10 Questions About Bitcoin, Answered

Updated October 23, 2026

Bitcoin has been called digital gold and worse. Here are the ten questions that come up most often, answered without advocacy in either direction. Updated September 2026.

8-minute read

1. What is Bitcoin and who created it?

Bitcoin is a purely digital form of money. There are no physical notes or coins, only entries on a shared ledger.

The first Bitcoin was mined on 3 January 2009 by a person or group using the name Satoshi Nakamoto, following a whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System. Satoshi subsequently disappeared from public communication, and the network has continued without any identified founder.

2. How does Bitcoin work?

Bitcoin runs on a blockchain, a public ledger recording every transaction in sequence. Anyone can inspect it.

Miners group new transactions into blocks and compete to add them, receiving newly issued Bitcoin as a reward. Nodes maintain copies of the ledger and validate what miners submit, which is what prevents invalid transactions from being accepted.

One correction to older versions of this article: the block reward is not 6.15 BTC. It halved to 3.125 BTC in April 2024, and halves again roughly every four years. That schedule is what makes total supply finite at 21 million coins.

3. What is Bitcoin worth and how is it valued?

Value is determined by supply and demand, as with commodities and currencies. There is no underlying cash flow or earnings figure to anchor a valuation to.

This produces high volatility. Trading activity, news, regulatory developments and general sentiment all move the price, sometimes sharply within a single day.

Market capitalisation, the price multiplied by coins in circulation, is a more stable figure to compare over time than the price alone. Any specific price quoted in an article is out of date by the time it is read.

4. How do you buy it and where do you keep it?

Bitcoin can be purchased on cryptocurrency exchanges. Check that any exchange you use is currently operating and regulated in your jurisdiction, since the sector has seen significant failures.

Storage requires a wallet holding the private keys that control your coins. A hot wallet is software on a phone or computer, convenient and connected to the internet. A cold wallet is a hardware device keeping keys offline.

On the claim that offline keys are unhackable: cold storage removes remote attack routes, which is a substantial protection, but it does not remove every risk. A stolen or photographed recovery phrase defeats any device, and a lost phrase means permanent loss with no recovery process.

5. Can you buy things with it?

Yes, though acceptance is uneven. Companies including Bitrefill, Travala and Expedia accept it, and payment processors allow merchants to accept Bitcoin while receiving fiat currency.

Can you use Bitcoin to buy stuff?

Transaction fees and confirmation times vary with network congestion, which can make it impractical for small everyday payments. The Lightning Network is a layer built on Bitcoin to address this, enabling faster and cheaper small transactions, and El Salvador adopted it as part of making Bitcoin legal tender.

6. Is Bitcoin a good investment?

No article can answer this for you, and any that claims to is selling something.

What can be stated factually: Bitcoin has produced very large returns over long periods and very large drawdowns within them, including multiple declines exceeding 70 percent from a peak. It has no cash flow, so valuation rests entirely on what others will pay.

The practical consequence is about position sizing rather than prediction. An allocation you could lose entirely without changing your circumstances is a different decision from one you cannot.

7. How is Bitcoin taxed?

Treatment varies by country, but most tax authorities classify crypto as property rather than currency, meaning disposals trigger capital gains tax.

A disposal usually includes more than selling for cash. Swapping one cryptocurrency for another and spending crypto on goods are both typically taxable events, which surprises people who have never withdrawn to a bank account. Check the rules in your jurisdiction and keep transaction records, since exchanges do not file on your behalf.

8. Is Bitcoin legal?

In most countries yes, with regulation covering exchanges and service providers rather than ownership itself. A minority of jurisdictions restrict or prohibit it, and El Salvador went the other way by adopting it as legal tender.

9. How secure is Bitcoin?

The protocol itself has never been successfully attacked. Its security comes from the computational cost of rewriting the chain, which increases with every block added.

How secure is Bitcoin?

Nearly every significant loss has occurred around Bitcoin rather than to it: exchange failures, stolen private keys, phishing and lost recovery phrases. The network being secure does not make your holdings secure, and those are separate problems requiring separate precautions.

10. Is Bitcoin bad for the environment?

Proof of work consumes substantial electricity by design, since the energy cost is what secures the network. Total consumption is comparable to that of a mid-sized country.

The debate concerns the energy source rather than the quantity. A rising share of mining uses renewable or otherwise stranded energy, and miners seek the cheapest power available, which is often surplus. Both the criticism and the defence contain accurate elements, and estimates on either side vary widely depending on methodology.

Bonus: Bitcoin against other cryptocurrencies

Bitcoin was first and remains the largest by market capitalisation. Its design prioritises security and a fixed supply over speed and programmability.

Other networks make different trade-offs, offering smart contracts, faster settlement or lower fees, generally with more centralisation or a shorter operating history. Bitcoin does one thing and has done it without interruption for over fifteen years.

Compare regulated venues in our crypto brokers section and see related trading guides.

Bitcoin: frequently asked questions

What is the current block reward?

3.125 BTC, following the April 2024 halving. It halves roughly every four years until total supply reaches 21 million.

Who created Bitcoin?

A person or group using the name Satoshi Nakamoto, who mined the first block on 3 January 2009 and later disappeared from public communication.

What determines Bitcoin's price?

Supply and demand alone. There is no cash flow or earnings figure underpinning a valuation, which is why volatility is high.

Is a hardware wallet completely safe?

It removes remote attack routes, which is substantial. But a stolen or photographed recovery phrase defeats any device, and a lost phrase means permanent loss.

Is swapping crypto taxable?

In most jurisdictions yes. Exchanging one cryptocurrency for another and spending crypto on goods are typically disposals, even without withdrawing to a bank.

Has Bitcoin ever been hacked?

The protocol has not. Losses have occurred around it: exchange failures, stolen keys, phishing and lost recovery phrases.