Three points to keep
- Bitcoin is a decentralised network and a currency: blocks are added about every 10 minutes by miners, and no company runs it.
- Its supply is capped at 21 million coins; new issuance halves roughly every four years, most recently in April 2024 to 3.125 BTC per block.
- It has no earnings or issuer, so its price rests on demand alone and has repeatedly fallen by more than half from peaks.
What is bitcoin, at the level of how it actually runs? It is two things with the same name: a network of computers that agree on a shared ledger of payments, and the currency unit recorded on that ledger (written in lower case, bitcoin, or BTC). It launched in 2009 after a paper published under the name Satoshi Nakamoto described a way to send value online without a trusted middleman. This guide looks at how it works, how its supply is controlled and what that means for anyone holding it.
How the network agrees on the ledger
Every transfer is broadcast to the network and collected by miners into a candidate block. To add a block, a miner must find a number that, combined with the block's contents, produces a hash below a target. The only way to find it is trial and error, which consumes electricity and specialised hardware. The difficulty adjusts every 2,016 blocks so that, on average, a block is found about every 10 minutes regardless of how much computing power joins.
The winning miner receives the block subsidy (newly created bitcoin) plus the fees attached to the transactions it included. Nodes across the world check each block against the rules and reject any that break them, including any attempt to create coins outside the schedule.
Supply: 21 million and the halvings
The code limits total supply to 21 million bitcoin. New coins enter circulation only through block subsidies, and the subsidy halves every 210,000 blocks, roughly every four years. Halvings took place in 2012, 2016, 2020 and April 2024; the subsidy is now 3.125 BTC per block, and the next halving is expected around 2028.
Issuance in round numbers (illustrative)
At about 144 blocks per day (one every 10 minutes), a 3.125 BTC subsidy creates around 3.125 × 144 = 450 BTC a day. After the next halving the subsidy becomes 1.5625 BTC, or about 225 BTC a day on the same assumption. Actual figures vary because block times vary.
A predictable, shrinking issuance is the basis of the "digital scarcity" argument for bitcoin. Scarcity alone does not create value, though. Demand does, and demand can fall.
Units, wallets and transfers
One bitcoin divides into 100 million units called satoshis. You do not need to buy a whole coin: $50 spent at an illustrative price of $60,000 buys 50 ÷ 60,000 = 0.00083333 BTC, or about 83,333 satoshis, before fees.
Holding bitcoin means controlling the private key for an address that holds it. You can let an exchange hold the key (custodial) or hold it yourself in a software or hardware wallet. Self-custody removes exchange risk but puts the full burden of backups and security on you. A transfer is final once confirmed; many recipients wait for several confirmations before treating a large payment as settled. How crypto works explains keys and wallets in more detail.
What bitcoin is used for
- Holding as a speculative asset, by individuals and, increasingly, through regulated products such as exchange-traded funds in some countries.
- Cross-border transfers without a bank, though fees rise when the network is busy.
- Payments, sometimes over the Lightning Network, a second layer designed for smaller, faster transfers.
How the price behaves
Bitcoin has no issuer, no earnings and no interest. Its price is whatever buyers and sellers agree on across hundreds of exchanges, twenty-four hours a day. Historically it has shown very large rises and very large falls; drawdowns of more than 50% from a previous high have happened several times. Periods around halvings attract attention, but past patterns are a small sample and prove nothing about the future.
Bitcoin also trades around the clock while stock markets are closed, so weekend moves are common and can be sharp when liquidity is thin. If you look at leveraged bitcoin products, remember that the UK bans crypto-derivatives for retail consumers and the EU caps retail crypto CFD leverage at 2:1.
Different ways to get exposure
Buying bitcoin on an exchange and leaving it there is only one route. Each alternative moves the risk to a different place.
| Route | What you hold | Main risk besides price |
|---|---|---|
| Exchange account | A claim on the exchange's bitcoin | Exchange failure, hacks, frozen withdrawals |
| Self-custody wallet | The private key itself | Loss or theft of keys and recovery phrase |
| Exchange-traded product (where permitted) | Units in a fund that holds bitcoin | Fund charges, custodian arrangements, market-hours trading only |
| Derivatives and CFDs | A contract on the price | Leverage, financing, provider risk; restricted for retail in some countries |
Availability depends on where you live. Check that any provider is authorised for the product in your country; see how to choose a broker.
Criticisms worth understanding
- Energy use: proof-of-work mining consumes large amounts of electricity. Supporters and critics disagree about how to weigh that.
- Throughput: the base layer handles a limited number of transactions per block, so fees can spike.
- Concentration: mining is concentrated in large pools, and a large share of coins sits in a relatively small number of addresses (some of which are exchanges holding coins for many customers).
- Irreversibility: useful against fraud by the payer, harmful when the payer is the victim.
Bitcoin next to shares and currencies
It helps to place bitcoin against the other markets on this site. Unlike a share, it gives no claim on profits and no vote. Unlike a national currency, it has no central bank adjusting supply to economic conditions and no government requiring it for taxes. Its supporters see those absences as the point; its critics see them as the reason its value is hard to pin down. Either way, they explain why its price reacts so strongly to shifts in demand, and why position sizes in bitcoin deserve extra caution. Financial markets explained compares the three structures.
Checking your own numbers
If you buy and later sell, the fees on both sides change the price at which you break even. Try the bitcoin profit and loss calculator with your own figures before acting, and read how to spot investment and crypto scams, since bitcoin is the most common payment method in investment fraud.
Reader questions
Who controls bitcoin?
No single party. Developers propose software changes, node operators choose which software to run, and miners produce blocks. A rule change only takes effect if the network broadly adopts it.
Will all 21 million bitcoin ever be mined?
Issuance keeps halving, so the last fractions are expected to be created well over a century from now. After that, miners would be paid by transaction fees alone.
Can bitcoin be copied or counterfeited?
Not within the network's rules. Every node checks that coins being spent exist and have not been spent before, and rejects any block that creates coins outside the schedule.
Sources
- Bitcoin whitepaper (Satoshi Nakamoto, 2008)
- Bitcoin Core developer documentation on difficulty adjustment and block subsidy
- UK Financial Conduct Authority, crypto-derivatives ban
- European Securities and Markets Authority, CFD leverage limits