A Guide to Bitcoin, the Basics in 2025

Bitcoin has become one of the most widely recognised digital assets in the world. Since its inception in 2009, it has disrupted traditional financial systems and established itself as a decentralised alternative to fiat currencies. As more individuals and institutions embrace Bitcoin, understanding its fundamentals becomes increasingly important.

What is Bitcoin?

Bitcoin is a decentralised digital currency that allows users to send and receive payments without the need for a central authority, such as a bank or government. Unlike traditional money, Bitcoin exists purely in digital form and operates on a technology called blockchain.

The blockchain is a public ledger that records every Bitcoin transaction. This ledger is distributed across thousands of computers worldwide, ensuring that no single entity controls the network. This decentralisation makes Bitcoin resistant to censorship and financial manipulation.

Bitcoin was created by an anonymous person or group under the pseudonym Satoshi Nakamoto. Since its launch, it has grown into a global financial asset with millions of users, investors, and businesses accepting it as a legitimate means of exchange.

How Does Bitcoin Work?

Bitcoin transactions occur on the blockchain, which is maintained by a network of nodes and miners. Each time a transaction is made, it is added to a block and verified through a process called Proof-of-Work (PoW).

Miners use powerful computers to solve complex mathematical problems, securing the network and ensuring that all transactions are legitimate. Once a block of transactions is verified, it is added to the blockchain, and miners are rewarded with newly minted Bitcoin.

The process of mining ensures that new Bitcoin is introduced into circulation at a predictable rate. Every four years, a Bitcoin halving event reduces the number of new bitcoins issued per block by half, limiting the total supply to 21 million coins. This scarcity is one of the key factors behind Bitcoin’s value.

Why is Bitcoin Valuable?

Bitcoin derives its value from several unique characteristics:

1. Scarcity

Bitcoin has a fixed supply of 21 million coins. Unlike fiat currencies, which can be printed endlessly by central banks, Bitcoin’s supply is mathematically limited, making it deflationary.

2. Decentralisation

No single entity controls Bitcoin. It operates on a peer-to-peer network, reducing reliance on banks and financial intermediaries.

3. Security and Transparency

Bitcoin transactions are recorded on a public blockchain, making them transparent and immutable. The use of cryptographic security prevents fraud and unauthorised transactions.

4. Portability and Accessibility

Bitcoin can be sent anywhere in the world instantly and at a low cost. Unlike traditional banking systems, it is accessible to anyone with an internet connection.

5. Store of Value

Many investors see Bitcoin as digital gold, a hedge against inflation and economic instability. With institutional adoption increasing, Bitcoin has gained legitimacy as a long-term investment.

How to Buy Bitcoin

Purchasing Bitcoin has become easier over the years, with various options available to new investors. The most common ways to buy Bitcoin include:

• Cryptocurrency exchanges – Platforms like Binance, Coinbase, and Kraken allow users to buy Bitcoin using fiat currency.
• Peer-to-Peer (P2P) marketplaces – Services like Paxful and LocalBitcoins enable direct transactions between buyers and sellers.
• Bitcoin ATMs – Physical kiosks that allow users to buy Bitcoin using cash.
• Brokerage services – Financial platforms like eToro and Robinhood offer Bitcoin trading for retail investors.

Before purchasing Bitcoin, it is important to research exchanges, compare fees, and ensure proper security measures are in place.

How to Store Bitcoin Safely

Since Bitcoin is a digital asset, proper storage is essential to prevent theft or loss. Bitcoin can be stored in two main types of wallets:

1. Hot Wallets (Online Storage)

Hot wallets are connected to the internet, making them convenient for everyday use but more vulnerable to hacking. Examples include:

• Mobile wallets – Apps like Trust Wallet and Exodus for smartphone storage.
• Web wallets – Exchange-based wallets such as Binance or Coinbase (not recommended for long-term storage).

2. Cold Wallets (Offline Storage)

Cold wallets offer maximum security by keeping Bitcoin offline. These wallets are ideal for long-term holders. Examples include:

• Hardware wallets – Devices like Ledger and Trezor store Bitcoin securely offline.
• Paper wallets – A printed document containing a Bitcoin private key and QR code for offline storage.

To enhance security, Bitcoin holders should enable two-factor authentication (2FA), use strong passwords, and store backup copies of private keys in a secure location.

How to Use Bitcoin

Bitcoin is more than just an investment. It can be used for various purposes, including:

• Online purchases – Many businesses and e-commerce platforms accept Bitcoin as payment.
• Remittances – Bitcoin enables fast and cost-effective international money transfers.
• Decentralised Finance (DeFi) – Users can lend, borrow, and stake Bitcoin on blockchain-based financial platforms.
• Trading and investing – Bitcoin can be traded against other cryptocurrencies or held as a long-term asset.

With increasing merchant adoption, Bitcoin is gradually being integrated into mainstream financial systems. Companies like Tesla, PayPal, and Microsoft have already started supporting Bitcoin payments.

Common Bitcoin Myths and Misconceptions

1. Bitcoin is Only Used for Illegal Activities

While Bitcoin was initially associated with dark web transactions, today it is widely used by legitimate businesses, financial institutions, and retail investors. Governments and regulatory bodies have implemented frameworks to monitor suspicious activity, ensuring compliance with financial laws.

2. Bitcoin is Not Secure

Bitcoin’s blockchain is one of the most secure networks in the world. With over a decade of operation, no successful attack has ever compromised its core protocol. The only vulnerabilities stem from poor user security practices, such as weak passwords and phishing scams.

3. Bitcoin is a Bubble

Many critics have called Bitcoin a bubble over the years. Despite multiple price corrections, Bitcoin has consistently recovered and continued to grow. Institutional adoption and regulatory clarity have further solidified its role as a legitimate financial asset.

The Future of Bitcoin

As Bitcoin continues to evolve, several key developments are shaping its future:

• Institutional adoption – Large corporations and investment firms are integrating Bitcoin into their portfolios.
• Layer 2 solutions – Technologies like the Lightning Network are enhancing Bitcoin’s scalability and transaction speed.
• Regulatory Ccarity – Governments worldwide are establishing clearer policies for Bitcoin taxation and usage.
• Mainstream integration – More payment processors and merchants are accepting Bitcoin, increasing its utility as a global currency.

Bitcoin’s long-term success will depend on technological advancements, regulatory frameworks, and continued adoption. As the financial landscape shifts, Bitcoin remains at the forefront of the digital economy.