What is Bitcoin, and what is a blockchain?
Bitcoin was launched in 2009 by the pseudonymous Satoshi Nakamoto, a few months after the financial crisis. It was designed as digital money that no bank or government controls.
The problem it solves
Digital information can be copied, so how do you stop someone spending the same digital coin twice without a bank keeping the ledger? Bitcoin's answer is a public ledger that everyone can verify and no single party controls.
The blockchain
Transactions are grouped into blocks. Each block contains a cryptographic fingerprint (hash) of the one before it, forming a chain. Changing an old transaction would change its block's hash and break every block after it. Thousands of computers (nodes) around the world keep a copy and check every new block against the rules.
Mining and proof of work
To add a block, miners compete to solve a computational puzzle by guessing numbers until the block's hash meets a target. It takes enormous computing power to find, but seconds to verify. The winner earns newly created bitcoin plus transaction fees. Rewriting history would require out-computing the rest of the network, which is extremely expensive. That cost is what secures the ledger.
Fixed supply and the halving
There will only ever be 21 million bitcoin. The reward for mining a block halves roughly every four years (every 210,000 blocks). The most recent halving was in April 2024. New supply keeps shrinking, which supporters see as the core of Bitcoin's value proposition.
Keys and custody
You own bitcoin by controlling a private key. Lose it and the coins are gone. Hand it to an exchange and you're trusting that exchange: “not your keys, not your coins”. The collapse of FTX in 2022 was a painful reminder.
The debate
- For: scarce, borderless, censorship-resistant, a potential hedge against currency debasement. Spot bitcoin ETFs launched in the US in 2024 and brought large institutional flows.
- Against: extreme volatility, no cash flows to value, high energy use, and its use in illicit activity. Many economists question whether it functions as money at all.
Key takeaway
Bitcoin is a decentralised ledger secured by computing power, with a fixed supply. Whether it is digital gold or a speculative asset, it's driven heavily by liquidity and sentiment (lesson 1.10).
Educational content only, not financial advice. Investing involves risk and you can lose money.