Key Takeaways:
- Bitcoin (BTC) is the first and most widely known cryptocurrency, launched in 2009 by Satoshi Nakamoto.
- It’s a decentralized digital currency, enabling peer-to-peer transactions without banks or intermediaries.
- Bitcoin is built on blockchain technology, which ensures transparency, immutability, and security.
- Supply is limited to 21 million BTC, making it a deflationary asset.
- Commonly seen as “digital gold”, Bitcoin is used for value storage, investment, and as a hedge against inflation.
- The cryptocurrency uses Proof-of-Work consensus (mining) to secure the network.
- It is regarded as the foundation of the entire cryptocurrency ecosystem.
What is Bitcoin? An Introduction
Bitcoin is a decentralised digital currency that allows people to send and receive value online without needing a central authority like a bank or government.
Unlike traditional currencies issued by central banks, Bitcoin is not printed or controlled by any one entity. Instead, it operates on a peer-to-peer network, enabling direct user transactions worldwide.
Bitcoin ownership is maintained using digital wallets, and all transactions are recorded on a public ledger known as the blockchain, which can be viewed using a blockchain explorer. Because of its decentralised nature, no single person or organisation “owns” Bitcoin. Instead, control of the cryptocurrency is distributed across the network, with consensus rules determining how the system operates.
Brief History
Bitcoin was introduced in 2008 by an anonymous individual or group using the pseudonym Satoshi Nakamoto. In the whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System, Nakamoto outlined a vision for a currency that functioned independently of traditional financial institutions.
The network officially launched in January 2009 with the mining of the first block, known as the Genesis Block. This marked the beginning of a financial experiment that would challenge the foundations of traditional money.
Bitcoin saw its first real-world transaction in May 2010, when programmer Laszlo Hanyecz bought two pizzas for 10,000 BTC. This single event demonstrated Bitcoin’s potential as a means of exchange and is now celebrated as Bitcoin Pizza Day.
Since then, Bitcoin has undergone many development milestones. While its value has seen sharp rises and falls, its long-term trend has been growth, adoption, and increasing public awareness.
How Bitcoin Works
Bitcoin has grown into a global financial asset embraced by retail users and institutional investors. It’s used for everything from online purchases to investment holdings and cross-border remittances, but not many people know exactly how it works.
At the core of Bitcoin is a decentralised digital ledger called the blockchain. This technology records every transaction made on the network in a series of linked “blocks,” secured and verified by a network of computers known as nodes.
- Blockchain and Transactions: When someone sends Bitcoin, the transaction is broadcast to the network. Miners (specialised participants with powerful computing equipment) then validate these transactions and group them into a block. Once verified, the block is added to the blockchain, which creates a permanent, immutable record.
- Proof of Work (PoW): Bitcoin uses a consensus mechanism called Proof of Work (PoW) to secure the network. In simple terms, miners compete to solve complex mathematical puzzles. The first to solve a puzzle adds the following block to the blockchain and receives a reward in Bitcoin. This is how new bitcoins are introduced into circulation.
- Bitcoin Nodes: These are the backbone of the Bitcoin network. They are the computers on which the Bitcoin software runs. They help to maintain the blockchain by storing a copy of the entire transaction history. Nodes verify the legitimacy of transactions and blocks, and this, in turn, ensures the network remains secure and decentralised.
These three elements (blockchain, Proof of Work, and a decentralised node network) make up Bitcoin’s infrastructure, and make it highly resistant to fraud, censorship, and double spending, which sets it apart from traditional financial systems.
Different Ways One Can Get Bitcoin
$1 USD is equivalent to approximately 0.000010 BTC, based on the price of a single Bitcoin in May 2025, which averaged $119,799. Experts are predicting potential fluctuations between $103,358 and $136,240 during the year.
Bitcoin ownership is highly concentrated, and according to recent reports, approximately 1.86% of wallet addresses (over one million) hold more than 90% of all BTC in circulation! The largest known holder is Bitcoin’s creator, Satoshi Nakamoto, who is estimated to own about 968,452 BTC, which have remained untouched.
Suppose you’re ready to get your slice of the pie. In that case, there are several ways to acquire Bitcoin, each offering different levels of accessibility, security, and convenience depending on your experience level and goals.
Buy Bitcoin from a Cryptocurrency Exchange
You can get Bitcoin on cryptocurrency exchanges like Coinbase, Binance, or Kraken, where you can register for an account, deposit USD, GBP, EUR, or any other fiat currency, and purchase Bitcoin directly.
After signing up, you’ll typically need to verify your identity, fund your account, and place a buy order for Bitcoin. You can then store your Bitcoin in an exchange or transfer it to a personal digital wallet for extra security.
Use Peer-to-Peer (P2P) Platforms
Paxful, LocalBitcoins, and other P2P platforms connect buyers and sellers directly and offer a broad range of payment options, ranging from bank transfers to gift cards and everything in between. You get greater flexibility and reduced transaction fees, but these platforms may also carry higher risk, so using only trusted platforms with secure escrow services is essential.
Through Rewards or Airdrops
On some platforms, you can earn Bitcoin rewards for online shopping, surveys, content creation, and various other activities. Some promotional events or network expansions may offer crypto airdrops—free distributions of coins or tokens, which occasionally include Bitcoin or Bitcoin-related assets.
Through Mining
You can also earn Bitcoin through mining, a process whereby users validate network transactions using specialised hardware. This computational work helps maintain the blockchain and is rewarded with new Bitcoin. Keep in mind, however, that mining has become increasingly competitive, energy-intensive, and requires massive investment in equipment and electricity.
Use a Bitcoin ATM
You can use Bitcoin ATMs to physically buy (and sometimes sell) Bitcoin using debit cards or cash. These machines can be found in many cities worldwide, and all you need to do is scan a wallet QR code, insert cash, and get your Bitcoin. The transaction fees can be higher than those of online exchanges, but for some users, the convenience makes it well worth the cost.
Trading and Investing
Bitcoin can also be obtained through trading—exchanging other cryptocurrencies or fiat currency for Bitcoin on centralised exchanges (like Binance or Coinbase) and decentralised exchanges (DEXs like Uniswap or Bisq). Many users enter the market as investors, buying Bitcoin to hold it long-term as a store of value or growth asset. Transactions across the network are validated using open-source software like Bitcoin Core, which forms the backbone of Bitcoin’s decentralised infrastructure.
Just keep in mind that experts consider Bitcoin to be a high-risk, high-reward asset, and suggest allocating a small portion of your portfolio (e.g. 2% to 5%) to Bitcoin could be prudent, given its potential for growth and role as a hedge against currency risk
Bitcoin ETF
A Bitcoin ETF is a financial product that tracks the price of Bitcoin, making it possible for investors to buy shares representing Bitcoin holdings.
Investing in a Bitcoin ETF (Exchange-Traded Fund) is an excellent way to gain exposure to Bitcoin without handling the cryptocurrency yourself. You can buy Bitcoin ETF shares directly through a brokerage account or stock trading platform.
Primary Uses of Bitcoin
Bitcoin began as an alternative to traditional currency for peer-to-peer payments, but its utility has changed a lot since its inception. The crypto is now widely regarded as a speculative asset, a long-term investment, and a digital store of value.
Below are the main ways Bitcoin is used today.
As a Payment Method
One of Bitcoin’s original purposes was to function as a borderless digital payment system. Users can send and receive money anywhere in the world almost instantly. There are minimal fees and no need for banks or intermediaries. These types of transactions can benefit regions with limited access to traditional banking or those with unstable local currencies.
For Trading and Investment
Rather than using Bitcoin as a currency, many people use it as a speculative investment. It is actively traded on hundreds of exchanges worldwide and has become one of the most volatile (and therefore potentially profitable) digital assets available.
Traders take advantage of price fluctuations, while long-term investors (“HODLers”) view Bitcoin as a hedge against inflation or economic instability. Its scarcity, capped at 21 million coins, adds to its appeal as a deflationary asset.
If you’re looking for tools or platforms to manage Bitcoin investments, you can get valuable insights from Coin Insider reviews section.
Store of Value
Often called “digital gold,” Bitcoin is increasingly viewed as a store of value that retains or increases in worth over time. Like silver and gold, Bitcoin is scarce, durable, and decentralised, which makes it attractive to investors who want to preserve wealth outside traditional financial systems.
Some institutional investors and large companies now hold Bitcoin as part of their treasury strategy – a signal of growing mainstream confidence in its long-term potential.
What Sets Bitcoin Apart from Traditional Money?
Bitcoin differs fundamentally from traditional currencies like the US Dollar, Euro, or British Pound. While both serve as a medium of exchange, store of value, and unit of account, Bitcoin’s structure, issuance model, and underlying technology offer distinct advantages and challenges in the following ways:
- Bitcoin is Decentralised: Unlike traditional money issued and regulated by central banks and governments, Bitcoin is decentralised. This means no single institution controls it, but instead, it operates on a distributed network where decisions are made collectively via consensus protocols. This removes the risk of central authority mismanagement and inflation through overprinting, as well as monetary policy changes that disproportionately affect consumers.
- Bitcoin has a Fixed Supply: Traditional currencies can be printed in unlimited quantities, often leading to inflation and reduced purchasing power. By contrast, Bitcoin has a hard cap of 21 million coins. This feature, which is embedded in its code, offers scarcity that mimics the properties of precious metals and reinforces Bitcoin’s appeal as a hedge against inflation.
- Bitcoin is Digital and Borderless: Bitcoin is natively digital, which means it’s not tied to any country or economy. Since it can be sent or received anywhere in the world with internet access, it allows for near-instant global transfers at any time. Furthermore, it offers lower transaction costs than conventional banking systems and remittance services.
- Transparency and Security: In contrast to traditional finance, where banks hold transaction records privately, Bitcoin transactions are more transparent as they are recorded on a public blockchain that anyone can view. Moreover, using cryptographic security and decentralised verification helps prevent fraud, censorship, and unauthorised changes.
Know the Risks and Considerations Before You Invest in Bitcoin
Bitcoin offers exciting potential as a decentralised digital asset, but it also poses significant risks. Before investing in this crypto asset, you must understand the challenges and vulnerabilities that could impact your capital and user experience.
Volatility and Market Risk
Bitcoin is highly volatile, with prices that can swing dramatically, as evidenced by the graph below:
This can be due to macroeconomic news, regulatory updates, or market sentiment. As any trader will tell you, this sort of unpredictability can lead to huge gains or heavy losses, which makes Bitcoin a high-risk asset, especially for short-term investors.
Security Risks
Holding Bitcoin comes with a lot of responsibility. It means that you have to be your own bank and take care of all security issues yourself. For instance, if you lose access to your digital wallet or your private keys are compromised, you could lose your Bitcoin permanently. You also have to be on the lookout for hackers who target individuals on crypto platforms.
Regulatory Concerns
The regulatory environment around Bitcoin continues to evolve. Some countries embrace it, but others restrict or even ban its use. Depending on your state, many factors can affect the usability and value of your Bitcoin, including taxation, anti-money laundering (AML) compliance, and future government policy.
Fraud and Scams
As Bitcoin grows in popularity, so too does the number of scams you’re likely to encounter, such as fake Bitcoin exchanges, phishing websites, Ponzi schemes, impersonation scams, and more. Bad actors often prey on newcomers unfamiliar with Bitcoin, so it’s crucial to educate yourself on how best to protect your investment.
Bitcoin Mining Explained
Bitcoin mining is the process through which new bitcoins are created and transactions are confirmed on the blockchain. It plays a vital role in maintaining the network’s security and integrity while introducing fresh supply into circulation.
At its core, mining involves solving complex mathematical puzzles using powerful computers. This process is part of Bitcoin’s Proof of Work system, where miners compete to add a new block of verified transactions to the blockchain. The first miner to solve the problem gets to add the block and is rewarded with newly minted bitcoins plus transaction fees from the block.
Sounds simple enough, right? But how exactly do you mine Bitcoin?
In the early days, mining could be done using a personal computer. Today, it requires specialised hardware known as ASICs (Application-Specific Integrated Circuits), significant energy resources, and cooling systems. Most miners now join mining pools—groups that combine computing power and share the rewards based on contribution.
Mining also involves running a full node to validate transactions and enforce Bitcoin’s consensus rules. It demands technical know-how and ongoing hardware, electricity, and maintenance investment.
The Genesis Block
Satoshi Nakamoto mined the first Bitcoin block —the Genesis Block—on 3 January 2009. It carried a reward of 50 BTC and included a hidden message referencing a headline from a newspaper: “The Times 03/01/2009 The Chancellor is on the brink of a second bailout for banks.” This message is often interpreted as a statement about Bitcoin’s purpose as an alternative to traditional finance.
How Bitcoin Can Be Converted into Cash
If you wish to liquidate your holdings, the good news is that you can convert Bitcoin into cash in several ways. Here are the main ways to do so:
- Cryptocurrency Exchanges: You can convert Bitcoin into cash through cryptocurrency exchanges like Binance, Coinbase, or Kraken.
- Bitcoin ATMs: Bitcoin ATMs allow users to exchange Bitcoin for cash by scanning a QR code linked to their wallet.
- Peer-to-Peer Platforms (P2P): Peer-to-peer platforms like LocalBitcoins or Paxful enable individuals to buy and sell Bitcoin directly with each other.
Bitcoin vs. Other Cryptocurrencies
According to Statista, Bitcoin continues to dominate the cryptocurrency market, consistently holding a market share (dominance ratio) above 50% compared to all other cryptocurrencies combined.
However, it is often compared to other popular cryptocurrencies such as Ethereum and various altcoins.
Here’s a breakdown of Bitcoin in comparison to others:
Bitcoin vs. Ethereum
While both Bitcoin and Ethereum are based on blockchain technology, they serve different purposes. Bitcoin was primarily designed as a digital store of value and a form of decentralised currency. Its primary focus is security, simplicity, and scarcity (with a capped supply of 21 million coins).
On the other hand, Ethereum was developed as a platform for decentralised applications (dApps) and smart contracts, allowing for programmable transactions and self-executing agreements.
Although Ethereum has gained significant attention and adoption, especially in decentralised finance (DeFi), Bitcoin remains the dominant cryptocurrency due to its larger network effect, stronger security features, and greater recognition in the market.
Bitcoin vs. Altcoins
Thousands of Altcoins exist, each with varying functionality and market value. Altcoins like Litecoin, Ripple (XRP), and Cardano often seek to improve transaction speed, scalability, or consensus mechanisms that Bitcoin was not originally designed to address.
Despite this, Bitcoin continues to outperform altcoins in terms of market capitalisation, security, and adoption.
According to recent reports, Bitcoin’s market capitalisation as of May 19, 2025, is approximately $2.04 trillion, up 55.85% from $1.31 trillion a year ago.
The Bitcoin network is the most secure, and its long-standing reputation as the first cryptocurrency gives it an edge that newer altcoins struggle to match.
Why Bitcoin Remains the Leading Cryptocurrency
Bitcoin’s position as the leading cryptocurrency is primarily due to its pioneering status, market dominance, and broad recognition.
As the first cryptocurrency, Bitcoin has become the most trusted and stable digital asset. Its decentralised nature, fixed supply, and a robust security network contribute to its enduring value.
Yes, other cryptocurrencies may offer technological advancements or unique features; however, Bitcoin remains the leader in the crypto space thanks to its large user base, institutional adoption, and recognition as a store of value.
FAQ
Who controls Bitcoin?
Bitcoin is decentralised and operates on a peer-to-peer network. No single entity, government, or individual controls it. Instead, Bitcoin is maintained by its users and miners who validate transactions through mining. The protocol and rules governing Bitcoin are set by its open-source software, which anyone can contribute to, ensuring that control remains distributed and transparent.
Can Bitcoin be used anonymously?
Bitcoin offers a degree of pseudonymity, but it is not entirely anonymous. While transactions are recorded on the blockchain, they are linked to public wallet addresses rather than personal identities. However, anyone with access to the blockchain can trace these transactions. Users often use techniques like mixing services or transacting through privacy-focused coins (e.g., Monero) to improve privacy. Nonetheless, complete anonymity is not guaranteed.
How many Bitcoins will ever exist?
The total supply of Bitcoin is capped at 21 million coins, a limit hardcoded into its protocol. This finite supply prevents inflation and preserves the asset's scarcity. Over 18 million Bitcoins have already been mined, and the remaining coins will be mined over the next century, with the final Bitcoin expected to be mined around the year 2140.
What is a Bitcoin wallet, and which type should I use?
A Bitcoin wallet is a digital tool that lets you store, send, and receive Bitcoin. There are three types of wallets: software wallets, such as desktop or mobile apps, are convenient for everyday use. Hardware wallets are physical devices like Ledger or Trezor that offer enhanced security and are ideal for long-term storage. Paper wallets involve printing out private keys and addresses for offline storage. The type of wallet you opt for depends on your security needs and how frequently you plan to access your Bitcoin. A software wallet may suffice for daily use, but a hardware wallet is recommended for long-term storage.
Why does Bitcoin have value?
Bitcoin's value comes from a combination of factors: its limited supply (21 million), decentralised nature, security through blockchain technology, and the trust placed in it by its users. Additionally, Bitcoin has gained recognition as a store of value, similar to gold, especially during economic uncertainty. Its scarcity and increasing demand have contributed to its price appreciation.
What is a Bitcoin halving, and why does it matter?
A Bitcoin halving happens roughly every four years, when the reward for mining Bitcoin blocks is cut in half. This slows down the rate at which Bitcoins are introduced into circulation, making it harder to mine them. Halving events are significant because they reduce supply, and historically, they have been followed by price increases due to the reduced rate of new coin issuance. Halving is a critical aspect of Bitcoin's economic model and scarcity.
How do I track Bitcoin transactions?
You can track and verify Bitcoin transactions using a blockchain explorer, such as Blockchair or Blockchain.com. All you have to do is enter a transaction ID or Bitcoin wallet address. You’ll then be able to view all the information pertaining to the transaction, such as sender/receiver addresses, amount sent, and transaction fees.