What is Bitcoin, and how does it work?
Short answer
Bitcoin is a digital currency that runs on a public network of computers with no central operator. Transactions are recorded in a shared ledger called the blockchain, and new coins are issued on a fixed schedule capped at 21 million.
Origin
Bitcoin was described in a 2008 paper, "Bitcoin: A Peer-to-Peer Electronic Cash System", by an author using the name Satoshi Nakamoto, whose identity is not known. The network started running in January 2009. It lets people send value directly to each other without a bank or payment company in the middle.
The blockchain and mining
Transactions are grouped into blocks, and each block is linked to the previous one, forming a chain that all participants can check. Miners compete to add the next block by solving a computational puzzle (proof of work). The network is designed to add a block about every ten minutes on average, and the winning miner receives newly issued coins plus transaction fees.
The total supply is capped at 21 million coins. The reward for adding a block is cut in half roughly every 210,000 blocks, an event called the halving, which happens about every four years. The smallest unit is the satoshi, one hundred-millionth of a bitcoin.
Wallets and keys
Ownership is controlled by private keys held in a wallet. Whoever controls the key controls the coins, and a lost or stolen key generally cannot be recovered. Holding coins on an exchange means trusting the exchange to safeguard them. Transactions on the blockchain are public but are linked to addresses rather than names.
What this page does not cover
This explainer covers how the system is built. It does not discuss prices, forecasts or whether to buy. Rules on taxation and trading differ by country. Live prices are shown separately on the markets pages.