What Is Bitcoin? How It Works, Who Made It and Where It Stands Now

Bitcoin is a digital currency that people can send to each other directly over the internet, with no bank or payment company in the middle. No company or person owns the network. Its users and the computers that run its software keep it going. A public ledger called the blockchain records every transaction. Miners secure that ledger with a process called proof-of-work, and no more than 21 million bitcoins will ever be created.

Where things stand (as of October 2026)

• Software: Bitcoin Core is the reference software most nodes run. Version 31.0 was released on 19 April 2026. It reworks the mempool into a cluster-based design and adds private transaction broadcasting over Tor or I2P. Version 31.1 is now listed as the latest release.
• Supply schedule: The fourth halving took place at block 840,000 in April 2024 (the evening of 19 April US Eastern time). It cut the new-coin reward per block from 6.25 BTC to 3.125 BTC. Halvings happen every 210,000 blocks, which is roughly every four years.
• US policy: On 6 March 2025 the US President signed an executive order creating a Strategic Bitcoin Reserve. The reserve starts with bitcoin the Treasury already holds from criminal or civil asset forfeiture. The White House fact sheet states that "the United States will not sell bitcoin deposited into this Strategic Bitcoin Reserve."
• Investment products: On 10 January 2024 the US Securities and Exchange Commission (SEC) approved the listing and trading of a number of spot bitcoin exchange-traded product (ETP) shares.

How Bitcoin works

A shared public ledger

Every Bitcoin transaction is recorded on the blockchain, a ledger copied across thousands of computers (nodes). Transactions are grouped into blocks, and each block is linked to the one before it. Anyone can check any transaction independently. Bitcoin.org puts it this way: "All transactions can be independently verified on the public blockchain."

Proof-of-work and mining

Miners compete to add the next block. To do it they must find a block header whose hash falls below a target value. Bitcoin uses the SHA-256 hash function for this, and the whitepaper calls the scheme "Hashcash style proof-of-work". It costs a lot of computing work to find a valid block but very little to check one.

• Timing: Every 2,016 blocks, the network compares how long those blocks took against a two-week target (1,209,600 seconds) and raises or lowers the difficulty. Over time this keeps blocks coming about every 10 minutes.
• Reward: The first transaction in each block must be the generation transaction. It pays the miner the block reward, which is newly created bitcoin plus the fees from the transactions in the block. Newly mined coins cannot be spent until 100 more blocks have been added.
• Security: To change an old block, an attacker would need as much hashing power as the whole network has spent since that block was created. This is why confirmed transactions are treated as final.

Supply and units

Only 21 million bitcoins will ever be created, and the number of new coins is cut in half on a fixed schedule. One bitcoin divides to eight decimal places. The smallest unit, 0.00000001 BTC, is called a satoshi, so 1 bitcoin equals 100,000,000 satoshis.

Keys and ownership

Bitcoin is held in wallets, which store private keys. Whoever controls the private key controls the coins. Bitcoin.org states plainly that "Bitcoin transactions are irreversible." If you send coins to the wrong address or lose your keys, no central party can undo it.

Who created Bitcoin

Bitcoin's creator used the name Satoshi Nakamoto, and their real identity is still unknown.

• 31 October 2008: Nakamoto posted "Bitcoin P2P e-cash paper" to the Cryptography mailing list. It linked to the whitepaper "Bitcoin: A Peer-to-Peer Electronic Cash System" and described "a new electronic cash system that's fully peer-to-peer, with no trusted third party."
• 3 January 2009: The genesis block, block 0, was mined. Its 50 BTC reward can never be spent.
• 8–9 January 2009: Nakamoto announced Bitcoin v0.1 on the same mailing list. The archived copy is dated 9 January in local time, which was 8 January in UTC. The first release ran only on Windows.
• Late 2010: Nakamoto stepped back from the project, according to Bitcoin.org. Over the following months, control of the code repository and the network "alert key" passed to developer Gavin Andresen. Sources give different dates for this handover.

Is Bitcoin legal?

The answer depends on the country. According to Bitcoin.org, "Bitcoin has not been made illegal by legislation in most jurisdictions," but some jurisdictions restrict or ban it. A few examples show how wide the range is:

• Japan: An amendment to the Payment Services Act took effect on 1 April 2017. It defined virtual currency and brought exchange operators under a registration system. It recognised virtual currency as a means of payment, not as legal tender. Japan has since revised the framework and now uses the term "crypto assets".
• China: On 24 September 2021 the People's Bank of China and other departments published a notice. It declared virtual currency exchange services, order matching, token issuance financing and virtual currency derivatives to be illegal financial activities. Offshore platforms serving mainland residents online are covered too.
• El Salvador: Bitcoin has been legal tender since September 2021. Under its 2025 programme with the International Monetary Fund (IMF), the Bitcoin Law was amended. Private businesses no longer have to accept bitcoin, the public sector is no longer required to accept it, and taxes are paid only in US dollars. A regulation barring tax payments in bitcoin took effect on 1 May 2025. Reports disagree on whether bitcoin still formally counts as legal tender.
• Central African Republic: A law adopted in April 2022 made bitcoin legal tender. Parliament repealed that status on 23 March 2023.
• United States: Spot bitcoin ETPs have been approved for trading since January 2024. The federal government holds a Strategic Bitcoin Reserve under the March 2025 executive order.

What people use Bitcoin for

• Sending value across borders: Payments go from person to person without a bank in between. Fees and confirmation times change with how busy the network is.
• Holding: Many holders treat bitcoin as a long-term store of value because its supply is fixed. Whether it works as one is still debated, given how much its price moves.
• Exposure through regulated funds: In the US, spot bitcoin ETPs let investors get price exposure through a brokerage account without holding keys themselves.

Risks

• Volatility: Bitcoin.org notes that "the price of a bitcoin is still very volatile." When he announced the ETP approval, SEC Chair Gary Gensler wrote: "Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto."
• Irreversibility and self-custody: Mistakes and theft usually cannot be undone, and losing your keys means losing the coins.
• Not anonymous: Bitcoin.org says Bitcoin is not anonymous and that its use "leaves extensive public records." Addresses can be linked to people.
• Regulatory change: As the examples above show, national rules can change quickly, in either direction.

Limitations: this explainer covers protocol basics and selected jurisdictions only. It is not legal, tax or investment advice.