Bitcoin

Bitcoin (abbreviation: BTC; sign: ₿) is the first decentralized cryptocurrency. It was invented in 2008 by an unknown person who published a white paper under the name Satoshi Nakamoto. People started using bitcoin as a currency in 2009 when the first version of its software was released as open-source implementation.

Bitcoin works by connecting many computers together. Each computer, called a node, keeps a copy of a public list of all transactions, known as a blockchain. This list does not need any central authority to check it. Transactions are protected using special mathematical methods called cryptography, so only the owner can spend their bitcoin.

Countries have different rules about bitcoin. From 2021 to 2025, El Salvador adopted it as legal tender currency before revoking it. Because bitcoin does not use real names, some people have misused it, which has caused some countries to ban it. Also, the process used to add new bitcoins, called mining, uses a lot of electricity and has raised concerns about its environmental impact.

History

Main article: History of bitcoin

Before bitcoin, many ideas about digital money were tested. People tried different ways to make digital money work, but they often had problems.

In 2008, someone using the name Satoshi Nakamoto shared a paper about bitcoin. In January 2009, the first block of bitcoin, called the genesis block, was created. This block contained a message from a newspaper about banks needing help. Soon after, the first bits of bitcoin were sent between people. By May 2010, someone spent a lot of bitcoin to buy pizzas, which is still remembered today.

Over the years, bitcoin grew. It was used in secret online markets and faced rules from governments. Big companies started to buy bitcoin, and it became more popular. In 2021, El Salvador said bitcoin could be used as money, though this changed later. Today, bitcoin continues to change and attract attention around the world.

Design

Units and divisibility

Bitcoin uses a special unit called the bitcoin. You can find it with the symbol ₿ and the code BTC. One bitcoin can be split into very small pieces. The smallest piece is called a satoshi, which is one hundred millionth of a bitcoin.

Blockchain

Bitcoin works without a central boss. Instead, it uses something called a blockchain. This is a digital list of all bitcoin transactions. Everyone in the bitcoin network has a copy of this list, and they all work together to make sure everything is fair and correct.

Addresses and transactions

When you use bitcoin, you use something called an address. Think of it like a special code that shows where your bitcoins are stored. To send bitcoins, you need a secret code called a private key. Only you should know this code, and it helps keep your bitcoins safe.

Mining

See also: Bitcoin protocol § Mining

People called miners help keep the bitcoin network running. They use computers to solve tricky problems. This helps make sure everyone agrees on what the blockchain says and stops people from trying to cheat.

Privacy and fungibility

Bitcoin is set up so that people don’t use their real names. Instead, they use addresses. Even though transactions are public, it’s hard to know who really owns the bitcoins unless they tell you.

Wallets

For broader coverage of this topic, see Cryptocurrency wallet

Bitcoin wallets are tools that help you keep your bitcoins safe. There are different kinds of wallets, like ones you keep on your computer or ones that are special hardware devices.

Scalability and decentralization challenges

Bitcoin can sometimes have trouble handling lots of transactions quickly. This can make fees go up and cause delays. There are projects working on ways to help bitcoin handle more transactions faster.

Economics and usage

Main article: Economics of bitcoin

Bitcoin's theoretical roots and ideology

Bitcoin's idea of decentralizing money comes from economic ideas, especially from a book by Friedrich Hayek called The Denationalisation of Money. This book talks about letting people control money without central banks. Sociologist Nigel Dodd says bitcoin's goal is to take money away from both social and government control. The Economist calls bitcoin a project to create online cash that people can use without interference from governments or banks. These ideas first attracted people who believe in free markets and alternative systems.

Recognition as a currency and legal status

Money can be used in three ways: to store value, to buy things, and to measure worth. The Economist said in 2014 that bitcoin works best as a way to buy things. In 2015, they noted that bitcoins are hard to earn, limited in number, and easy to check. However, by 2018, they said cryptocurrencies didn't meet these qualities. Some researchers in 2015 said bitcoin worked more as a payment method than a currency. Economist Robert J. Shiller thought bitcoin could measure value but didn't solve real economic problems. In 2017, François Velde from the Chicago Fed said bitcoin was unlikely to replace traditional money.

Different countries have different rules about bitcoin. Because it's decentralized and used worldwide, it's hard to regulate. Some countries have banned bitcoin completely, like China and Egypt. Others have implicit bans. The use of bitcoin by some people for illegal activities has led to attention from regulators and law enforcement.

Use for payments

Harvard Professor Kenneth Rogoff said in 2025 that bitcoin is rarely used for everyday purchases but is popular in informal economies and for some illegal activities. Prices are usually not listed in bitcoin; transactions often convert to regular money. Reasons people don't use bitcoin more include high costs, slow transactions, and fees. Bloomberg reported that bitcoin was used for big purchases on Overstock.com and for payments to freelancers. In 2021, El Salvador made bitcoin legal money alongside the US dollar. However, most businesses there didn't accept it, and by 2025, the government stopped requiring its use. The Central African Republic also tried making bitcoin legal money but changed its mind after a year.

Some governments use bitcoin. For example, Iran started using it to bypass sanctions. Some US states and places in Switzerland accept bitcoin for taxes. As of 2023, the US government owned over $5 billion worth of seized bitcoin.

Use for investment and status as an economic bubble

Further information: Cryptocurrency bubble

Most bitcoin transactions happen on exchanges since 2018. Bitcoin is also used to store value, with some individuals and companies buying and selling large amounts. Bitcoin wealth is very unevenly distributed.

Many economists, including Nobel Prize winners, have called bitcoin an economic bubble. Others argue it might become a valuable asset. In 2024, some said bitcoin had no real value. The Federal Reserve Chair described it as a digital competitor to gold but not to the dollar. In 2025, some thought bitcoin might appeal to central banks as a neutral reserve currency. Research shows bitcoin is very volatile and doesn't behave like traditional investments.

Market characteristics

Bitcoin markets run all day, every day, unlike traditional markets. Bitcoin prices change a lot and react strongly to news and regulations. The daily trading volume of bitcoin can reach $50 billion.