About Bitcoin

Bitcoin is a digital currency that no company, bank or government runs. It is a network of computers that follow the same fixed rules and keep one shared record of who owns what. It started in 2009, and since January 2024 you can also get exposure through US-listed spot Bitcoin ETFs, which this site tracks every day. This guide covers the basics in plain English.

What Bitcoin is

Bitcoin is money that exists only as data. There is no coin and no company to call. Instead, thousands of computers around the world run the same open-source software, check every transaction against the same rules, and keep identical copies of a public ledger. If someone tries to cheat, the other computers reject it.

People use the word in two ways. "Bitcoin" with a capital B usually means the network and its rules. "bitcoin" with a small b, or BTC, means the unit of money. One bitcoin can be split into 100,000,000 smaller units called satoshis, or "sats", so nobody needs to buy a whole one.

No central bank sets the price. It is whatever buyers and sellers agree on at exchanges such as Coinbase, around the clock. Today most people hold bitcoin as an investment rather than spending it. It can be sent anywhere in the world without permission, but price swings and fees make it awkward for buying a coffee.

A short history

• Oct 31, 2008: Satoshi Nakamoto shares a nine-page paper, Bitcoin: A Peer-to-Peer Electronic Cash System, with a cryptography mailing list.
• Jan 3, 2009: The first block, called the genesis block, is created. Nakamoto embedded a newspaper headline in it: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".
• Jan 12, 2009 (UTC): The first transaction between two people: Nakamoto sends 10 bitcoin to the developer Hal Finney.
• May 22, 2010: A programmer named Laszlo Hanyecz pays 10,000 bitcoin for two pizzas, the first widely known real-world purchase.
• Nov 28, 2012; Jul 9, 2016; May 11, 2020; Apr 2024: The first four halvings, when the reward for creating a block was cut in half. The most recent, at block 840,000, took effect on Apr 20, 2024 (UTC), which was the evening of Apr 19 in US Eastern time.
• Jan 10-11, 2024: The US Securities and Exchange Commission approves the first spot Bitcoin ETFs on Jan 10, and eleven of them begin trading on Jan 11.

How Bitcoin works

The blockchain

Bitcoin transactions are collected into groups called blocks, and roughly every ten minutes a new block is added to the end of the chain. Each block contains a fingerprint (a hash) of the block before it. That links them together, hence "blockchain". Changing an old transaction would change every fingerprint after it, so a cheater would have to redo all the later work faster than the rest of the network. The "block height" above is the number of blocks added since the first one.

Mining and proof of work

Who gets to add the next block? Computers called miners compete. They repeatedly guess numbers until one produces a block fingerprint below a target set by the network. The guessing takes real computing power and electricity, which is the "work" in proof of work. The first miner to succeed adds the block and collects the block reward plus the fees paid by the transactions inside it. Every other computer checks the block and rejects it if it breaks any rule.

To keep blocks arriving about every ten minutes, the network adjusts the difficulty of the guessing game every 2,016 blocks, roughly every two weeks. The cost of mining is a security feature: attacking Bitcoin would mean out-spending all the honest miners. It is also why Bitcoin's energy use is debated.

The 21 million cap and the halving

Bitcoin's supply is limited by its software. The reward for each block started at 50 bitcoin and is cut in half every 210,000 blocks, which takes about four years. That event is called the halving. The reward went from 50 to 25 in 2012, to 12.5 in 2016, to 6.25 in 2020, and to 3.125 in April 2024. The next halving is due at block 1,050,000. The box above counts the blocks remaining; the date is only an estimate.

Add all the rewards up and the total approaches, but never passes, 21 million bitcoin. Because the rewards shrink, most of the supply has already been mined, and the last fraction will trickle out until about the year 2140. After that, miners will be paid only through transaction fees. Changing that schedule would need nearly everyone on the network to agree.

Wallets, self-custody and ETFs

A bitcoin wallet does not actually store coins. The coins are entries on the blockchain. What a wallet stores is your private keys, which are the secret numbers that let you authorize sending those coins. Whoever controls the keys controls the bitcoin. Wallets back the keys up as a "seed phrase" of 12 or 24 words. Anyone with that phrase can take the coins, and if you lose it and your device, the coins are gone. There is no password reset.

That leaves three common ways to hold bitcoin exposure, each with a different trade-off:

Self-custody gives you full control and full responsibility. An exchange account is easier but means trusting a company. An ETF removes key management and fits in a brokerage or retirement account, but you cannot move the bitcoin yourself.

Why people own Bitcoin, and the risks

People buy bitcoin for several reasons, and they are arguments rather than guarantees:

• Scarcity. The supply is capped, which some investors compare to gold, so Bitcoin is often called "digital gold".
• Access without permission. Anyone with an internet connection can hold and send it, with no bank account required.
• Diversification and speculation. Some hold a small slice alongside stocks and bonds; others expect the price to rise.

The risks are real and worth taking seriously:

• Volatility. The price can move several percent in a day, and it has dropped by more than 75% from a peak more than once: about 84% from the December 2017 peak to late 2018, and about 77% from the November 2021 peak to late 2022.
• No income. Bitcoin pays no interest or dividend. Your return depends entirely on someone later paying more for it.
• Loss and scams. Most losses come from lost keys, hacked exchanges and scams, not from the network itself being broken. Transfers cannot be reversed.
• Regulation and taxes. Rules can change, and in the US bitcoin is generally taxed as property, so selling at a gain can create a tax bill.

Where spot Bitcoin ETFs fit in

A spot Bitcoin ETF is a fund that holds actual bitcoin and sells shares that trade on a stock exchange, just like a stock. Each share tracks the price of bitcoin, less the fund's yearly fee. "Spot" means the fund holds the real asset; earlier US Bitcoin funds held futures contracts instead.

The SEC approved the first group of spot funds on Jan 10, 2024, and trading began the next day. Reuters, citing LSEG data, reported about $4.6 billion of shares changing hands on that first day. Eleven funds launched together, including BlackRock's IBIT and Fidelity's FBTC, and Grayscale's older GBTC trust converted into an ETF at the same time. More have launched since; the funds table lists the ones we track.

Each fund uses a custodian, a regulated company that keeps the bitcoin safe. Coinbase's custody business holds the bitcoin for most of the funds, while Fidelity's FBTC uses Fidelity's own custody arm. Fees vary: most funds charge between about 0.14% and 0.25% a year, while GBTC, the oldest, charges 1.5%. Issuers change fees, so check the funds table for current numbers.

The most useful number for following ETFs is the net flow: the money that went into the funds minus the money that came out. When investors buy more shares than they sell, the funds end up buying bitcoin, and when they sell more, the funds end up selling it. Flows are a window into demand from one group of buyers, not a forecast of the price. You can follow them every trading day on the flows dashboard, learn how to read them in Bitcoin ETF Flows Explained and Flow Breadth and Concentration, and see another way to get exposure, public companies that hold bitcoin on their balance sheets, on the Bitcoin Treasuries page.

FAQ

Sources and further reading

• Bitcoin: A Peer-to-Peer Electronic Cash System (Satoshi Nakamoto, 2008)
• SEC statement on the approval of spot Bitcoin ETPs (Jan 10, 2024)
• Live data: mempool.space (blocks), CoinGecko (supply, all-time high), Coinbase (price)

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More: Learn hub · Live data: flows dashboard · Bitcoin Treasuries