What is Bitcoin?
Bitcoin is a decentralized digital currency that works without a central bank, a company or any other central authority in charge. It runs on a public network of computers that record every bitcoin transaction on a shared ledger called a blockchain, and only 21 million bitcoins will ever exist. Bitcoin launched in 2009 as the first cryptocurrency, and it is still the largest by market value.
What is Bitcoin?
Bitcoin is decentralized digital money that you can send to anyone with an internet connection, without a bank or payment processor in between. It has no physical form: you own bitcoin through private keys that let you move it from one bitcoin address to another. People sometimes call it a virtual currency; in EU law it is a crypto-asset.
Bitcoin was created by Satoshi Nakamoto, a pseudonym for a person or group whose identity is still unknown. Nakamoto published the Bitcoin white paper on 31 October 2008, and bitcoin mining began when the first block was created on 3 January 2009. The goal was “peer-to-peer electronic cash”: a form of payment that doesn’t rely on trusted financial institutions.
Two meanings are worth separating:
- Bitcoin with a capital B usually means the network and its software.
- bitcoin or BTC means the currency unit. One bitcoin can be split into 100 million smaller units called satoshis, so you never have to buy a whole coin.
How does Bitcoin work?
Bitcoin works through a decentralized network of computers (nodes) that together form the bitcoin network. Each one keeps a copy of the bitcoin blockchain, a public digital ledger that records bitcoin transactions from the very first block onwards. Nobody can change past entries without redoing an enormous amount of computing work, which is what makes the record trustworthy.
A single bitcoin transaction goes through these stages:
- You sign a transaction. Your bitcoin wallet uses your private key to sign a message that sends an amount to another bitcoin address.
- The network checks it. Nodes verify transactions to make sure the signature is valid and you actually own the coins.
- Miners bundle it. Bitcoin miners collect valid transactions into a new block, usually picking those with higher transaction fees first.
- The block is added. A new block is added roughly every 10 minutes, and each one links to the previous block.
- It becomes final. With every new block on top, reversing the transaction becomes harder. Most exchanges wait for several confirmations.
Bitcoin mining
Bitcoin mining is how new bitcoin is created and how the network stays secure. Miners use specialised computers to compete in solving a mathematical puzzle; the winner adds the next block and receives newly created bitcoin plus the fees in that block. This system is called proof of work, and it uses a lot of electricity, which is one of the main criticisms of Bitcoin. Mining is also what makes rewriting old transactions so expensive.
The 21 million limit and the halving
The bitcoin software caps the supply at 21 million coins. About every four years, the reward for mining a block is cut in half in an event called the halving, which slows down how fast new bitcoin enters circulation. Unlike traditional currencies, no central bank can decide to create more.
Bitcoin wallets and keys
A bitcoin wallet doesn’t hold coins; it holds the keys that control them. Bitcoin keys come as a pair of public and private keys, and any digital wallet that stores them lets you hold bitcoin and send it. Your public key produces the bitcoin address you share to receive payments, and your private key is the secret that lets you send them.
| Wallet type | Who holds the keys | Good for |
|---|---|---|
| Exchange account (custodial) | The exchange | Buying, selling, small balances |
| Software wallets on your phone | You | Everyday use, smaller amounts |
| Hardware wallet | You, on a separate device | Larger amounts held long term |
If you lose your keys or recovery phrase, nobody can restore your bitcoin. If someone else gets them, they can take it. Our guide to hot and cold wallets explains the trade-offs.
What is Bitcoin used for? From saving to bitcoin payments
Today Bitcoin is used mainly as a store of value and an investment, and less as a medium of exchange for daily shopping. People use bitcoin to:
- Save or invest, betting that a scarce digital asset will store value better than government issued currencies.
- Send money across borders, without needing a bank account in the receiving country.
- Make bitcoin payments. Some shops and online services accept bitcoin, often through a payment processor that converts it to euros straight away.
Bitcoin prices are very volatile. The price can move 10% or more in a single day, and it has fallen by more than 70% from its peak more than once. That makes it a speculative asset, not a replacement for your savings account.
How to buy Bitcoin in the EU
To buy bitcoin in the EU, open an account at a bitcoin exchange or broker that holds a MiCA licence, verify your identity, and pay in euros. Regulating bitcoin itself isn’t possible, because nobody issues it, so the EU regulates the companies that let you purchase bitcoin and hold it instead. Since 1 July 2026, only MiCA-authorised platforms may offer crypto services to EU residents.
- Pick a licensed platform. Check the exchange in the ESMA register or your national regulator’s list.
- Verify your identity. Upload an ID and take a selfie, as every licensed exchange must check who you are.
- Deposit euros. Use a SEPA transfer, iDEAL or a debit card. Card payments are usually the most expensive option.
- Buy bitcoin. Enter an amount in euros, check the price, fees and spread, and confirm.
- Decide where to keep it. Leave small amounts on the exchange, or move larger amounts to your own wallet.
A simple example: if one bitcoin costs €60,000 and you buy €100 worth with a 1% fee, €1 goes to fees and you receive €99 worth of bitcoin, about 0.00165 BTC. Always check both the fee and the spread, because the spread is often the bigger cost. Our pages on choosing your first crypto exchange and the best exchanges for beginners help you compare.
Bitcoin ATMs exist in some EU countries, but they usually charge far higher fees than a cryptocurrency exchange. You can also get exposure through an investment account at a broker by buying a bitcoin ETN, a security listed on a European stock exchange that tracks the bitcoin price. You then don’t hold the coins yourself, and the product carries the issuer’s risk.
How to sell bitcoin or convert bitcoin to euros
To sell bitcoin, place a sell order on the exchange where you hold it, or send it there from your own wallet first. You receive euros at the current market price minus fees and the spread, and you can withdraw them to your bank account. Exchanges also let you convert bitcoin into other fiat currencies or other digital currencies, but every swap has a cost and may count as a sale for tax purposes.
Risks of investing in Bitcoin
The main risks of Bitcoin are price swings, losing access to your coins, and scams. Before you buy, make sure the amount fits your risk tolerance and that you could lose it without hurting your finances.
- You can lose money. There’s no floor under the price and no promised return.
- No compensation scheme. Crypto is not covered by EU investor compensation or deposit guarantee schemes.
- Irreversible transfers. Send bitcoin to the wrong address or a scammer and it’s gone.
- Tax. In the Netherlands, bitcoin counts towards box 3 assets on 1 January. In Germany, gains on bitcoin sold within a year are taxable, while bitcoin held for more than a year can generally be sold tax-free. Keep transaction records of every buy and sell.
The bottom line
Bitcoin, the system Satoshi Nakamoto designed, is scarce digital money run by a network instead of a bank: open to anyone, limited to 21 million coins, and highly volatile. If you buy it, use a licensed exchange, keep control of your keys for larger amounts, and only invest what you can afford to see fall. To understand the technology underneath, read what a blockchain is and how Bitcoin differs from an altcoin.
Related terms
Questions people ask
What exactly is Bitcoin in simple terms?
Bitcoin is digital money that no bank or government controls. A worldwide network of computers keeps a shared record of who owns which bitcoin, and new coins are created on a fixed schedule until there are 21 million.
What happens if I put €100 in Bitcoin?
You get a fraction of one bitcoin, minus the exchange's fees. Its value then moves with the bitcoin price, which can rise or fall sharply, so your €100 could be worth much more or much less later.
Are bitcoins real money?
Bitcoin works as money in the sense that you can send it and some businesses accept it, but it is not legal tender in the EU. Most people treat it as a speculative asset or store of value rather than everyday cash.
Can I turn Bitcoin into cash?
Yes. Sell your bitcoin for euros on a crypto exchange and withdraw the money to your bank account, usually by SEPA transfer. Selling can be a taxable event, depending on your country.
What is the main goal of Bitcoin?
Bitcoin was designed as peer-to-peer electronic cash: a way to send value online without a bank or payment processor in the middle. Today many holders see it mainly as scarce digital money.