What is bitcoin and how does it work: a guide to understand it before you buy

Bitcoin is a digital currency that runs without a central bank, without banks and without any company in charge: a network of computers keeps a public record of every transaction, the blockchain, and the system's own rules cap issuance at 21 million units. It moves from person to person over the internet, trades on exchanges and has a very unstable price.

How bitcoin works

Everything rests on four pieces, described on bitcoin.org, the project's reference site, and in the whitepaper:

• Blockchain: a public ledger with every confirmed transaction since the beginning, which anyone can inspect and which cryptography protects.
• Decentralized network: there is no central authority. Computers called nodes keep copies of the blockchain and check that each transaction follows the rules.
• Wallet and keys: the wallet generates the addresses you give to whoever is paying you and stores the private key, the secret that signs transactions. In the whitepaper's design, whoever transfers a coin signs the previous transaction and the next owner's public key; the network verifies the signature without knowing the secret.
• 21 million cap: according to bitcoin.org, there will never be more than 21 million bitcoins.

Two consequences: a confirmed transaction cannot be undone (only the recipient can send the money back), and bitcoin is not anonymous, because payments carry no names but stay public forever.

Mining, proof of work and the halving

Mining means bundling pending transactions into a block and adding it to the blockchain. The miner has to find, by trial and error, a cryptographic result below a target set by the network, which uses computing power and electricity: this is the whitepaper's proof of work. Changing an old block would require redoing its work and that of every block after it, which makes the record practically immutable as long as most of the computing power is honest.

The code of Bitcoin Core, the reference software, targets one block every 10 minutes and recalculates the difficulty every 2,016 blocks, about two weeks. Whoever finds the block receives newly created bitcoins plus the transaction fees. The new-coin portion is cut in half every 210,000 blocks, roughly every four years: that is the halving. It started at 50 bitcoins in 2009 and has been cut four times; the latest cut came at block 840,000, mined on April 20, 2024, when it fell from 6.25 to 3.125 bitcoins, the amount that applies until block 1,050,000.

Who created bitcoin and when

On October 31, 2008, someone signing as Satoshi Nakamoto sent the whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System to a cryptography mailing list. The proposal: electronic cash sent directly between people, with no financial institution, using a peer-to-peer network that prevents spending the same coin twice. The genesis block, the first one, was mined on January 3, 2009. According to bitcoin.org, Satoshi left the project in late 2010.

What bitcoin is for, and what it is not so good at

In its original design, it is a means of payment with no middleman. It works, with limits: the first confirmation usually takes 10 to 60 minutes, according to bitcoin.org, and there are no chargebacks like on a credit card.

For many people it has become mostly a bet on rising prices. The SEC, the United States securities regulator, described it in January 2024 as primarily a speculative, volatile asset. Those who see it as a store of value point to its limited supply; skeptics note that the price can collapse in a short time.

El Salvador made bitcoin legal tender in September 2021, alongside the US dollar. As a condition for a 1.4 billion dollar arrangement with the IMF, approved in February 2025, the law changed: according to the Fund's report, the reform published on January 30, 2025 removed the essential features of legal tender, made acceptance voluntary for the private sector and required taxes to be paid only in dollars.

Bitcoin, cryptocurrencies, altcoins and stablecoins

Bitcoin was the first cryptocurrency, not the only one. Brazil's tax authority, for example, sorts crypto-assets into groups: bitcoin; altcoins, the other cryptocurrencies, such as ether; stablecoins, referenced to a traditional currency like the dollar to try to keep a stable value; and NFTs. Each group has its own risks and uses.

What bitcoin is worth and why it swings so much

Nobody sets the price: it comes from trading between buyers and sellers on exchanges. That is why this guide gives no quote, which would be stale within minutes; the MATHEUZERA quotes page shows BTC live. Bitcoin.org attributes the volatility to a market that is still relatively small, where modest amounts can move the price, and Spain's securities regulator, the CNMV, lists the possibility of losing all the money invested among the risks of crypto-assets.

How to buy bitcoin safely

1. Use an authorized platform

   In Brazil, the central bank's rules for virtual asset service providers have applied since February 2, 2026, and firms must apply for authorization. In Spain, since July 1, 2026 only providers authorized under the EU's MiCA rules may operate. Check the regulators' registers in your country.

2. Know the ETF alternative

   Exchange-traded funds track the price without you holding keys. The SEC approved spot bitcoin products on January 10, 2024, warning that this was not an endorsement of bitcoin.

3. Decide where to keep it

   Bitcoin.org warns that online services can be hacked, fail or freeze access to funds. With self-custody, the wallet is yours: a little on your phone, the rest on an offline device.

4. Protect the seed phrase

   Your own wallet generates a recovery phrase that restores all addresses. Whoever has the phrase has the bitcoins; if it is lost along with the device, the coins stay frozen forever. Keep copies in safe places and never type it into a website.

5. Turn on two-step verification

   On your exchange account, enable multi-factor authentication.

Bitcoin in Brazil: the law, the central bank and income tax

Brazil's Law 14,478 of December 21, 2022 defines a virtual asset as a digital representation of value that can be traded or transferred electronically and used for payments or investment; national and foreign currencies are excluded. It requires prior authorization for companies in the sector. Decree 11,563 of June 2023 gave the Banco Central do Brasil the job of regulating, authorizing and supervising them, without removing the role of the CVM, the securities regulator. Under the rules the central bank announced in November 2025, providers must disclose risks and fees clearly and assess the client's profile before more complex operations.

For income tax, the Receita Federal manual, updated in May 2026, requires crypto-assets to be declared as assets when the purchase cost of each type reaches 5,000 reais, always at the price paid, not the current quote.

Bitcoin in Spain and the European Union

The European Union applies MiCA, Regulation (EU) 2023/1114, in force since December 30, 2024. It regulates companies, not price risk: in October 2025, the European supervisory authorities (EBA, EIOPA and ESMA) warned that crypto-assets can be risky and that legal protection may be limited, and the CNMV notes that there is no compensation scheme if a provider fails. In Spain, the tax agency requires form 721 when virtual currencies held abroad exceed 50,000 euros on December 31.