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What is Bitcoin and how does it work? Blockchain, mining, halving and storage

What is Bitcoin? Bitcoin is a digital currency that works without a central bank or company. Transactions are recorded on a public ledger called a blockchain, which thousands of computers around the world keep in sync, and new bitcoin is created through a process called mining. The total supply is capped by the software at 21 million coins.

Key takeaways

Where Bitcoin comes from

Bitcoin was described in a nine-page white paper published on 31 October 2008 under a pseudonym, and the network went live on 3 January 2009 with its first block. The author's real identity has never been confirmed, which is part of the design: the system is meant to work without having to trust any particular person or institution.

The idea was to let two people exchange value online directly, without a bank in the middle, while solving the problem of spending the same digital coin twice. On 27 October 2026 Bitcoin was the largest cryptocurrency, with a market capitalization of about 1.62 trillion dollars and a price of about 80,800 dollars per coin, according to CoinGecko. That is a little more than half of the whole crypto market, which CoinGecko put at about 2.80 trillion dollars on the same day.

How the blockchain works

A blockchain is a list of transaction records grouped into blocks. Each block contains a cryptographic fingerprint (a hash) of the previous block, so the blocks form a chain: changing an old transaction would change its block's fingerprint and break every block after it. A new Bitcoin block is added roughly every ten minutes.

The ledger is not stored in one place. Thousands of computers called nodes each keep a full copy, check every new block against the same rules and reject anything that breaks them, such as a payment from an address that does not hold enough bitcoin. Anyone can run a node with ordinary hardware, which is why the rules are hard to change without broad agreement.

Ownership is based on public key cryptography. A wallet holds a private key, a secret number, and derives from it public addresses that can receive coins. Spending requires a digital signature made with the private key. The network never needs to know who the owner is, only that the signature is valid; the history of every address, however, is public.

What mining is

Mining is the process that adds new blocks and keeps the ledger honest. Miners collect pending transactions, then use specialized computers to search for a number that gives the block a hash below a target set by the network. Finding it takes enormous trial and error, which is why the method is called proof of work.

The first miner to find a valid block broadcasts it, the other nodes check it, and the miner receives a reward: newly created bitcoin plus the fees paid by the transactions in the block. Every 2,016 blocks, about two weeks, the network adjusts the difficulty so that blocks keep arriving about every ten minutes, whatever the total computing power.

Rewriting history would require controlling more computing power than the rest of the network combined, which makes an attack on Bitcoin very expensive. The trade-off is energy use: mining consumes large amounts of electricity, a point that regulators and investors continue to debate.

The 21 million cap and the halving

The Bitcoin software limits the total supply to 21 million coins. New coins enter circulation only as mining rewards, and the reward is cut in half every 210,000 blocks, roughly every four years. This event is called the halving.

The reward started at 50 BTC per block in 2009 and fell to 25, 12.5 and 6.25. The fourth halving, on 20 April 2024 at block 840,000, reduced it to 3.125 BTC, which means about 450 new bitcoin per day. The next halving is expected at block 1,050,000, around April 2028, and will bring the reward to 1.5625 BTC. The exact date depends on how fast blocks are found.

The 20 millionth bitcoin was mined in March 2026, so more than 95% of the total supply already exists. About 20.08 million BTC were in circulation on 31 August 2026, according to Mudrex. Because the reward keeps halving, the last fraction of a coin is expected to be mined around the year 2140. After that, miners will be paid only through transaction fees.

Each bitcoin can be divided into 100 million smaller units, so it is possible to buy a small fraction of a coin, for example 0.001 BTC, instead of a whole one.

What people use Bitcoin for

Today Bitcoin is used mainly as a store of value and an investment asset, and also for cross-border payments. In the United States the SEC approved the first spot bitcoin exchange-traded products on 10 January 2024, which made exposure to bitcoin available through ordinary brokerage accounts. Some companies hold bitcoin in their treasuries.

Payments directly on the main chain can be slow and expensive when the network is busy, so faster systems have been built on top of it, such as the Lightning Network, which lets two parties exchange many small payments and settle on the blockchain later.

Bitcoin can also be used to invest in private markets. Unicorn Club, the members-only club for accredited investors, accepts BTC, ETH, USDT and USDC (ERC-20) for its pre-IPO club deals; the guide on how to invest in pre-IPO companies with crypto explains the steps.

How to store bitcoin

Storing bitcoin means protecting the private keys. There are two broad approaches: leaving the coins with a custodian such as an exchange, or holding the keys yourself in a non-custodial wallet.

Risks to keep in mind

The price of bitcoin can move sharply in both directions within days. Transactions cannot be reversed, so a payment to a wrong address or to a scammer is very hard to recover. Rules on crypto assets differ by country and can change, and taxes usually apply when bitcoin is sold or spent. Investing involves the risk of losing capital. This guide is educational and is not personalized investment advice.

Frequently asked questions

Who controls Bitcoin?

No single entity. The rules are enforced by the nodes that run the software, and changes need broad support from users, miners and developers.

Can more than 21 million bitcoin be created?

Not under the current rules. Changing the cap would require almost the whole network to adopt different software, which is considered very unlikely.

Do I have to buy a whole bitcoin?

No. One bitcoin is divisible into 100 million units, and most platforms let you buy small amounts in your own currency.

When is the next halving?

It is expected at block 1,050,000, around April 2028, when the block reward will fall from 3.125 to 1.5625 BTC.

Is Bitcoin anonymous?

It is pseudonymous. Addresses are not linked to names on the blockchain, but every transaction is public, and regulated exchanges verify the identity of their customers.

Related guide

Sources

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