What is Bitcoin? Simply explained

At first, Bitcoin can feel like a tangle of jargon. We’ll untangle it with you calmly – with everyday images, one term at a time.

Bitcoin in one sentence

Bitcoin is a digital money system that works without a bank, a state or a company in the middle. It was described on 31 October 2008 in a nine-page paper, the whitepaperGlossaryWhitepaper (Bitcoin whitepaper)The nine-page founding document in which Satoshi Nakamoto introduced Bitcoin on 31 October 2008. It explains how payments can work without a bank and how double spending is prevented.In the glossary →×. Its aim: payments go directly from person to person, with no financial institution in between.^[1]

The catch: digital data can be copied at will, but money must not be spent twice. Normally, a central party prevents that – your bank, for example, which keeps the accounts. Bitcoin replaces this party with a public ledger whose entries are secured by computing work.^[1]

This ledger is called the blockchainGlossaryBlockchainBitcoin’s public ledger: a chain of blocks in which each block refers to its predecessor. Anyone wanting to change an old entry would have to recreate all the blocks that follow it.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×. Copies of it sit on thousands of computers around the world, the nodesGlossaryNodeA computer that runs Bitcoin software and exchanges transactions and blocks with other nodes. Together, the nodes form the Bitcoin network; full nodes check every rule themselves.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×, and every node checks every new entry itself. All nodes are equal and there is no headquarters: Bitcoin is a peer-to-peerGlossaryPeer-to-peer (P2P)‘Between equals’: participants exchange data or money directly with one another, without a central intermediary. In Bitcoin, nodes pass transactions and blocks directly to each other.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →× network. How blocks, transactions and miners work together is explained in How does Bitcoin work?.

Bitcoin, BTC, satoshi

In everyday language, everything is called ‘Bitcoin’. Strictly speaking, there are three things:

Term	What it means	Example sentence
Bitcoin	the network, the protocol, the system as a whole	‘The Bitcoin network has been running since 2009.’
BTC	the currency unit, the ticker on exchanges	‘I bought 0.01 BTC.’
Satoshi (sat)	the smallest unit: 1 BTC = 100,000,000 sats	‘The fee was 300 sats.’

Internally, Bitcoin counts only in whole satoshis; BTC is the conversion for humans.^[2] More in Sats, BTC & units.

Your bitcoin aren’t files on your phone. The blockchain only records who may spend which amount. Only someone who holds the matching secret key, the private keyGlossaryPrivate keyA secret, randomly generated number that you use to sign transactions and so control your bitcoin. Anyone who knows the private key can spend the bitcoin that belongs to it – it must never fall into anyone else’s hands.On the learning path: Stage 5 · Step 3 – Backing up your seed phrase →In the glossary →×, can spend it. A wallet is therefore more like a key ring than a purse – more in Keys, addresses & seed phrases.

The key properties

21 million

maximum supply in BTC

strictly: just under

100 million

satoshis per BTC

smallest unit

≈ 10 min

target interval between two blocks

on average

2009

network launch

genesis block of 3 January 2009

These values are set in the Bitcoin Core source code.^[2],[3],[4] So far, around 20,093,887 BTC have been issued, i.e. 95.69% of the final supply – calculated continuously from the current block height and the issuance rule.^[5],[3]

• Limited: The number of new BTC per block halves every 210,000 blocks, roughly every four years. That is why, under today’s rules, there will never be more than just under 21 million BTC.^[3],[4] When the last satoshi will be created is explained in The halving & the 21 million.
• Divisible: One whole bitcoin currently costs $85,533. But you can also own fractions – 0.0005 BTC is bitcoin just the same.
• Open: You need neither permission nor an account to use a wallet or run your own node. If you buy on a regulated exchangeTermExchange (crypto exchange)A trading platform where buyers and sellers trade bitcoin with each other via an order book.On the learning path: Stage 4 · Step 2 – Choosing a provider →In the glossary →AdLicensed providers with a paid linkProviders from our comparisonKrakenExchange · MiCA (Central Bank of Ireland)Visit Kraken* (paid link, opens in a new window)BitvavoExchange · MiCA (AFM, Netherlands)Visit Bitvavo* (paid link, opens in a new window)CoinbaseExchange · MiCA (CSSF, Luxembourg)Visit Coinbase* (paid link, opens in a new window)All 7 compared – including non-partners →*Paid link: if you sign up or buy through it, we earn a commission. Your price stays the same. How we make money →18+ · Crypto assets are highly volatile; you could lose all your money. No deposit protection.×, however, you have to identify yourself there.
• Verifiable: The software is open source. Every node recalculates all the rules and the entire money supply itself.
• Pseudonymous, not anonymous: All transactions are public, but linked only to addresses, not automatically to names.^[1]
• Final: A confirmed payment practically can’t be reversed – no chargebacks, no hotline. The whitepaper intends this to protect sellers from fraud.^[1]

Who sets the rules?

In Bitcoin, there is no body that sets the rules. Power is spread across several groups that keep each other in check.

• Nodes check every new block against the rules. If it contains too many new bitcoin, for example, they reject it – no matter who sent it.
• Miners bundle transactions into blocks and receive a reward for doing so. They decide which payments go first, but they can’t force through invalid blocks. More in Mining & proof of work.
• Developers write software and propose rule changes, usually as a BIPGlossaryBIP (Bitcoin Improvement Proposal)A publicly documented proposal for Bitcoin – for example for new rules, standards or processes. A BIP is not a decision: whether it gets used is up to users, wallets and node operators themselves.In the glossary →× (Bitcoin Improvement Proposal). A BIP represents only the opinion of its authors; whether it is adopted is decided by the participants across the whole ecosystem.^[6]
• Users, merchants and exchanges decide which software they run and what they accept as ‘Bitcoin’.

So a rule applies because the vast majority enforce it voluntarily – that is consensusGlossaryConsensus (consensus rules)The agreement of all nodes on which blocks and transactions are valid and which chain counts. It rests on fixed consensus rules that every node checks for itself – no vote, no boardroom.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×. Anyone who changes the rules unilaterally ends up on a chain of their own. That is how supporters of larger blocks founded a separate currency, Bitcoin Cash, on 1 August 2017.^[7] In August 2026, supporters of BIP-110, a proposal to keep images, text and other non-financial data out of transactions for a year, split off. Their chain found two blocks in around eight hours; the main chain found 48 in the same period.^[8] How such splits play out is explained in Forks & controversies.

What Bitcoin is not

• Not a company and not a share: no issuer, no balance sheet, no dividend. Bitcoin is independent of governments and central banks.^[9]
• Not legal tender in Germany – only the euro is. Nobody has to accept bitcoin.^[10],[9]
• Not covered by deposit protection.^[9] What applies if a provider holding your bitcoin goes bust is explained in Understanding custody.
• Not the same as ‘crypto’: thousands of other tokens follow entirely different rules. We only explain Bitcoin – you can read why in Bitcoin, not ‘crypto’.

What supporters and critics say

Two authors at the European Central Bank made the last point in a 2022 blog post: Bitcoin had never been used to any significant extent for legal payments, and transactions were cumbersome, slow and expensive.^[11] Supporters see Bitcoin more as a store of value and point to the Lightning Network for small payments. The detailed weighing-up is in Criticism & risks, honestly explained.

What does this mean for you?

Bitcoin is money you can use without anyone else’s permission – provided you hold your keys yourself. The flip side is responsibility: nobody reverses a wrong transfer or resets a lost key.

You don’t have to buy Bitcoin to understand it. The learning path takes you from first understanding to safe custody.