Bitcoin 101

1

Money is a tool

Money stores value across time and moves it across space. For centuries it was gold, then paper backed by gold, then paper backed by nothing. Bitcoin is a new tool for the same job.

2

The problem with digital money

Anything digital can be copied. Before Bitcoin, sending money online required a bank or company to keep the records and prevent double-spending. That intermediary could freeze, reverse, or inflate the supply.

3

Bitcoin removes the intermediary

Bitcoin is a peer-to-peer network. You send bitcoin directly to another person. No bank approves the payment. The network itself keeps the ledger.

4

The blockchain is the ledger

Every transaction is recorded in a public ledger called the blockchain. It is a chain of blocks. Each block contains a batch of transactions and a link to the block before it. Anyone can read it.

5

Anyone can verify

Thousands of computers around the world keep a copy of the ledger. They check every transaction against the rules. If a transaction breaks the rules, the network rejects it. You do not need to trust any single person or company.

6

There will only be 21 million

Bitcoin has a fixed supply. The code that runs the network will never create more than 21 million bitcoin. This limit is enforced by every computer on the network. No one can print more.

7

New bitcoin is released on a schedule

New bitcoin enters circulation through mining. The amount released every ten minutes is cut in half roughly every four years. This is called the halving. The schedule is known in advance and cannot be changed by vote.

8

Mining secures the network

Miners use specialized computers to solve a mathematical puzzle. The first to solve it adds the next block of transactions and earns the new bitcoin. The puzzle requires real electricity. This cost makes rewriting history expensive.

9

You control your own keys

Bitcoin is controlled by private keys — secret numbers that prove ownership. If you hold the keys, you hold the bitcoin. No company can freeze it or reverse a payment you send. This is called self-custody.

10

A wallet holds the keys

A wallet is software or hardware that stores your private keys and lets you send and receive bitcoin. The wallet does not hold the bitcoin itself. The bitcoin lives on the blockchain. The wallet holds the keys that control it.

11

Addresses are like account numbers

An address is a string of letters and numbers that someone can send bitcoin to. You can create as many addresses as you want. Each one is derived from your keys. Sharing an address does not reveal your private keys.

12

Transactions are public

Every transaction is recorded on the blockchain and visible to anyone. The amounts and addresses are public. The names of the people behind the addresses are not. This is transparent but pseudonymous.

13

Confirmations make payments final

When a transaction is included in a block, it has one confirmation. Each new block adds another. After several confirmations, reversing the payment becomes prohibitively expensive. This is why merchants wait for confirmations.

14

Fees pay for block space

Each block has limited space. To get your transaction included, you attach a fee. The fee is paid to the miner. Higher fees are included sooner. Fees are priced by the size of the transaction, not the amount of bitcoin sent.

15

Bitcoin is divisible

One bitcoin can be divided into 100 million smaller units called satoshis. You can send fractions of a bitcoin. This makes bitcoin usable for both large and small payments.

16

You can buy bitcoin on an exchange

Exchanges let you buy bitcoin with dollars, euros, or other currencies. Most exchanges hold the bitcoin for you. You can withdraw it to your own wallet whenever you choose. Until you withdraw, the exchange holds the keys.

17

Price is set by the market

Bitcoin has no official price. It trades continuously on exchanges around the world. The price you see is the most recent trade. It changes every second based on what buyers and sellers are willing to pay.

18

Institutions now hold bitcoin

Public companies, funds, and governments hold bitcoin on their balance sheets. Spot bitcoin ETFs let traditional investors gain exposure through brokerage accounts. This has expanded access beyond early adopters.

19

Lightning makes small payments fast

The Lightning Network is a second layer built on top of Bitcoin. It allows near-instant payments with very low fees. These payments settle on the main blockchain when the channel closes. It is useful for everyday transactions.

20

Bitcoin is open source

The software that runs Bitcoin is free and open for anyone to inspect, copy, or improve. Changes are proposed through Bitcoin Improvement Proposals. No company or government controls the code. Upgrades require broad agreement across the network.

21

Bitcoin continues to run

Since January 2009, the Bitcoin network has produced a new block roughly every ten minutes without interruption. It has no headquarters, no CEO, and no scheduled maintenance. It runs as long as people choose to run the software.