Bitcoin Price Today: What Is Bitcoin? How Does It Work?

Bitcoin is the world’s first decentralized digital currency, revolutionizing the way we perceive and use money. Operating without the oversight of any central authority, Bitcoin enables peer-to-peer transactions securely and transparently using blockchain technology.

As a groundbreaking financial innovation, it combines cryptography, decentralization, and a robust protocol to offer a secure and efficient system for transferring and storing value. This article explores what Bitcoin is, how it works, and the pros and cons of investing in Bitcoin.

Key Takeaways

• Bitcoin is a decentralized digital currency that operates without central authorities like banks or governments.
• Transactions are verified through a secure, transparent blockchain and recorded permanently.
• Bitcoin’s supply is limited to 21 million coins, creating scarcity that drives its value.

How Much Is One bitcoin?

The price of one Bitcoin varies depending on market conditions and can change within minutes.

As of now, the best way to find its current value is to check a reliable cryptocurrency exchange or price tracker.

To calculate the value of Bitcoin in your local currency or compare its worth in other assets, use the calculator below:

What is Bitcoin?

Bitcoin (BTC) is a decentralized cryptocurrency, functioning as a virtual currency and a medium of payment that operates independently of any central authority, such as banks or governments.

This design eliminates the need for intermediaries in financial transactions, providing users with a peer-to-peer system for transferring value.

Introduced in 2008 by an anonymous creator or group known as Satoshi Nakamoto, Bitcoin became the first cryptocurrency to achieve widespread recognition.

Its implementation began in 2009 with the release of open-source software, marking the start of its use as a digital currency.

Over time, Bitcoin’s influence has grown, inspiring the creation of numerous other cryptocurrencies.

Bitcoin operates on a free-market principle, and its decentralized nature has made it a popular investment option.

While El Salvador became the first country to adopt Bitcoin as legal tender in 2021, its use has sparked debates.

Some critics have described it as an economic bubble, and concerns over its pseudonymous nature have led to regulatory scrutiny and bans in certain regions.

Despite these challenges, Bitcoin remains the most well-known and widely used cryptocurrency globally.

What Makes Bitcoin Different From Other Currencies?

The reason that Bitcoin stands out from traditional currencies and other cryptocurrencies is due to its decentralized structure, unique features, and revolutionary approach to digital transactions.

These characteristics have established Bitcoin as a trailblazer in the world of finance, se tting it apart in several key ways:

– Decentralization of Bitcoin’s Network

Unlike traditional currencies managed by central banks or governments, Bitcoin operates on a decentralized network of nodes.

Each node is an independently operated computer connected through the internet, working collectively to validate and secure transactions.

This decentralized consensus ensures that no single entity controls the Bitcoin network, making it resilient and tamper-proof.

– Censorship Resistance

Bitcoin provides a censorship-resistant financial system where transactions are conducted without interference from governing bodies or institutions.

Its pseudonymous nature ensures that users retain privacy, with transactions only tied to cryptographic wallet addresses rather than personal identities.

While some regulatory frameworks, such as Anti-Money Laundering (AML) laws, require identification for fiat-to-crypto exchanges, Bitcoin itself allows users to create anonymous wallets, maintaining the philosophy of financial privacy championed by its creator, Satoshi Nakamoto.

– Fixed Supply of 21 Million Bitcoin

One of BTC’s unique features is its hard cap of 21 million coins.

This finite supply is embedded in its core code and cannot be altered without near-unanimous agreement from the network’s decentralized participants.

The scarcity of Bitcoin distinguishes it from fiat currencies, which can be printed at will, leading to inflation.

The fixed supply creates a deflationary model that enhances Bitcoin’s value as a store of wealth.

– Immutability of Transactions

Every transaction on the Bitcoin network is permanently recorded on its blockchain.

The blockchain links every new block to the previous one through cryptographic processes, ensuring that data cannot be altered or erased.

This immutability makes Bitcoin an exceptionally secure and transparent system, eliminating risks like forgery or corruption often associated with traditional financial systems.

– Network Effects and Global Adoption

Bitcoin’s growing user base has solidified its role as a mainstream financial asset.

With over 100 million active users globally, Bitcoin’s widespread adoption bolsters its liquidity and legitimacy.

Its acceptance as a store of value and medium of exchange rivals established fiat currencies, such as the Japanese yen, making it one of the most widely recognized financial innovations of the modern era.

– Security and Economic Resilience

Bitcoin’s design includes built-in safeguards that prevent it from being overtaken by malicious actors.

Its decentralized and large-scale network makes it nearly impossible to launch a 51% attack.

Furthermore, miners, who validate transactions, are incentivized to support the network rather than disrupt it, as Bitcoin’s value continues to rise over time.

These factors position Bitcoin as one of the most secure financial systems ever created.

– Revolutionary Impact

Bitcoin is more than just a currency—it represents a paradigm shift akin to the invention of the internet.

Its decentralized framework, transparency, and resistance to external control offer a revolutionary way to transfer and store wealth.

As the hardest and safest asset ever devised, Bitcoin continues to absorb economic power, challenging traditional financial systems and creating new opportunities for those willing to understand and engage with its principles.

How Does Bitcoin Work?

If you want to know how Bitcoin works, we have just the right answer for you.

Bitcoin functions as a decentralized digital currency through its reliance on blockchain technology, cryptographic keys, and a distributed network of participants.

These elements work together to process, verify, and secure transactions without the need for central authorities.

Here’s a simplified breakdown:

Initiating a Bitcoin Transaction

When a user decides to send Bitcoin, they generate a transaction by specifying the recipient’s wallet address and the amount to transfer.

This transaction is digitally signed using the sender’s private key, ensuring it is authentic and unalterable.

Broadcasting and Verification

The authenticated transaction is then shared across the Bitcoin network.

Miners, acting as validators, check that the sender has sufficient Bitcoin and verify the transaction’s legitimacy.

This prevents unauthorized transfers or double-spending.

Blockchain and Mining

After validation, the transaction is combined with others to form a block.

Miners engage in a competitive process to solve complex cryptographic challenges, which is referred to as the proof-of-work mechanism.

The successful miner adds the block to the blockchain, a public ledger that records every transaction in a secure and immutable format.

Confirming the Transaction

After inclusion in the blockchain, the transaction is confirmed.

Additional confirmations occur as more blocks are added, solidifying its place in the ledger.

This layered security ensures that transactions are nearly impossible to reverse or tamper with.

Key Components of Bitcoin’s Operation

• Decentralized Network: Transactions are processed and verified by a global network of independent nodes rather than a central authority.
• Blockchain Technology: The blockchain ensures transparency and integrity by linking all transaction records chronologically.
• Proof-of-Work Mining: Mining not only secures the network but also creates new Bitcoin, aligning incentives for participants.
• Cryptographic Security: Private keys protect ownership, while cryptographic signatures validate and secure transactions.

Through these mechanisms, Bitcoin achieves its goal of facilitating secure, decentralized financial transactions on a global scale.

Confirmation Time (Confirmation Count)

Bitcoin transaction confirmation times depend on factors like network activity and transaction fees.

On average, a single confirmation takes about 10 minutes, though this can vary.

Higher transaction fees incentivize miners to process transactions more quickly, while lower fees may lead to longer delays.

Typically, one confirmation is sufficient for most transactions, but six confirmations are considered the standard for larger or high-value transfers, requiring approximately one hour.

During periods of network congestion, transactions with low fees may take several hours to confirm.

If a transaction remains unconfirmed for over 72 hours, it might be necessary to resend it with a higher fee to ensure prioritization by miners.

What Is The Blockchain?

The blockchain is a decentralized, distributed ledger that records data across a network of computers, known as nodes.

It is most recognized for its role in cryptocurrency systems like Bitcoin, where it ensures a secure and tamper-resistant record of transactions.

However, blockchain technology has applications far beyond cryptocurrencies, making data in various industries immutable and transparent.

How Blockchain Functions

Blockchain is a decentralized ledger that securely records data in blocks, which are then linked in a chronological chain.

Each block contains information such as transaction details, asset transfers, or other data entries, and once added to the chain, it cannot be modified. This immutability ensures transparency and prevents tampering or fraud.

The blocks are connected using cryptographic methods, forming a secure and unchangeable sequence.

This eliminates the need for intermediaries, reduces costs, and minimizes the potential for human error.

Since its introduction with Bitcoin in 2009, blockchain technology has expanded to various industries, powering applications like decentralized finance (DeFi), NFTs, smart contracts, and more.

For a detailed explanation of blockchain and its applications, check out our full guide: What Is A Blockchain?

What Is BTC Halving?

Bitcoin halving is a key event in the Bitcoin network that occurs approximately every four years or after 210,000 blocks are mined.

During this event, the reward miners receive for validating transactions and adding new blocks to the blockchain is reduced by half.

This process limits the supply of new Bitcoin entering the market, creating scarcity that can potentially increase its value under consistent market conditions.

How BTC Halving Works

Miners are rewarded with Bitcoin for solving complex cryptographic puzzles to validate transactions and add blocks to the blockchain.

This block reward, which was initially set at 50 BTC when Bitcoin launched in 2009, is halved every four years as part of Bitcoin’s deflationary design.

Year	Block reward (BTC)
2009	50
2012	25
2016	12.5
2020	6.25
2024	3.125
2028	1.5625
~2140	0 (negligible)

What Do I Need to Use Bitcoin? – Bitcoin Keys and Wallets

If you want to use Bitcoin, you will need a wallet and a set of cryptographic keys.

1. BTC Keys

Bitcoin keys are integral to managing and securing Bitcoin ownership.

These cryptographic tools—comprising a public key and a private key—enable users to send, receive, and control their Bitcoin.

The public key functions as your Bitcoin wallet’s address.

It’s similar to an email address used to send or receive messages.

When someone wants to send you Bitcoin, they direct it to your public key, which assigns ownership of the Bitcoin to you on the blockchain.

The public key is safe to share and forms part of the Bitcoin network’s transparent and decentralized nature.

The private key is what grants you control over the Bitcoin assigned to your public key.

It is a unique cryptographic code that acts as your digital signature, enabling you to authorize transactions.

Without it, you cannot access or transfer your Bitcoin, making its security paramount.

2. BTC Wallets

A Bitcoin wallet is a software application that enables users to manage their Bitcoin by accessing the blockchain network.

It allows users to view balances, send, and receive Bitcoin.

The wallet works by locating and aggregating pieces of Bitcoin scattered across the blockchain—where they are recorded as data inputs and outputs from previous transactions—and presenting the total amount in an easy-to-read format.

– Types of Bitcoin Wallets

Bitcoin wallets fall into two main categories: custodial and noncustodial.

1. Custodial Wallets: Custodial wallets are managed by a trusted third party, such as a cryptocurrency exchange. In this setup, the wallet provider holds and secures the user’s private keys. For example, platforms like Coinbase offer custodial wallets, where users delegate the responsibility of key storage to the provider.
2. Noncustodial Wallets: Noncustodial wallets give users full control and responsibility over their private keys. These wallets, often found as applications on mobile devices, are connected to the internet and categorized as “hot storage.” While convenient, hot wallets are vulnerable to hacking and theft due to their active internet connection.

– Storage Options: Hot, Cold, and Deep Cold

To address security concerns, various methods of storing Bitcoin keys have been developed:

• Hot Storage: These wallets operate online and are designed for ease of use in regular transactions. Examples include mobile apps and online wallet services. However, they are also the most vulnerable to cyber threats.
• Cold Storage: This solution keeps the private keys offline. Methods include storing keys on a removable USB drive or writing them down on paper (known as a paper wallet). These options provide a higher level of security for long-term holdings.
• Deep Cold Storage: This method takes cold storage a step further by adding physical security measures. Examples include storing keys in a personal safe or a safety deposit box. Deep cold storage is ideal for those seeking maximum security, as accessing the keys involves additional steps and safeguards.

How To Buy Bitcoin “BTC”?

You can buy Bitcoin on several platforms and methods available to suit different preferences and investment strategies.

Here are six different methods to buy BTC:

Cryptocurrency Exchanges

Crypto exchanges are the preferred platforms for purchasing Bitcoin.

They offer a wide range of cryptocurrencies, including Bitcoin, and provide tools for trading, storing, and managing digital assets.

Popular exchanges include Gemini, Kraken, Coinbase, and Crypto.com. Each platform has varying fees and features, so research carefully to choose the best option for your needs.

For a seamless online Bitcoin purchase, check out our online Bitcoin buying platform.

Traditional Stockbrokers

Some traditional brokerage platforms now offer Bitcoin trading as part of their services.

Robinhood was a pioneer in this area, allowing users to trade Bitcoin with zero fees.

Other brokers, such as Fidelity, have also begun providing access to Bitcoin and other cryptocurrencies, making it easier for traditional investors to enter the market.

Bitcoin ATMs

Bitcoin ATMs function like standard ATMs but enable users to buy and sell Bitcoin.

Found in convenience stores and other accessible locations, these machines provide a physical option for acquiring Bitcoin.

Before using a Bitcoin ATM, check the fees and ensure you have a wallet to store your Bitcoin after purchase. To locate a Bitcoin ATM near you, visit our Bitcoin ATM locator.

Bitcoin Exchange-Traded Funds (ETFs)

The approval of spot Bitcoin ETFs in early 2024 marked a significant milestone for Bitcoin accessibility.

These ETFs track Bitcoin’s price and are traded on major exchanges, making it simple for traditional investors to gain exposure to Bitcoin through brokerage accounts.

Peer-to-Peer Money Transfer Apps

Apps like PayPal, Venmo, and Cash App now support Bitcoin purchases directly within their platforms.

These apps allow users to buy, store, send, and sell Bitcoin, providing a convenient option for those already familiar with their interfaces.

Wallet Software

Certain crypto wallets and blockchain-enabled apps allow users to purchase Bitcoin directly within their ecosystems.

These services often use third-party providers like MoonPay to facilitate transactions, offering quick and seamless purchases.

While they may have higher fees than traditional exchanges, they are user-friendly and ideal for those looking for simplicity. For high-volume purchases, explore our Bitcoin OTC services.

Pros and Cons of Investing in Bitcoin

Investing in Bitcoin comes with different advantages and disadvantages:

Advantages Explained

• Decentralization: Operates without intermediaries like banks, reducing risks associated with centralized systems.
• Efficient Transactions: Faster and cheaper peer-to-peer transfers without third-party involvement.
• Cross-Border Transfers: Simplifies international money transfers by serving as an intermediary currency.
• Security: Transactions are secured by public and private key cryptography.
• Innovation Potential: Supports decentralized finance (DeFi) applications like flash loans and smart contracts.

Disadvantages Explained

• Pseudonymity: Transactions leave a digital trail, making them traceable by authorities.
• Illicit Use: Often associated with illegal activities like money laundering and ransomware attacks.
• Centralized Mining: Dominated by large mining pools due to high energy costs, undermining decentralization.
• Security Risks: Exchanges and wallets are vulnerable to hacking, leading to potential financial losses.
• Price Volatility: Extreme value fluctuations make Bitcoin a speculative and risky investment.
• Energy Consumption: Mining requires significant energy, contributing to environmental concerns.

What is Bitcoin Mining?

Bitcoin mining is the process of validating transactions and adding them to the blockchain by solving complex mathematical problems.

This competitive activity requires specialized hardware and significant energy consumption.

How Bitcoin Mining Works

Miners compete to solve cryptographic puzzles, a process called proof of work.

They aim to find the correct or closest hash—a target number that validates a new block.

This involves making random guesses as quickly as possible, requiring substantial computational power.

As additional miners enter the network, the complexity of the puzzles grows.

Mining Hardware

Miners use application-specific integrated circuits (ASICs), specialized devices designed for mining.

These machines, costing up to $10,000, are highly efficient but consume vast amounts of electricity.

The environmental impact of mining has drawn criticism due to its high energy usage, which also limits profitability.

Rewards and Halving

Successfully mining a block earns the miner a reward, currently set at 3.125 bitcoins.

This reward is halved approximately every four years or 210,000 blocks in an event known as “halving.”

At October 2024 prices, 3.125 bitcoins are worth around $193,750.

The fixed reward schedule and limited total supply of Bitcoin ensure its scarcity and influence its market value.

Bitcoin Mining Difficulty

Bitcoin mining difficulty is a metric that measures how challenging it is to add a new block to the blockchain.

It is directly influenced by the network’s computational power, known as the hashrate, and adjusts periodically to maintain consistent block times.

Mining difficulty ensures that the average time to mine a block remains approximately 10 minutes, regardless of the number of miners or the total computational power in the network.

It is recalibrated every 2,016 blocks, which occurs roughly every two weeks.

The difficulty adjusts based on the mining speed: it increases if blocks are mined too rapidly and decreases if the process is too slow.

Bitcoin Security: How secure is it?

Bitcoin’s security is built on foundational blockchain principles and mechanisms designed to protect assets, ensure transaction integrity, and maintain network reliability.

These elements collectively create a robust system resistant to tampering, fraud, and unauthorized access.

Decentralization

Bitcoin’s decentralized structure is key to its security.

With no central authority, the network relies on thousands of distributed nodes to validate and secure transactions.

This makes it extremely difficult for any single entity to control the network or conduct a 51% attack, a feat measured by the Nakamoto Coefficient.

A higher coefficient indicates greater network security and resilience.

Cryptography

Strong cryptographic methods safeguard Bitcoin transactions and user data.

• Asymmetric Cryptography: Bitcoin uses a combination of public and private keys. The public key enables others to encrypt data or send Bitcoin, while the private key, which cannot be derived from the public key, allows users to decrypt data or authorize transactions.
• Immutability: Transactions, once recorded on the Bitcoin blockchain, are permanent and tamper-proof, creating a transparent, reliable ledger.

Proof of Work (POW)

Bitcoin’s Proof of Work (POW) consensus mechanism ensures that only legitimate transactions are added to the blockchain.

Miners compete to solve cryptographic puzzles, requiring significant computational resources, which makes malicious alterations prohibitively expensive and practically unfeasible.

Network Security

Bitcoin’s network is distributed across thousands of computers worldwide, ensuring that no single point of failure can compromise the system.

If one node is compromised, the remaining nodes maintain the blockchain’s integrity, making coordinated attacks against the network extremely difficult.

Transparency and Traceability

The Bitcoin blockchain is a complete, write-only ledger, providing an immutable history of all transactions.

This transparency builds trust, enabling users to trace transaction histories while preventing reversals or alterations.

Governance and Adaptability

Bitcoin operates on a decentralized governance model.

Any updates or changes to the network require broad consensus among stakeholders.

This ensures no single entity can unilaterally modify the system, preserving its decentralized ethos.

Can Bitcoin be stolen?

While Bitcoin’s blockchain is highly secure, thefts can and do occur, primarily through vulnerabilities in key storage, user behavior, and third-party custodians.

Understanding how Bitcoin can be stolen helps users better protect their assets.

– Wallet Hacks

Bitcoin ownership is tied to private keys, which grant access to the cryptocurrency.

If a wallet storing these keys is compromised, hackers can steal the Bitcoin associated with them.

Hot wallets, connected to the internet, are particularly vulnerable to cyberattacks.

Cold wallets, which are offline, offer greater protection but can still be physically stolen if not securely stored.

– Exchange Hacks

Cryptocurrency exchanges often hold large reserves of Bitcoin and private keys, making them attractive targets for hackers.

Although some exchanges use “deep cold storage” and enterprise-level security, breaches can still occur.

Users who store their Bitcoin on exchanges risk losing their funds if the platform is hacked or experiences a security failure.

– Scams and Ransomware

Social engineering scams, such as romance scams, exploit human trust to steal Bitcoin.

Attackers pose as romantic partners or trusted individuals to convince victims to transfer cryptocurrency.

Ransomware attacks are another method, where hackers encrypt data and demand Bitcoin as payment to restore access.

Could there be a bug in the Bitcoin software?

Yes. Bitcoin software, like any software, is not immune to vulnerabilities.

While Bitcoin Core, the primary implementation of the Bitcoin protocol, is robust and extensively tested, past  incidents highlight the possibility of bugs.

These vulnerabilities are usually addressed promptly by developers to maintain the network’s security and integrity.

The 2018 Bitcoin Core Vulnerability

In 2018, a denial-of-service (DoS) vulnerability in Bitcoin Core was discovered, which could have allowed attackers to exploit the network.

The bug, rated with a severity level of 7.8 (high), affected Bitcoin Core versions 0.16.0 and 0.16.1. Here’s a summary of the issue:

1. Nature of the Bug: The vulnerability arose because “remote nodes” failed to clear invalid transactions from their memory. This allowed attackers to overload nodes with stale data, causing them to shut down—a phenomenon called “uncontrolled resource consumption.”
2. Impact on the Network: While the vulnerability could disrupt operations and potentially affect Layer 2 solutions like the Lightning Network, Bitcoin full nodes themselves were not at risk of losing funds.
3. Resolution: Developer Matt Corallo patched the vulnerability in Bitcoin Core 0.16.3 following its disclosure by Braydon Fuller and Javed Khan. Other implementations, including Bitcoin Knots, Litecoin Core, and Namecoin Core, also released patches to address similar issues.
4. No Exploitation Detected: No evidence of the bug being exploited in the wild was found, and the issue was disclosed only after most node operators had updated their software.

Challenges of Building Secure Software

Bitcoin’s software development faces inherent challenges:

• Human-Created Code: Programming errors are an inevitable part of software development, even for extensively vetted systems like Bitcoin Core.
• Global Standards: Building a secure, decentralized monetary system requires immense coordination, technical rigor, and constant vigilance.
• Delayed Updates: Not all node operators update promptly, leaving parts of the network temporarily exposed to vulnerabilities.

Examples of Other Vulnerabilities

The 2018 bug was not the only security issue discovered in Bitcoin Core.

In the same year, another bug in version 0.16.3 allowed miners to inflate the Bitcoin supply by double-spending certain values.

This issue was also patched as an emergency fix.

Can the Bitcoin network be shut down or hacked?

The Bitcoin network is designed to be highly resilient and secure, but no system is entirely immune to theoretical threats.

Here’s an exploration of potential vulnerabilities and their practical implications.

– Brute Force Attacks

Bitcoin addresses and private keys are protected by robust cryptography.

The probability of brute-forcing a Bitcoin wallet is astronomically small, requiring 2²⁵⁶ attempts—a number vastly greater than the total atoms on Earth.

Achieving this with current or even foreseeable technology is beyond imagination, making brute force an impractical method of hacking the Bitcoin network.

51% Attacks

A potential weakness occurs if an individual or group gains over 50% of the Bitcoin network’s computational power, referred to as the hashrate.

 This would allow them to:

• Reverse unconfirmed transactions.
• Double-spend Bitcoin by altering the blockchain.
• Potentially delay or censor new transactions.

However, executing a 51% attack on Bitcoin is nearly impossible due to the network’s size and decentralization:

1. Immense Computational Requirements: Controlling over half the Bitcoin hashrate would require an enormous investment in mining hardware and energy, far exceeding the resources of any single entity.
2. Economic Disincentives: The cost of mounting such an attack would likely outweigh the potential gains, as it would undermine trust in Bitcoin and devalue the asset attackers sought to control.

Immutability and Confirmations

Bitcoin transactions are secure after one confirmation but become effectively immutable after six confirmations.

This layered approach ensures that even if an attack temporarily disrupts the network, older transactions remain unaffected.

Practical Impossibility of Shutdown

Shutting down the Bitcoin network would require disabling every node and miner globally,

which is virtually impossible due to:

• Geographic Distribution: Bitcoin nodes are spread across the world, often in jurisdictions with differing regulations and enforcement capabilities.
• Decentralized Consensus: The network does not rely on a single point of failure, making coordinated attacks on all nodes infeasible.

Conclusion

Bitcoin represents a transformative shift in the financial world, offering a decentralized, secure, and transparent alternative to traditional currencies.

By leveraging blockchain technology, it ensures trustless transactions and immutable records.

As Bitcoin continues to evolve, its impact on the economy, technology, and society remains profound, highlighting its potential as both a currency and a store of value.