Bitcoin was described in a 2008 white paper by the pseudonymous Satoshi Nakamoto. Thousands of computers around the world (nodes) keep a copy of its blockchain and check every transaction against the same rules, and miners compete to add new blocks. Anyone can send, receive or hold bitcoin without asking permission, but payments are hard to reverse, so double-check addresses before you send. One bitcoin can be split into 100,000,000 smaller units called satoshis.

Think of it as a public ledger that nobody owns and everybody can check. Each block contains a fingerprint (hash) of the block before it, so changing an old entry would mean redoing every block after it and convincing the rest of the network to accept the new version. On large networks like Bitcoin, that is practically impossible. Not every blockchain is public or decentralized, though: how secure one is depends on how many independent participants keep it running.

In the United States, spot Bitcoin ETFs began trading in January 2024, and spot ether ETFs followed in July 2024. When you buy one, you own shares of the fund, not the coins themselves: the fund’s custodian holds the crypto, you cannot withdraw it to your own wallet, and you pay a yearly management fee (the expense ratio). ETF shares trade only when the stock market is open, while crypto itself trades around the clock.

Centralized exchanges are the easiest way to buy crypto with dollars: you open an account, verify your identity (KYC) and trade. The trade-off is custody. While your coins sit on the exchange, the company controls the keys, and if it is hacked, freezes withdrawals or goes bankrupt, you may wait a long time or lose money, as FTX customers learned in November 2022. Decentralized exchanges let you trade from your own wallet, but there is no customer support if you make a mistake. Many people buy on an exchange, then move long-term savings to a wallet they control.

Every action on Ethereum uses a certain amount of “gas” (a basic ether transfer uses 21,000 units), and you pay a price per unit, quoted in gwei. That price has two parts: a base fee set by the network, which is burned, and an optional tip to the validator who includes your transaction. Complex actions such as swaps use more gas than simple transfers. Layer 2 networks bundle many transactions together, which is why fees there are usually much lower.

Bitcoin’s code cuts the block reward in half every 210,000 blocks, which works out to roughly every four years. The reward started at 50 BTC in 2009 and has been halved four times so far, most recently in April 2024, from 6.25 to 3.125 BTC. The next halving is expected around 2028. Halvings will continue until the reward becomes too small to divide, around the year 2140, when the 21 million limit is reached and miners will rely on transaction fees alone.

Miners repeatedly hash block data, trying to hit a number below the network’s target, and each attempt counts as one hash. Bitcoin’s hashrate is so large it is usually quoted in exahashes per second (EH/s); one exahash is a quintillion guesses. A higher hashrate means an attacker would need more machines and electricity to overpower the honest miners. Hashrate also feeds into the difficulty: when it rises, Bitcoin makes blocks harder to find so they keep arriving about every 10 minutes.

Miners gather waiting transactions into a candidate block, then race to find a hash for it that meets the network’s difficulty target. Finding one takes enormous numbers of guesses, which costs real electricity and hardware, and that cost is what makes rewriting history so expensive. The first miner to find a valid block broadcasts it, other nodes check it, and the miner collects the block reward. Most miners join mining pools to receive smaller, steadier payouts.

Your wallet uses the private key to sign transactions. The network checks the signature against your public key, so the key itself never has to be revealed. If someone else learns your private key or seed phrase, they can move your coins, and there is no bank to reverse it. If you lose the key and have no backup, the coins are locked for good. That is why most wallets give you a seed phrase to back up all your keys at once.

Prices of small purchases, Lightning payments and network fees are often quoted in sats because whole-bitcoin numbers get awkward: 0.0005 BTC is simply 50,000 sats. The unit is named after Bitcoin’s creator, Satoshi Nakamoto. You can convert bitcoin to sats and back with the crypto calculator on our Market page.

Also called a recovery phrase. Anyone who has these words can rebuild your wallet on their own device and take everything in it, so keep them on paper or metal, somewhere safe, and never in a screenshot, email or cloud note. Legitimate wallets and exchanges never ask for your seed phrase; a message that does is a scam. If your phone or hardware wallet breaks, the seed phrase is how you get your funds back.

Stablecoins such as USDT and USDC let people move dollar value around crypto networks quickly and around the clock. They are not the same as money in a bank account, though: they are generally not covered by deposit insurance, and they are only as safe as the issuer and the assets behind them. Some stablecoins have lost their peg in the past.

On Ethereum, running your own validator takes 32 ETH and a computer that stays online; most people instead stake smaller amounts through an exchange or a staking service. Rewards are not guaranteed and change over time. Risks include price drops while your coins are staked, waiting periods to withdraw, penalties (slashing) if a validator breaks the rules, and the chance that the service you staked through fails.

Wallets come in two broad kinds. Custodial wallets, like an exchange account, are run by a company that holds the keys for you. Non-custodial wallets, such as phone apps and hardware devices, give you the keys and a seed phrase to back them up. Hot wallets stay online for convenience; cold wallets keep keys offline for safety. Losing a non-custodial wallet’s seed phrase can mean losing the funds for good.