What Is Bitcoin? How It Works, Who Controls It and Why Its Price Moves

Bitcoin is the first and largest cryptocurrency, and for many people it is the gateway into crypto as a whole. It is also widely misunderstood. Some think of it as an anonymous payment app, some as a company's product, some as a get-rich-quick scheme. It is none of those things.

This guide explains what Bitcoin actually is, how the network works without a bank or company in charge, where new bitcoins come from, why there will only ever be 21 million, and what drives its price. It finishes with what all of that means if you want to trade it — and the risks you should understand first.

Bitcoin in one paragraph

Bitcoin is a digital currency that lives on a public, open network of computers. Instead of a bank keeping a private record of who owns what, every participant can keep a copy of a shared ledger — the blockchain — which records every Bitcoin transaction ever made. New transactions are added to that ledger roughly every ten minutes by miners, who compete to do so and are rewarded with newly created bitcoin. The rules — including the fixed supply of 21 million — are enforced by the software that thousands of independent computers run, not by any single organisation.

The word "Bitcoin" with a capital B usually refers to the network and protocol; "bitcoin" in lower case, or the ticker BTC, refers to the currency unit. One bitcoin is divisible into 100 million smaller units called satoshis, or "sats", so you never need to buy a whole coin.

Where Bitcoin came from

In October 2008, during the global financial crisis, a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list by someone using the name Satoshi Nakamoto. It described a way to send money online directly from one person to another without going through a financial institution — solving a problem computer scientists had struggled with for years: how to stop the same digital money being spent twice without a central authority to check.

The network went live on 3 January 2009, when Satoshi mined the first block, known as the genesis block. Satoshi continued to work on the software with a small group of developers before stepping away around 2011. Their identity has never been confirmed, and the coins believed to belong to them have not moved.

Since then, Bitcoin has been maintained by open-source developers around the world. Anyone can read the code, propose changes or run the software.

How Bitcoin works

The blockchain: a shared ledger

The blockchain is a list of blocks, each containing a batch of transactions. Every block includes a cryptographic fingerprint (a hash) of the block before it. That link is what makes it a chain: changing any past transaction would change that block's fingerprint, which would break every block after it.

Because thousands of independent computers — called nodes — keep full copies of the blockchain and check every new block against the rules, a dishonest change would be rejected immediately. Nobody needs to trust anyone else; they only need to check the maths.

Transactions and keys

Bitcoin ownership is controlled by cryptographic keys:

• A private key is a secret number that lets you authorise spending. Whoever controls it controls the coins.
• A public key, and the address derived from it, is what you share to receive bitcoin — similar to an account number.

When you send bitcoin, your wallet software creates a transaction and signs it with your private key. Nodes can verify the signature using the public key without ever seeing the private key. Once the transaction is included in a block and a few more blocks are built on top of it, reversing it becomes practically impossible.

This has a serious consequence: Bitcoin transactions cannot be reversed by anyone. There is no bank to call if you send coins to the wrong address or to a scammer. We cover how to protect keys in crypto wallets explained.

Mining and proof of work

Who gets to add the next block? Bitcoin answers that question with proof of work.

1. Miners collect pending transactions into a candidate block.
2. They repeatedly run the block's data through a hash function (SHA-256), changing a small number each time, looking for a result below a target value set by the network.
3. Finding a valid result takes enormous numbers of attempts — it is essentially a lottery where each attempt is a ticket.
4. The first miner to find one broadcasts the block. Other nodes check it instantly and, if it is valid, build on top of it.
5. The winning miner receives the block reward: newly created bitcoin plus the fees paid by the transactions in the block.

Every 2,016 blocks — roughly two weeks — the network automatically adjusts the difficulty so that blocks keep arriving about every ten minutes on average, however much computing power joins or leaves.

Proof of work is what makes rewriting history so expensive. To change a past block, an attacker would need to redo all the work for that block and every block since, faster than the rest of the network combined. The trade-off is significant electricity use, which is one of the most debated aspects of Bitcoin.

No one in charge — but rules everyone follows

Bitcoin has no CEO, no head office and no customer support. Changes to the rules happen only if a broad majority of node operators, miners, developers and users adopt them. That makes Bitcoin slow to change. Notable upgrades have included SegWit (activated in 2017), which changed how transaction data is stored, and Taproot (activated in November 2021), which improved privacy and flexibility for more complex transactions.

Bitcoin's supply: why only 21 million

Bitcoin's monetary policy is written into its code. When the network launched, each new block created 50 BTC. Every 210,000 blocks — about every four years — that reward is cut in half in an event called the halving:

Because the reward keeps halving, the total supply approaches but never exceeds 21 million bitcoins. More than 19 million have already been created; the last fractions are expected to be mined around the year 2140. After that, miners will be paid by transaction fees alone.

This fixed, predictable supply is the main reason people describe Bitcoin as "digital gold". It is also why the halving draws so much attention — we explain it in depth in the Bitcoin halving explained.

What Bitcoin is used for

• Store of value. Many holders buy bitcoin as a long-term asset they believe will hold value against inflation or currency debasement. This is the dominant use today.
• Payments and transfers. Bitcoin can be sent anywhere in the world without a bank. On-chain fees and confirmation times make it less practical for small, everyday purchases, which has driven interest in faster payment layers built on top of it, such as the Lightning Network.
• Trading and speculation. Bitcoin trades around the clock on many venues and is one of the most traded assets in crypto.
• Investment products. Since January 2024, spot Bitcoin exchange-traded funds in the United States have given traditional investors exposure without holding coins directly — see Bitcoin ETFs explained.

What moves the price of Bitcoin

Because supply follows a fixed schedule, short- and medium-term price changes are driven almost entirely by demand. The main forces include:

• Global liquidity and interest rates. Bitcoin has tended to do better when money is cheap and investors are willing to take risk, and worse when rates rise.
• Investor sentiment. Crypto markets are prone to waves of optimism and fear, amplified by social media.
• Investment-product flows. Money moving into or out of Bitcoin ETFs and similar products.
• Regulation and legal news. Approvals, bans, enforcement actions and tax changes in major economies.
• Large holders. Long-term holders, funds and companies with large balances can move the market when they buy or sell.
• Leverage. When many traders use borrowed money, forced liquidations can turn a modest move into a sharp one.
• The halving cycle, at least as a source of expectations — covered in crypto market cycles.

The result is an asset that has historically been far more volatile than major currencies or stock indices. We look at the reasons in detail in why crypto is so volatile, and at the long-run record in Bitcoin price history.

Common misconceptions

• "Bitcoin is anonymous." It is pseudonymous. Every transaction is public and permanent; addresses are not labelled with names, but they can often be linked to people through exchanges and analysis.
• "Bitcoin is owned by a company." No company issues or controls it. Exchanges and apps that let you buy it are separate businesses.
• "You have to buy a whole bitcoin." You can own or trade fractions down to one hundred-millionth of a coin.
• "Bitcoin can be printed like money." The issuance schedule is fixed in the protocol; changing it would require almost every participant to agree.
• "The network can be hacked." The Bitcoin protocol has proved highly resilient. Most losses come from hacked exchanges, stolen keys, mistakes and scams — not from breaking Bitcoin itself.

The risks of Bitcoin

Understanding Bitcoin also means understanding what can go wrong.

• Price risk. Drawdowns of more than 70% from a peak have happened several times. Large daily moves are common.
• Custody risk. If you hold coins yourself, losing your keys means losing your coins. If someone else holds them for you, you rely on their security and solvency — several large crypto firms have failed and frozen customer funds.
• Irreversibility. Sending to the wrong address, or to a scammer, cannot be undone.
• Scams. Fake investment schemes, impersonation and "guaranteed returns" are widespread — see crypto scams and risks.
• Regulatory risk. Rules differ widely between countries and can change quickly.

Regulators such as the UK's Financial Conduct Authority warn that consumers investing in cryptoassets should be prepared to lose all their money.

A worked example: fees and confirmations

Suppose you want to send 0.01 BTC to another wallet. Bitcoin fees depend on the size of the transaction in data, not on the amount sent. If your transaction is about 140 virtual bytes and the network is quiet with fees around 5 sats per virtual byte, the fee is about 700 sats — 0.000007 BTC. If the network is busy and the going rate jumps to 60 sats per virtual byte, the same transaction costs 8,400 sats.

After broadcast, it waits in a queue (the mempool) until a miner includes it in a block. Higher-fee transactions are usually picked first. Many services wait for several confirmations — several blocks built on top — before treating a payment as final, which at roughly ten minutes per block can mean 30 to 60 minutes.

The lesson: if you ever need to move bitcoin quickly, fees and timing are not under your control.

Owning bitcoin versus trading its price

There are two broadly different ways people get exposure to Bitcoin:

1. Owning coins. You buy bitcoin and hold it in a wallet — your own, or one run by an exchange. You benefit if the price rises and carry all the custody risks above.
2. Trading the price. You take positions on the price moving up or down, without holding coins on the blockchain. This is how BTC is offered on RumiEX.

On RumiEX, Bitcoin is listed as BTC/USDT and marked OTC: prices are quoted by RumiEX's own pricing engine rather than taken from an external exchange, and they are available around the clock. Because they are RumiEX's quotes, they will not exactly match the price of bitcoin on any particular exchange. You can follow the live price on the markets page or open the chart on the trading charts page.

If you are new, the sensible first step is practice: every account includes a demo wallet funded with virtual money, so you can learn how BTC moves before risking anything. Our guide on how to trade Bitcoin walks through the process step by step.

Key takeaways

• Bitcoin is a decentralised digital currency recorded on a public blockchain, launched in January 2009 by the pseudonymous Satoshi Nakamoto.
• Miners secure the network through proof of work and are rewarded with new bitcoin and fees; blocks arrive about every ten minutes.
• Supply is capped at 21 million, with new issuance halving every 210,000 blocks — most recently in April 2024.
• Price moves are driven by demand: liquidity, sentiment, regulation, investment flows and leverage.
• Transactions are irreversible and custody is your responsibility — security and position sizing matter as much as any view on price.

Next, compare Bitcoin with the second-largest network in Bitcoin vs Ethereum, or learn what Ethereum is.