What is Bitcoin and how does it work?

Bitcoin is digital money that no company or government issues or controls. It runs on a public blockchain kept by thousands of independent computers, its total supply is capped at 21 million coins, and anyone with an internet connection can send or receive it without asking permission. It was described in a nine-page paper by the pseudonymous Satoshi Nakamoto in October 2008, and the network started in January 2009.

How a payment works

You hold bitcoin through private keys, usually kept by a wallet app or hardware device. To pay, your wallet signs a transaction with your key saying which coins go to which address, and broadcasts it. Nodes check the signature and that the coins have not already been spent, and miners include the transaction in a block — on average one every ten minutes. Each later block makes it harder to undo, which is why large payments wait for several confirmations.

Where new bitcoin comes from

Miners run specialised computers that compete to add the next block, and the winner receives newly created bitcoin plus the fees of the transactions in it. The network adjusts the difficulty every 2,016 blocks, about two weeks, so blocks keep arriving roughly every ten minutes however much computing power joins.

21 million and the halving

Every 210,000 blocks — roughly every four years — the new bitcoin per block halves. It started at 50, and since the halving of April 2024 it is 3.125; the next is expected in 2028. The halvings make the total approach 21 million and never pass it. More than 20 million have already been mined; the last fraction will take until around 2140. After that, miners will be paid by fees alone.

Satoshis

One bitcoin divides into 100,000,000 satoshis, or sats. You never need to buy a whole coin; most purchases are a small fraction of one. A wallet showing 0.0025 BTC holds 250,000 sats.

What makes it different

• Fixed supply. The issuance schedule is in the software every node runs, and no central bank can add more.
• No one in charge. Changing the rules needs the network to adopt the change; nobody can freeze an address or reverse a payment.
• Open to anyone. Sending needs no account and no approval, across borders, at any hour.
• Transparent. Every transaction is public. Addresses are not names, but the history of an address is visible to anyone.

Risks to know first

• Volatility. Bitcoin's price has fallen by more than half several times in its history, and can again.
• Self-custody is unforgiving. Lose the keys and the coins are gone; send to the wrong address and nobody can send them back. See hot vs cold wallets.
• Scams. Bitcoin's irreversibility is what scammers rely on — the common ones.
• Rules vary. Tax and regulation differ by country.

Nothing here is investment advice. If you do buy, keep a record from the first purchase — how to track a portfolio — and if you would rather not pick a moment, see how buying on a schedule works.

This guide explains how things work. It is not financial, investment or tax advice. Something wrong? Write to hi@perly.io and we will correct it.