Key takeaways
- Bitcoin is a digital asset that moves directly between people over a network, with no bank or company issuing it.
- Every transaction is recorded on a public ledger called the blockchain, which thousands of computers keep and check.
- Ownership is controlled by private keys. Whoever holds the key can spend the coins, and a lost key generally cannot be recovered.
- The supply is capped at 21 million bitcoin, and new coins are created at a rate that halves roughly every four years.
- The price can move sharply in either direction. Crypto is generally not covered by the FSCS or the Financial Ombudsman Service.
For information only. Not investment advice. This guide explains how Bitcoin works and makes no prediction about its price. Don't invest unless you're prepared to lose all the money you invest.
The short answer
Bitcoin is money that exists only as data. Instead of a bank keeping your balance, a network of computers keeps a shared record of every transaction, and the rules that govern it are written into open-source software. You hold bitcoin by controlling a secret key, and you send it by signing a message with that key. The design was set out in a white paper published under the name Satoshi Nakamoto in October 2008, and the network started in January 2009.
This guide is part of the CoinCorner learn hub. It covers the mechanics. Whether Bitcoin is lawful and who supervises the firms around it is a separate question, answered in Is Bitcoin legal in the UK?
The ledger: what Bitcoin records
Bitcoin is a ledger, not a coin in a pocket. The ledger lists transactions, such as “this amount moved from address A to address B”, and your balance is whatever the ledger says is yours to spend. Transactions are grouped into blocks, and each block carries a fingerprint of the one before it, so the blocks form a chain. That is why the ledger is called the blockchain.
Two properties make this useful. The ledger is public, so anyone can run software that downloads it and checks every transaction against the rules. And it is hard to rewrite: changing an old block would mean redoing the work for every block after it, faster than the rest of the network adds new ones.
The computers that hold a copy and enforce the rules are called nodes. If a transaction breaks a rule, for example by spending coins that were already spent, honest nodes reject it. This is how Bitcoin avoids the “double spend” problem without a central referee, which is the problem the white paper set out to solve.
Keys, wallets and ownership
Ownership in Bitcoin comes down to keys. A private key is a very large secret number, and a public key or address derived from it is what others use to send you coins. You spend by producing a digital signature that only the holder of the private key can create, and the network can verify it without learning the key.
A wallet is software or hardware that stores keys and builds transactions. The wallet does not “contain” coins; it holds the keys that let you move coins recorded on the ledger. That has two practical consequences:
- Whoever controls the key controls the coins. If someone else learns it, they can take the funds, and a Bitcoin transfer cannot normally be reversed.
- If the key is lost, the coins are usually lost. There is no helpdesk at the network level that can reset it.
This is why custody matters. You can hold keys yourself or have a firm hold them for you, and each choice trades convenience against responsibility. CoinCorner's Vault uses multi-signature, meaning more than one key must approve a spend. The security page explains how customer Bitcoin is held and what its insurance does and does not cover.
Mining and how transactions are confirmed
Someone has to decide which valid transactions go into the next block, and Bitcoin does this through mining. Miners collect pending transactions and compete to find a block that meets a difficulty target, which takes a great deal of computing effort to find but is quick for everyone else to check. This is called proof of work. The winning miner adds the block and receives newly created bitcoin plus the transaction fees in it.
The protocol aims for a new block roughly every ten minutes, and it adjusts the difficulty about every 2,016 blocks to hold that pace as mining power changes. A transaction is usually described as confirmed once it is in a block, and it becomes harder to undo with each further block built on top. For payments that need to land in seconds, a second layer exists; see how the Lightning Network works.
Supply: the 21 million cap
The protocol limits Bitcoin to 21 million coins. New coins enter circulation only as the miner's block reward, and that reward is halved every 210,000 blocks, which works out at roughly every four years. The reward was 3.125 bitcoin per block after the halving of April 2024, and it will keep halving until issuance ends. Because this schedule is in the software every node runs, changing it would need broad agreement across the network.
Each bitcoin is divisible into 100,000,000 units called satoshis, so a purchase does not have to be for a whole coin.
Four terms in one place
- Blockchain: the public ledger of all Bitcoin transactions, stored as a chain of blocks.
- Node: a computer that keeps a copy of the ledger and checks every transaction against the rules.
- Private key: the secret number that lets you authorise spending.
- Satoshi: the smallest unit, one hundred-millionth of a bitcoin.
The Bitcoin glossary defines more terms in a sentence or two.
What people use Bitcoin for
People use Bitcoin in a few distinct ways, and the same person may do more than one:
- Holding it as an asset. Many people buy and hold it, hoping the value rises. This is speculation, and the value may also fall.
- Sending value across borders. A transfer does not depend on bank opening hours or correspondent banks, though converting to and from local currency has its own costs and checks. Readers in the UAE can see the practical routes in the guide to cashing out crypto to AED.
- Paying and being paid. Some businesses accept it, and Lightning makes small payments practical.
None of these is a recommendation. Bitcoin is not legal tender in the UK, and a seller can choose whether to accept it.
Risks to understand first
The FCA warns consumers that they should be prepared to lose all the money they invest in crypto. The main risks fall into four groups:
- Price volatility. The price can fall sharply in a short time, and there is no issuer or central bank supporting it.
- No safety net. Most crypto activity is not regulated in the UK, so the Financial Services Compensation Scheme and the Financial Ombudsman Service generally do not apply.
- Irreversibility. A mistyped address or a payment to a scammer usually cannot be undone.
- Key and custody risk. Lose the key, or trust the wrong firm, and the coins can be gone for good.
Tax can also apply when you sell, swap or spend Bitcoin; the tax basics are summarised in the UK legal guide.
If you decide to buy
Before you buy, check who the firm is and where it appears on a public register, understand what its registration does not cover, and read its published costs on the fees page. The step-by-step guide to buying Bitcoin in the UK walks through payment methods, identity checks and where your Bitcoin is kept. Common account questions are answered in the FAQ, and the about page lists the companies behind CoinCorner. CoinCorner Ltd is registered with the Isle of Man Financial Services Authority as a designated business for anti-money-laundering oversight only. That is not a licence, and CoinCorner is not regulated by the FCA.
Frequently asked questions
Who owns or controls Bitcoin?
Nobody owns Bitcoin and no company issues it. The software is open source and the network is run by many independent computers (nodes) that each check the rules. People can propose changes to the software, but a change only takes effect if enough of the network chooses to run it.
Who created Bitcoin?
Bitcoin was described in a white paper published in October 2008 under the name Satoshi Nakamoto, and the network began in January 2009. The real identity of Satoshi Nakamoto is not publicly established, and the network does not depend on it.
Is there a limit to how many bitcoins can exist?
Yes. The protocol caps the total at 21 million bitcoin. New bitcoin are created as a reward for miners, and the size of that reward is cut in half roughly every four years, so new supply keeps slowing until the cap is reached.
Can I own less than one whole Bitcoin?
Yes. One bitcoin divides into 100,000,000 units called satoshis, so you can hold a small fraction. CoinCorner lets you buy from £1, which is a fraction of a bitcoin priced in pounds.
Is Bitcoin safe?
The network itself has run continuously since 2009, but the risks sit elsewhere. The price can fall sharply, transactions cannot normally be reversed, and a lost key or a fraudulent firm can mean a permanent loss. In the UK, crypto holdings are generally not covered by the FSCS or the Financial Ombudsman Service.
Is Bitcoin the same as crypto?
No. Bitcoin is one cryptoasset, and the oldest. “Crypto” is the wider category and includes thousands of other tokens with different designs, owners and risks. This guide is only about Bitcoin.
Sources
The statements about how the protocol works come from the documents below. Their links are given so that you can check each point against the original. This guide was written on 14 October 2026; protocol parameters such as the block reward change only on the schedule described above, but check the originals for the latest position.
- Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System (2008): https://bitcoin.org/bitcoin.pdf
- Bitcoin Project, Developer Guides (blockchain, mining, wallets): https://developer.bitcoin.org/devguide/
- Financial Conduct Authority, Crypto: The basics: https://www.fca.org.uk/investsmart/crypto-basics
- Financial Conduct Authority, Crypto investment scams: https://www.fca.org.uk/consumers/crypto-investment-scams
- HM Revenue and Customs, Check if you need to pay tax when you sell cryptoassets: https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets