Bitcoin is a peer-to-peer digital money network: people can send bitcoin to one another without a central bank or single company operating the system. Its shared rules are enforced by participating computers, while a public ledger records confirmed transactions. To use it, you need a wallet that manages the keys used to receive and spend bitcoin.
What is Bitcoin?
Bitcoin refers both to an open-source network for transferring digital value and to the bitcoin asset (BTC) sent across that network. It is decentralized in the sense that participants run compatible software and apply shared protocol rules instead of relying on one central operator. Developers, miners, businesses, and service providers can still influence how people use Bitcoin; decentralization does not mean those actors have no influence.
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The system was described in Bitcoin’s original white paper as peer-to-peer electronic cash. Bitcoin.org’s overview and white paper provide background on that design.
How do wallets and keys work?
A wallet is software or a device that manages the information needed to receive and spend bitcoin. It can generate an address to share with someone who wants to pay you. A private key is secret: it authorizes spending by signing a transaction. The wallet helps manage keys; it is not, by definition, a bank account held at a Bitcoin company.
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- 2-of-3 MULTISIG: Three keys are stored separately across your phone, Bitkey device, and Bitkey’s server. Any two keys are required to move your bitcoin.
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Some services hold keys on a customer’s behalf, which is a custodial arrangement. With self-custody, you control the keys and take responsibility for keeping them secure and backed up. Bitcoin.org’s How does Bitcoin work? explainer describes the relationship between wallets, keys, transactions, and the ledger.
How does a Bitcoin transaction get confirmed?
- Create and sign: The sender’s wallet creates a transaction and signs it with the private key that authorizes the spend.
- Broadcast and check: The transaction is sent to the network, where participating software checks it against Bitcoin’s rules. Being broadcast is not the same as being confirmed.
- Include in a block: Miners use proof of work to propose blocks containing transactions. Other participants can check the work and apply the same rules when deciding which ledger history to accept.
- Wait for confirmations: Once a block containing the transaction is added to the blockchain, it has a confirmation. More blocks can be built on top of it. How long confirmation takes and how many confirmations are appropriate depend on network conditions and the transaction’s context; there is no fixed instant-finality promise.
The blockchain is a shared public ledger of confirmed transactions. Bitcoin.org’s network explainer describes the ledger and mining process. Ordinary users do not need to mine to send or receive bitcoin.
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What do mining and the 21 million limit mean?
Mining is Bitcoin’s proof-of-work process for proposing blocks and helping participants agree on the order of transactions. Miners may receive a block reward made up of newly issued bitcoin and transaction fees. The newly issued portion, called the block subsidy, declines according to a schedule: Bitcoin.org’s vocabulary page says it halves every 210,000 blocks, roughly every four years.
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- Simple & Secure Interface: Manage your digital assets easily with a clear OLED screen for secure on-device confirmations
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Is Bitcoin anonymous?
No. Bitcoin transactions are visible on a public ledger and are permanent. Addresses do not inherently contain a person’s name, but activity can sometimes be linked to real-world identities depending on how the addresses and services are used. Calling Bitcoin simply anonymous is misleading. Bitcoin.org discusses privacy and user control in its privacy guidance.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Should a beginner use a software or hardware wallet?
A software wallet may be enough for someone learning the basics. Wallet choices involve trade-offs rather than a universal best option:
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| Wallet type | Typical strengths | Responsibilities and trade-offs |
|---|---|---|
| Mobile software wallet | Portable and convenient for use on a phone. | Keys are managed in a mobile-device environment; protect the device and keep a usable backup. |
| Desktop software wallet | Can give the user direct control from a computer. | Keys are managed in a computer environment, which requires attention to device security and backups. |
| Hardware wallet | Designed to keep keys offline when not in use. | Requires setup and backup management. If the device is lost and there is no proper backup, funds can be unrecoverable. |
Bitcoin.org’s wallet selector outlines these broad differences, and its wallet security guidance explains backup responsibilities. Choose self-custody only if you are prepared to safeguard the keys and maintain a recovery backup.
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What to remember before using Bitcoin
- Bitcoin is a network and an asset, not a bank or a company account.
- A wallet manages keys; the private key authorizes spending, while the blockchain records confirmed transactions publicly.
- Mining helps order transactions and issue bitcoin under protocol rules, but users do not need to mine.
- Public visibility means Bitcoin is not automatically anonymous, and self-custody makes key protection and backup your responsibility.
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