Bitcoin 101

What Is Bitcoin?

Bitcoin is a digital payment network and asset introduced in 2009. Its public blockchain records confirmed on-chain transactions. Participants run software that checks transactions and blocks against shared protocol rules; activity handled by custodians or payment layers may not appear as a distinct transaction on the base blockchain.

Bitcoin can be transferred without using a bank as the transaction intermediary, subject to network access, fees, applicable law, and the recipient's ability to use the network. Many people and businesses still rely on exchanges, custodians, payment processors, or other service providers.

Supply and issuance

Bitcoin's consensus rules define a maximum issuance of 21 million bitcoin. Miners may receive a block subsidy plus transaction fees for producing a valid block. The April 2024 halving reduced the subsidy to 3.125 BTC per block. The subsidy halves every 210,000 blocks; the next halving is expected around 2028 and would reduce it to 1.5625 BTC. Timing and daily issuance vary because blocks do not arrive at perfectly fixed intervals.

These software rules constrain issuance. They do not guarantee market price, purchasing power, liquidity, or investment returns.

Mining and transaction confirmation

Miners use proof of work to propose blocks. Network nodes independently verify that proposed blocks and transactions follow the protocol rules. Greater proof-of-work expenditure generally raises the resources required to reorganize confirmed history, but no technical system is free from operational, software, custody, or market risk.

  • Transactions can remain pending while miners select transactions for blocks.
  • Fees vary with network demand and the transaction's data size.
  • Confirmations reduce reversal risk over time; they do not eliminate every risk.

Bitcoin's Price History

Bitcoin's market price has experienced rapid appreciation, severe drawdowns, and long periods of uncertainty. Historical prices do not predict future returns. A business considering bitcoin should evaluate volatility, liquidity needs, custody and counterparty risks, accounting treatment, taxes, and the possibility of loss.

Primary references

Educational information only; not accounting, tax, legal, custody, or investment advice.