Glossary
Bitcoin
The first cryptocurrency, launched in 2009, with a fixed maximum supply of 21 million coins secured by proof of work.
Bitcoin (ticker BTC) is a digital currency that runs on a public, decentralized network instead of being issued by a government or bank. It was described in a 2008 white paper by the pseudonymous Satoshi Nakamoto and its network went live in January 2009, making it the first cryptocurrency. It remains the largest by market value, and its price swings are among the most closely watched in any asset market.
How it works
Every transaction is recorded on a shared ledger, the bitcoin blockchain. Computers called miners compete to add a new block of transactions roughly every 10 minutes by solving a computational puzzle, a system known as proof of work. The winner receives newly created bitcoin plus transaction fees.
The protocol limits total supply to 21 million coins. The reward per block halves every 210,000 blocks, about every four years. The April 2024 halving cut it from 6.25 to 3.125 BTC, so new supply keeps shrinking. Each coin divides into 100 million units called satoshis.
Ways to own it and the risks
People hold bitcoin directly in a wallet they control, through a crypto exchange, or indirectly through US spot bitcoin ETFs, which the SEC allowed to list in January 2024 and which trade like stocks in a brokerage account.
Key risks include:
- Volatility. Declines of 50% or more from a peak have occurred several times.
- Custody. Lost private keys cannot be recovered, and exchanges have failed or been hacked.
- Protection. Bitcoin held directly is not covered by SIPC or FDIC; SIPC says crypto that is not a security is outside its protection.
In the US, the IRS treats bitcoin as property, so selling or spending it can create a capital gain or loss.