What Is Bitcoin? A Plain-English Guide for Gold Owners

What bitcoin is

Bitcoin was described in a nine-page paper written under the name Satoshi Nakamoto. Its first line sets out the aim: a purely peer-to-peer version of electronic cash that lets payments go directly from one party to another without a financial institution in between. The network started on 3 January 2009 with its first block, which carries a newspaper headline as a timestamp: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.

Nothing physical exists, and no bank account sits behind it. A bitcoin balance is an entry in a shared ledger that records which amounts can be spent by which keys. Computers running the software, called nodes, each keep a full copy and check every change against the same rules.

The plural "bitcoins" refers to the units. Each bitcoin divides into 100 million smaller units, called satoshis, so it can be bought in fractions.

How the supply is fixed

New bitcoin is created only as a reward to whoever adds the next block to the ledger. The reward is set in the software: 50 bitcoin per block at launch, halving every 210,000 blocks, which works out at roughly every four years. The sum of that schedule is just under 21 million.

• Issued so far: 20,104,525 bitcoin at block 973,447 on 27 October 2026, or 95.7% of the cap.
• Current reward: 3.125 bitcoin per block, since the April 2024 halving.
• New supply: about 164,000 bitcoin a year, or 0.8% of the existing stock.
• Next halving: block 1,050,000, expected around April 2028.

Changing the schedule would require the people running the network to adopt different software, and nodes reject any block that pays its miner more than the rules allow. Lost coins, the halving dates and the arithmetic behind the cap are covered in how many bitcoins there are.

How a transaction gets confirmed

A payment is a message signed with the sender's private key, naming the coins being spent and the receiving address. The steps, as the white paper sets them out:

1. The signed transaction is broadcast to the network.
2. Miners collect waiting transactions into a candidate block.
3. Each miner searches for a proof of work: a number that makes the block's fingerprint meet a difficulty target. Finding it takes enormous computing effort; checking it takes almost none.
4. The winner broadcasts the block. Nodes accept it only if every transaction in it is valid and not already spent.
5. Miners then build the next block on top of it.

The software aims for one block every 10 minutes and resets the difficulty every two weeks' worth of blocks to keep that pace. Each block added after the one holding a payment is called a confirmation. To reverse a confirmed payment, an attacker would have to redo the work for that block and every block after it, and the white paper shows the odds of catching up fall exponentially with each block added.

Senders also attach a fee, which goes to the miner. Once all 21 million coins are issued, the white paper says, fees can fund the reward entirely.

Custody: what owning bitcoin means

A bitcoin wallet does not hold bitcoin. It holds the private keys that can spend it, the Securities and Exchange Commission's investor bulletin on custody explains. The key works like a password that can never be changed or reset. Lose it, and any backup, and the coins are gone for good; anyone who copies it can spend them.

The bulletin, published on 12 December 2025, describes two choices.

• Hot or cold wallet. A hot wallet is software connected to the internet: convenient, but exposed to hacking. A cold wallet is kept offline, on a device or even paper: safer from hacking, but it can be lost, damaged or stolen.
• Self-custody or third-party custody. Holding the keys yourself means sole control and sole responsibility. Leaving them with an exchange or custodian means the firm controls the keys, and if it is hacked, shuts down or goes bankrupt, the owner may lose access.

Most wallets also create a seed phrase, a list of words that can restore the wallet. The SEC's advice is to store it securely and share it with no one. Ownership in the bitcoin system is whatever the keys say. In self-custody there is no help desk that can reverse a payment or restore a lost key.

How much the price moves

Bitcoin's price is set entirely by trading. It has fallen by half or more several times, using daily closing prices on Coinbase Exchange.

The record so far is $124,720 at the close of 6 October 2025, with an intraday high of $126,296 the same day. On 27 October 2026 bitcoin closed at $80,669, 35% below that record and 38% above the June low.

Single days can be large. Bitcoin fell 14.0% on 5 February 2026 and rose 12.3% the next day. Over the year to 27 October 2026, its annualised volatility on daily closes was about 44%. For comparison, the World Gold Council puts gold's 20-year average at 17%, though gold's 30-day reading rose above 50% for a time in the first half of 2026.

How bitcoin differs from gold

Neither can be created by a central bank, which is why the two are often compared.

Market values use the 27 October 2026 prices: $4,074.60 for gold on COMEX and $80,669 for bitcoin. At those prices one bitcoin was worth 19.8 ounces of gold.

Gold also has uses outside finance, in jewellery and electronics, and central banks hold about 39,000 tonnes of it. Bitcoin has no industrial or decorative use, so its value depends entirely on people wanting to hold and use it. Physical gold has to be stored and guarded; bitcoin can be lost with a key or taken by anyone who copies one. Why gold has held its value for so long is set out in why gold is so valuable.

How bitcoin differs from stablecoins

Stablecoins are digital assets built to hold a fixed value, usually one dollar. US law now defines them. The GENIUS Act, signed on 18 July 2025 as Public Law 119-27, describes a payment stablecoin as a digital asset used for payment or settlement whose issuer is obligated to convert, redeem or repurchase it for a fixed amount of money.

The Congressional Research Service summarises the main rules: issuers must be approved by a state or federal regulator, must hold at least one dollar of permitted reserves for every dollar issued, in cash, insured deposits, short-dated Treasury bills and similar assets, and may not pay interest to holders.

Bitcoin differs on each point. No one issues it, no one owes the holder anything, and its price floats. A dollar stablecoin is a digital claim on dollars and loses purchasing power at the rate of US inflation, which the inflation calculator tracks. Bitcoin is priced in dollars but issued outside the dollar system, and its holders carry the price swings shown above.