What is Bitcoin and how does it work?

Bitcoin is a digital currency that lets people send value over the internet without a bank, with every transaction recorded on a public ledger called a blockchain. Its supply is capped at 21 million coins, and new coins are created through mining. This guide explains Bitcoin in one minute, how transactions and blocks work, mining and the 21 million limit, wallets, addresses and satoshis, why the price swings so much, and how to check whether Bitcoin is legal where you live. There is also a small demo that runs the same kind of hashing miners use.

This article is educational, not investment advice. Bitcoin's price is highly volatile; only use money you can afford to lose.

Bitcoin in one minute

Bitcoin was described in a 2008 paper by the pseudonymous Satoshi Nakamoto and launched in January 2009. It runs on thousands of computers worldwide that keep identical copies of the ledger. Nobody can print more than the rules allow, reverse a confirmed payment or freeze an address on the network itself. For the wider picture, see what is cryptocurrency.

How transactions and blocks work

1. You sign a transaction with your private key in a wallet app.
2. The transaction is broadcast to the network and waits in a pool.
3. Miners group waiting transactions into a block, roughly every 10 minutes.
4. Each block contains the hash of the previous one, forming a chain that is very hard to rewrite.

More on the ledger itself: what is blockchain.

Mining and the 21 million limit

Miners compete to find a block hash below a target by repeatedly running SHA-256. The winner earns the block reward, currently 3.125 BTC since the April 2024 halving, plus fees. The reward halves every 210,000 blocks, about every four years, so issuance slows until it reaches the 21 million cap. About 20,099,688 BTC have been mined so far. Details: what is crypto mining. The demo below hashes in your browser to show how a miner searches for a valid result:

Block#5,907,956

paused

Attempts

0 / ≈65,536

Speed

0 hash/s

Target

4 leading zeros

1. 426cd91a84816ca5b47a9e66498be09e6f8db9d00257b2979f9ed90a0e5a63177
2. 33623bbfee451d832069297162e611afda63aa70cb8dc134d6973becb154b486a
3. 2e9375251f83b50412c4fd869cef8ead79552aa298a0a77a3d1b3ade125bd46c7
4. 117d672b4b79e3fe90a957fead8971fa81839b2bd0b0f11a0b07931ded328413c
5. 0a1bd02e2986e8b9cfed2e1f2d1e84361acc2cf6e37b82f67d9fc18fa83480d67

Wallets, addresses and satoshis

You do not need to buy a whole coin; most platforms sell small fractions. Beginners' guide: crypto for beginners.

Price swings and why Bitcoin is risky

• The price can move 10% or more in a day and has fallen over 70% in past cycles.
• Since January 2024, spot Bitcoin ETFs trade in the United States, which brought more institutional money but did not remove volatility.
• Lost recovery phrases mean permanently lost coins.
• Scams use Bitcoin's name: fake platforms, "guaranteed" returns and impersonated celebrities.

Local prices also depend on exchange rates; for example, see Bitcoin to naira.

Is Bitcoin legal where you live?

Rules differ widely. In some countries Bitcoin is fully legal and regulated, in others trading is allowed but heavily taxed, and a few ban it. A handful have even made it legal tender. Before buying, check your country's rules and use licensed platforms where they exist. Tax rules also vary, so keep records of every purchase and sale.

See SHA-256 mining in a game

TotalHash is a free mining game in Telegram. Your device computes real SHA-256 hashes as a game mechanic, and missions send small amounts of USD₮ and GRAM to a TON wallet. No promise of earnings.

FAQ

What is Bitcoin and how does it work?

A digital currency recorded on a public blockchain, secured by miners who add blocks every 10 minutes.

What is Bitcoin mining?

Running SHA-256 to find a valid block and earn the block reward.

How many Bitcoins are there?

The supply is capped at 21 million.

Can I buy less than one Bitcoin?

Yes, Bitcoin is divisible down to one satoshi, 0.00000001 BTC.