Bitcoin (abbreviation: BTC; sign: ₿) is the first cryptocurrency that does not rely on a central authority. It was created in 2008 by an unknown person who used the name Satoshi Nakamoto. Bitcoin became a currency in 2009 when its open-source software was released. Between 2021 and 2025, El Salvador made Bitcoin a legal currency but later stopped this practice. Because Bitcoin allows users to hide their real identities, some governments have banned it due to concerns about criminals using it.

Bitcoin operates through a network of computers that work together. Each computer, or node, keeps a copy of a public record of all transactions, called a blockchain. This record is not controlled by any single group. Transactions are checked using special codes called cryptography, which ensure that only the owner of Bitcoin can spend it, as long as they keep certain information private.

All computers in the network agree on the details of the blockchain through a process called mining. Mining involves solving complex math problems with powerful computers. This process uses a lot of electricity and has raised concerns about its impact on the environment.

History

Before Bitcoin, several digital cash systems were created. In the 1980s, David Chaum developed ecash. In 1992, cryptographers Cynthia Dwork and Moni Naor suggested that solving computer puzzles could have value. In 1997, Adam Back created Hashcash, a system to stop spam. In 1998, cypherpunks Wei Dai and Nick Szabo proposed ideas for digital currencies called b-money and bit gold. In 2004, Hal Finney made the first currency using reusable proof of work. These early systems had problems: ecash needed central control, Hashcash could not stop people from spending the same money twice, and b-money and bit gold were not secure against attacks called Sybil attacks.

The website bitcoin.org was registered on August 18, 2008. On October 31, 2008, a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" was shared online by someone named Satoshi Nakamoto. Nakamoto’s identity is unknown. Computer scientist Arvind Narayanan said that Bitcoin’s parts came from earlier research. Nakamoto’s work combined these ideas into the first system that was not controlled by one group, protected against Sybil attacks, and could handle problems in communication. This system later became known as the first blockchain. Nakamoto’s paper was not reviewed by experts and was ignored at first.

Nakamoto shared Bitcoin’s code for others to use. On January 3, 2009, the Bitcoin network started when Nakamoto mined the first block, called the genesis block. This block included a message from a newspaper article about a financial crisis. Nine days later, Hal Finney received the first Bitcoin transaction: ten bitcoins from Nakamoto. Wei Dai and Nick Szabo supported Bitcoin early. On May 22, 2010, a programmer named Laszlo Hanyecz bought two pizzas for 10,000 bitcoins, an event now called "Bitcoin Pizza Day." Nakamoto asked a developer named Martti Malmi to help create content for the bitcoin.org website.

Blockchain experts estimate that Nakamoto mined about one million bitcoins before leaving in 2010. He gave control of Bitcoin to Gavin Andresen, who later became a leader at the Bitcoin Foundation, an organization created in 2012 to support Bitcoin.

Early Bitcoin users included black markets, like the Silk Road website, which sold goods for bitcoins. Silk Road operated for 30 months and handled about 9.9 million bitcoins, worth around $214 million.

In 2013, the U.S. government created rules for Bitcoin, calling American miners who sold bitcoins as businesses that needed to follow laws. In 2013, U.S. authorities shut down an unregistered exchange called Mt. Gox and seized bitcoins used to buy illegal drugs. The FBI also took about 30,000 bitcoins from Silk Road after its founder was arrested.

In 2013, China banned financial institutions from using Bitcoin. After this, Bitcoin’s value dropped, and a search engine called Baidu stopped accepting bitcoins. Using virtual currencies to buy goods had been illegal in China since 2009.

In 2017, researchers at the University of Cambridge said about 2.9 to 5.8 million people used Bitcoin wallets. In August 2017, a software update called SegWit was added to improve Bitcoin’s ability to handle more transactions. Some people disagreed with SegWit and created a new version of Bitcoin called Bitcoin Cash.

In December 2017, the Chicago Mercantile Exchange started offering futures contracts for Bitcoin.

In 2018, Bitcoin’s price dropped after China banned trading with bitcoins. The share of Bitcoin trading in China’s currency fell from over 90% to less than 1%. Bitcoin’s price also dropped due to thefts from cryptocurrency exchanges.

In 2020, companies like MicroStrategy, Square, and MassMutual invested large amounts of money in Bitcoin. In 2020, PayPal allowed users in the U.S. to buy and sell Bitcoin.

In 2021, Bitcoin’s value reached $1 trillion for the first time. A software update called Taproot improved Bitcoin’s ability to handle complex transactions. In 2021, El Salvador made Bitcoin legal money, along with the U.S. dollar. In 2021, the first Bitcoin futures ETF was approved by the U.S. government.

In 2022, during protests in Canada, organizers used Bitcoin to collect donations after traditional banks blocked them. Bitcoin’s price dropped later in 2022 after problems with other cryptocurrencies.

In 2023, a new type of digital item called ordinals was added to Bitcoin. By June 2023, about 81.7 million people used Bitcoin, or about 1% of the world’s population.

In 2024, the first Bitcoin ETFs were sold on U.S. stock exchanges. In 2024, Bitcoin’s price reached $100,000 for the first time. U.S. president-elect Donald Trump promised to make the U.S. a leader in cryptocurrency and to hold Bitcoin. BlackRock, a large investment company, advised people to keep up to 2% of their money in Bitcoin.

In 2025, El Salvador still said Bitcoin was legal money, but a law change removed requirements for businesses and the government to accept it. In 2025, Trump ordered the U.S. to create a reserve of Bitcoin. Some U.S. states and the Czech Republic also started holding small amounts of Bitcoin for testing.

Design

The unit of account in the bitcoin system is called bitcoin. It is often shown with the symbol ₿, created in 2010, and the code BTC. However, BTC does not follow the ISO 4217 standard because BT is the country code for Bhutan, and ISO 4217 requires the first letter of currency codes for global commodities to be 'X'. The code XBT, which follows ISO 4217, is used by Bloomberg L.P., though it is not officially part of the standard.

There is no single rule for capitalization. Some sources use "Bitcoin" with a capital letter to refer to the technology and network, and "bitcoin" with a lowercase letter for the unit of account. Dictionaries like the Cambridge Advanced Learner's Dictionary and the Oxford Advanced Learner's Dictionary use both forms without distinguishing between them.

One bitcoin can be divided into eight decimal places. Smaller units include the millibitcoin (mBTC), equal to 1/1000 of a bitcoin, and the satoshi (sat), which is 1/100,000,000 of a bitcoin, the smallest unit. There are 100,000 satoshis in one mBTC.

Bitcoin operates as a decentralized system, meaning it has no central authority or administrator. Anyone can create a bitcoin address and send or receive transactions without needing approval. This is done using a distributed ledger called a blockchain, which records all transactions.

The blockchain is an ordered list of blocks. Each block contains a SHA-256 hash of the previous block, linking them in order. The blockchain is maintained by a peer-to-peer network. Information about blocks, addresses, and transactions is public and can be viewed using a blockchain explorer.

Nodes (computers on the network) validate and share transactions, keeping a copy of the blockchain to verify ownership. A new block is added to the blockchain roughly every 10 minutes, updating all nodes without central control. This process ensures that each bitcoin is spent only once. Unlike traditional ledgers that track physical money, bitcoins exist digitally as unspent outputs from transactions.

In the blockchain, bitcoins are linked to specific strings called addresses. Most addresses are created by encoding a hash of a public key. Generating an address involves creating a random private key and calculating the corresponding address. This process is fast, but finding a private key from an address is nearly impossible. Sharing an address does not risk exposing the private key, and it is unlikely to accidentally generate a used key with funds. To use bitcoins, owners need their private key to sign transactions, which are verified by the network using the public key. An address may also encode a script requiring multiple private keys to spend funds, such as in "multisig" transactions.

Bitcoin transactions use a Forth-like scripting language, with inputs and outputs. When sending bitcoins, a user specifies the recipient's address and the amount for each output. This allows sending bitcoins to multiple recipients in one transaction. To prevent double-spending, each input must refer to a previous unspent output. Using multiple inputs is similar to using multiple coins in cash transactions. If the total input amount exceeds the intended payment, the extra is returned to the sender as change. Unallocated input satoshis become the transaction fee.

Losing a private key means losing access to the associated bitcoins, as no other proof of ownership is accepted by the system. For example, in 2013, a user lost ₿7,500 (worth $7.5 million) by discarding a hard drive with the private key. It is estimated that about 20% of all bitcoins are lost. Private keys must also remain secret, as exposure, such as through a data breach, can lead to theft. As of December 2017, approximately ₿980,000 had been stolen from cryptocurrency exchanges.

Miners do not act as nodes but communicate with them. Mining prevents double-spending and ensures all nodes agree on the blockchain's content. It also makes it difficult for adversaries to alter the blockchain, as doing so requires more mining power than the rest of the network combined.

Mining involves using computer power to maintain the blockchain. Miners group transactions into blocks, which are verified by the network. Each block must include a proof of work (PoW), which requires finding a nonce number that, when combined with the block's content, produces a hash smaller than the network's difficulty target. PoW is easy to verify but hard to generate, requiring many attempts. PoW is the basis of bitcoin's consensus mechanism.

The difficulty of generating blocks is adjusted every 2,016 blocks (about two weeks) to maintain a 10-minute average block time. This process requires significant computational power and specialized hardware.

Miners who create a valid block can collect transaction fees and a fixed reward in bitcoins. A special transaction called a coinbase is included in the block, with the miner as the recipient. All bitcoins ever created have come from such transactions. The reward is halved every 210,000 blocks until ₿21 million total bitcoins are issued, expected around 2140. Afterward, miners will earn only transaction fees, which depend on the transaction size and data used (measured in satoshis per byte).

The proof of work system and the linked blocks make changing the blockchain very difficult. Altering one block requires changing all subsequent blocks. As more blocks are added, modifying older ones becomes harder. If there is a disagreement, nodes trust the longest chain, which required the most effort to create. To tamper with the blockchain, an entity would need to control the majority of the global hashrate, a costly and unlikely feat.

Bitcoin mining has environmental effects, drawing attention from regulators. As of 2025, a study estimated bitcoin mining used 0.5% of global electricity and 0.08% of world greenhouse gas emissions, similar to Slovakia's emissions. About half of the electricity used comes from fossil fuels. Mining hardware also contributes to electronic waste due to its short lifespan. In 2025, the US led global bitcoin mining with 38% of the market, followed by Russia (16%) and China (14%, despite a 2021 ban on cryptocurrency activities).

Bitcoin is pseudonymous, meaning funds are linked to addresses, not real-world identities. While address owners are not directly identified, all transactions are public on the blockchain. Patterns, such as spending coins from multiple inputs, may suggest a common owner. Public data can sometimes be matched with real-world information.

Economics and usage

According to the European Central Bank, the idea of decentralized money in Bitcoin comes from the Austrian school of economics, especially Friedrich Hayek’s book The Denationalisation of Money. In this book, Hayek suggests allowing free markets to control money instead of central banks. Sociologist Nigel Dodd says the main goal of Bitcoin is to take money away from control by governments and society. The Economist describes Bitcoin as a project to create an online version of cash, allowing people to make transactions without interference from governments or banks. These ideas first attracted libertarians and anarchists.

Money has three roles: storing value, being used to buy and sell goods (a medium of exchange), and serving as a standard for measuring value (a unit of account). In 2014, The Economist said Bitcoin works best as a medium of exchange. In 2015, the same publication noted that Bitcoin had three useful qualities for currency: it is hard to earn, has a limited supply, and is easy to verify. However, a 2018 report by The Economist said cryptocurrencies did not meet these criteria. Some researchers said in 2015 that Bitcoin functions more as a payment system than as a currency. In 2014, economist Robert J. Shiller said Bitcoin could be used as a unit of account, like Chile’s Unidad de Fomento, but that Bitcoin in its current form does not solve important economic problems. In 2017, François Velde, a senior economist at the Chicago Fed, said Bitcoin is unlikely to replace money in well-functioning systems.

The legal status of Bitcoin varies in different countries. Because Bitcoin is not controlled by a single group and is used globally, it is hard to regulate. However, using Bitcoin can be illegal, and banning exchanges and peer-to-peer transactions in a country could stop its use. The use of Bitcoin by criminals has drawn attention from regulators, lawmakers, and law enforcement. Nobel Prize-winning economist Joseph Stiglitz says Bitcoin’s anonymity helps money laundering and other crimes. This is the main reason some countries ban Bitcoin. As of November 2021, nine countries had an absolute ban (Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar, and Tunisia), and 42 countries had an indirect ban.

As of 2025, Harvard Professor Kenneth Rogoff said Bitcoin is rarely used for regular transactions with businesses but is popular in informal economies and for illegal activities. Prices are usually not shown in Bitcoin, and trades often involve converting Bitcoin to traditional money. Common reasons for not using Bitcoin include high costs, the inability to reverse payments, high price changes, long transaction times, and fees, especially for small purchases. Bloomberg reported that Bitcoin was used for large purchases on Overstock.com and for sending money to freelancers across borders. In 2015, there was little use of Bitcoin for international money transfers, even though banks and Western Union charge high fees.

From September 2021 to January 2025, El Salvador made Bitcoin a legal currency, along with the US dollar. This decision faced criticism both inside and outside the country. In 2022, the International Monetary Fund (IMF) told El Salvador to stop using Bitcoin as legal currency. By 2022, only 20% of businesses in El Salvador accepted Bitcoin. In 2025, El Salvador’s government removed Bitcoin’s status as legal currency to meet IMF loan conditions. El Salvador still calls Bitcoin “legal tender,” but businesses are not required to accept it, and the government no longer uses Bitcoin for taxes or fees.

In April 2022, the Central African Republic (CAR) made Bitcoin a legal currency alongside the CFA franc but canceled the policy one year later.

Some governments use Bitcoin. For example, Iran initially opposed cryptocurrencies but later used them to avoid sanctions. Since 2020, Iran has required local Bitcoin miners to sell Bitcoin to the Central Bank of Iran, allowing the bank to use it for imports. Some local governments, like Colorado in the US and Zug and Lugano in Switzerland, accept Bitcoin for tax payments. As of 2023, the US government owned more than $5 billion in seized Bitcoin.

As of 2018, most Bitcoin transactions happened on cryptocurrency exchanges. Since 2014, regulated Bitcoin funds have allowed people to invest in Bitcoin or its futures. Bitcoin is used as a way to store value, with individuals and companies like the Winklevoss twins and Elon Musk’s companies (SpaceX and Tesla) buying and selling large amounts of Bitcoin. Bitcoin wealth is highly concentrated, with 0.01% of holders owning 27% of all Bitcoin in circulation as of 2021.

As of March 2025, El Salvador had $550 million worth of Bitcoin in its international reserves, about 6,102 coins.

Bitcoin, along with other cryptocurrencies, has been called an economic bubble by economists, including Nobel Prize winners like Joseph Stiglitz, James Heckman, and Paul Krugman. Nobel Prize winner Robert Shiller says Bitcoin is a trend that might become an asset class. He compares its price growth to an “epidemic” caused by spreading stories. In 2024, Nobel Prize winner Jean Tirole called Bitcoin a “pure bubble” because it has no intrinsic value. He said some bubbles, like gold and traditional money, last a long time, but it is unclear if Bitcoin will collapse or become an alternative to gold. In 2024, Federal Reserve Chair Jerome Powell said Bitcoin is a digital competitor to gold but not to the dollar, as it is too volatile and not used for payments. In 2025, Kenneth Rogoff said Krugman was wrong, arguing Bitcoin has value as it competes with the dollar to become the currency used in the underground economy, which makes up 20% of the world’s GDP. Rogoff said Bitcoin could become appealing to emerging-market central banks as a “politically neutral” reserve currency. In 2025, Kevin Warsh, a nominee for the Federal Reserve Chair, called Bitcoin the “new gold.”

A 2018 study in The International Review of Financial Analysis said Bitcoin is highly volatile and behaves differently from other traditional assets. A 2022 analysis in The Journal of Alternative Investments said Bitcoin was less volatile than oil, silver, US Treasuries, and 190 stocks in the S&P 500 during and after the 2020 stock market crash. The term “hodl” was created in December 2013 to describe holding Bitcoin instead of selling it during price changes.

In 2014, economist Nouriel Roubini called Bitcoin a Ponzi scheme. Legal scholar Eric Posner disagreed, saying a real Ponzi scheme involves fraud, while Bitcoin seems more like a shared belief. A 2014 World Bank report also said Bitcoin was not a deliberate Ponzi scheme.

Bitcoin markets operate 24 hours a day, seven days a week, unlike traditional financial markets with set trading hours. Bitcoin prices change more quickly and are strongly affected by new rules and major events.