currency, on the Bitcoin page.