Bitcoin is the oldest and best-known crypto-asset. It is also widely misunderstood. Some people describe it as the future of money, others as a bubble. This article does neither. It explains, step by step, what Bitcoin is and how it works, so you can understand the news and make up your own mind.

A short history

In October 2008, during the global financial crisis, someone using the name Satoshi Nakamoto published a nine-page paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. It described a way to send digital money directly between people without a bank or payment company in the middle.

The Bitcoin network started on 3 January 2009, when the first block (the “genesis block”) was created. Satoshi Nakamoto’s identity is still unknown. Since then, Bitcoin has grown from an experiment among cryptographers into an asset traded worldwide, with regulated products and companies built around it. It has also gone through several crashes in which its price fell by more than 70%.

What Bitcoin actually is

Bitcoin is two things at once:

• A network: thousands of computers (“nodes”) around the world that run open-source software and keep a copy of a shared ledger.
• A unit: bitcoin (often written BTC), the digital currency that is tracked on that ledger. One bitcoin can be divided into 100 million smaller units called satoshis.

There is no company, central bank or government that issues or controls Bitcoin. The rules are enforced by the software that participants choose to run.

The blockchain: a shared ledger

All Bitcoin transactions are recorded in a public ledger called the blockchain. Transactions are grouped into blocks, and each block contains a cryptographic reference to the previous one, forming a chain. Changing an old transaction would require redoing the work for that block and every block after it, which is practically impossible on a large network.

Anyone can view the blockchain. Transactions are linked to addresses, not names, which makes Bitcoin pseudonymous rather than anonymous: if an address can be linked to a person (for example through an exchange that verified their identity), their transactions can be traced.

How transactions are confirmed: mining

Who decides which transactions go into the next block? That is the job of miners. They use specialised computers to compete in solving a mathematical puzzle, a system known as proof of work. The first miner to find a valid solution gets to add the next block and receives a reward: newly created bitcoin plus the transaction fees paid by users.

A new block is added roughly every 10 minutes on average. The difficulty of the puzzle adjusts automatically about every two weeks, so that the pace stays steady even when more or fewer miners join.

Mining uses a lot of electricity, which is one of the main criticisms of Bitcoin. Supporters argue that this energy secures the network; critics point to the environmental impact. Both arguments appear regularly in policy debates, including in the EU.

The 21 million limit and halvings

Bitcoin’s software sets a maximum supply of 21 million bitcoin. New coins are only created as mining rewards, and that reward is cut in half roughly every four years (every 210,000 blocks), an event known as the halving.

• In 2009 the reward was 50 bitcoin per block.
• After the halving in April 2024 it became 3.125 bitcoin per block.
• The next halving is expected around 2028.

The last bitcoin is expected to be mined around the year 2140. After that, miners would be paid only by transaction fees. A fixed supply does not mean the price can only go up: price depends on supply and demand, and demand can fall as well as rise.

Wallets and keys

To use bitcoin, you need a wallet. A wallet does not store coins; it stores your private keys, the secret data that proves you control certain bitcoin on the blockchain.

• Custodial wallets: an exchange or app holds the keys for you. Easier, but you depend on that company.
• Self-custody wallets: you hold the keys, in a phone app, desktop software or a hardware wallet. You have full control, and full responsibility.

When you set up a self-custody wallet you get a recovery phrase of 12 or 24 words. Anyone who has these words can take your bitcoin. If you lose them and your device, your bitcoin cannot be recovered. There is no helpdesk and no “forgot password” button.

Sending bitcoin

A Bitcoin transaction is final once confirmed. There is no chargeback. If you send to the wrong address, or to a scammer, the money is almost always gone. Always double-check addresses, start with a small test amount and be suspicious of anyone who asks you to send bitcoin to “verify”, “unlock” or “protect” your funds.

Fees depend on how busy the network is, not on the amount you send. For small, fast payments, there are also “layer 2” systems such as the Lightning Network, which settle many payments off the main chain.

Bitcoin in the EU

In the European Union, companies that let you buy, sell or store bitcoin need an authorisation under the Markets in Crypto-Assets Regulation (MiCA). Bitcoin itself has no issuer, so there is no white paper requirement for it. But the platforms you use must be licensed, and since 1 July 2026 the transition period for unlicensed providers is over across the EU. Check the ESMA register or your national regulator (in the Netherlands, the AFM) before using any platform.

Bitcoin is not legal tender in the EU, and it is not covered by deposit guarantee schemes. In the Netherlands, bitcoin holdings are generally taxed in Box 3; see our guide to crypto taxes in the Netherlands.

The main risks

Before you consider buying bitcoin, understand these risks:

• Extreme price volatility. The price can rise or fall by tens of percent within weeks. Large drops have happened repeatedly.
• You can lose everything. Through price falls, hacks, scams, mistakes or losing your keys.
• No protection or guarantees. No deposit guarantee, no central bank, no undo button.
• Scams. Bitcoin is a favourite payment method for fraudsters because transactions are irreversible.
• Regulatory and tax changes. Rules can change and affect how you can use or are taxed on bitcoin.
• Technology risk. Software bugs, wallet errors or future technical threats cannot be ruled out.

Nobody can predict bitcoin’s future price, and anyone who claims to know is guessing or selling something.

Common beginner questions

Do I have to buy a whole bitcoin?

No. Bitcoin is divisible into satoshis, so you can hold a fraction.

Is Bitcoin anonymous?

No. It is pseudonymous. All transactions are public, and regulated providers must verify your identity and share certain information under EU rules.

Who controls Bitcoin?

No single party. Changes to the rules require broad agreement among the people who run the software. This makes the system hard to change, which some see as a strength and others as a weakness.

Is Bitcoin the same as “crypto”?

Bitcoin is one crypto-asset. There are thousands of others, with very different designs, risks and purposes.

Bottom line

Bitcoin is a decentralised digital currency with a fixed supply, secured by mining and recorded on a public blockchain. It is technically interesting and has lasted more than 17 years, but it remains highly speculative and volatile. If you decide to engage with it, do so only with money you can afford to lose entirely, use licensed providers, and learn how to keep your keys safe (see Hardware wallets explained and How to spot crypto scams).

Sources: Bitcoin white paper (Satoshi Nakamoto, 2008), Bitcoin protocol documentation, Regulation (EU) 2023/1114 (MiCA), ESMA statements on the end of the MiCA transitional period. Information as of October 2026.