What Is Bitcoin? How It Works, Who Controls It, and What Can Go Wrong

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Last updated: 16 October 2026 · By Spencer Li, CFTe

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Bitcoin is a digital currency that runs on a shared public record, the blockchain, kept by thousands of computers instead of a bank. Nobody issues it and nobody can freeze the network. New bitcoins are created on a fixed schedule, and only 21 million will ever exist. You hold bitcoin through a private key, a secret code that proves the coins are yours. Its price moves freely on supply and demand, and it can rise or fall sharply.

Bitcoin’s own site describes it as “a consensus network that enables a new payment system and a completely digital money.” It adds: “From a user perspective, Bitcoin is pretty much like cash for the Internet.”

In this post, I’m going to cover where Bitcoin came from, how a transaction actually works, who is in charge, and the risks that matter if you are thinking of holding any.

Where did Bitcoin come from?

It started with a short paper. Someone using the name Satoshi Nakamoto published “Bitcoin: A Peer-to-Peer Electronic Cash System.” Its first sentence sets out the whole idea: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

According to bitcoin.org, “The first Bitcoin specification and proof of concept was published in 2009 in a cryptography mailing list by Satoshi Nakamoto.” The same page adds that Satoshi “left the project in late 2010 without revealing much about himself.” To this day, nobody has publicly proven who Satoshi is.

How does Bitcoin work?

The core trick is a shared record that nobody owns and everybody can check.

When you send bitcoin, your wallet signs the payment with your private key and broadcasts it to the network. Miners collect waiting payments into a block. Roughly every 10 minutes, one of them wins the right to add the next block, and every computer on the network updates its copy of the record. Your payment is then confirmed, and each new block on top makes it harder to undo. What is Bitcoin mining walks through the numbers behind that race.

2 features follow from this design:

• Payments cannot be reversed. Bitcoin.org says “once confirmed, they can only be refunded by the person receiving the funds.” There is no bank to call and no chargeback.
• Whoever holds the key holds the coins. Lose the key, and the coins are stuck forever. Share it, and they can be taken.

Why will there only ever be 21 million bitcoins?

Because the schedule is written into the software. Bitcoin.org explains that new coins are created “at a decreasing and predictable rate”, and the number created “is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence.”

As of 16 October 2026, about 20.10 million bitcoins had been issued, around 95.7% of the total, according to blockchain.info. The rest will trickle out over more than a century, at a pace that halves roughly every 4 years.

21 million sounds small for a global currency, but each bitcoin splits into tiny units. In bitcoin.org’s words, “there are 100,000,000 satoshis in 1 bitcoin.”

Here is how that compares with the money in your bank account:

If you want a daily routine for trading what you understand, the free 15-Minute Swing Trader’s Checklist is at the end of this post.

Who controls Bitcoin?

Nobody, and everybody who uses it. Bitcoin.org compares it to email: “Nobody owns the Bitcoin network much like no one owns the technology behind email.” Developers can propose changes, but “they can’t force a change in the Bitcoin protocol because all users are free to choose what software and version they use.”

That has a flip side. With no company in charge, there is also nobody to complain to. If you send coins to the wrong address or fall for a scam, no help desk can reverse it.

Is Bitcoin safe?

Here is where people mix up 2 very different things. I call it the bank-robbery test.

Bitcoin.org puts it like this. Thefts at exchanges and businesses do not “involve Bitcoin itself being hacked, nor imply inherent flaws in Bitcoin.” It compares them to a bank robbery, which “doesn’t mean that the dollar is compromised.”

So when you read about stolen coins, ask which one it was. Was the Bitcoin network broken, or was a company that held other people’s coins broken into? Almost every famous loss has been the second kind. That matters, because it tells you where your own risk sits: with whoever holds your keys.

[INFOGRAPHIC: the bank-robbery test, 2 columns, the network itself versus a company holding your coins, with where each risk sits and what you control]

What can go wrong if you own Bitcoin?

4 things, and none of them are hypothetical.

The price can fall hard. Bitcoin.org is candid on this: there is “no guaranteed purchasing power and the exchange rate floats freely,” which “leads to volatility where owners of bitcoins can unpredictably make or lose money.” It also says “There is no guarantee that Bitcoin will continue to grow.”

You can lose your keys. No one can reset them for you. How to store crypto safely covers the habits that prevent this.

The company holding your coins can fail. When an exchange keeps your coins, bitcoin.org calls it “a form of counterparty risk.”

You can be scammed. Bitcoin.org’s own rule of thumb is that “guaranteed-return investment offers are scams.”

Singapore’s regulator takes a tougher line than bitcoin.org does. In a 2022 reply in Parliament, MAS said cryptocurrencies “are purely speculative as an investment asset, and have no intrinsic value. That is why MAS has consistently warned the retail public not to deal with them.” Bitcoin’s supporters disagree with that view. Whichever side you take, it tells you how the rules you trade under were written.

What does Bitcoin actually do?

Personally, I think the best way to understand Bitcoin is to stop arguing about its price for a moment and look at what it does. It moves value between 2 people without a bank, on a schedule nobody can change, with no way to undo a mistake. Some people see that as freedom. Others see it as risk with nobody to call. Both are describing the same design.

If you want to go further, the blockchain and cryptocurrencies guide maps the whole topic. Is cryptocurrency a good investment? weighs the case for and against. And how to invest in crypto without holding coins covers the routes that skip the wallet entirely.

So which part of the design matters most to you? The fixed supply, or the fact that nobody can reverse a payment? And if you held some today, who would actually hold your keys?

FAQ

What is Bitcoin in simple terms?

Bitcoin is a digital currency with no central issuer. Payments are recorded on a public blockchain kept by thousands of computers, and only 21 million bitcoins will ever exist.

Who created Bitcoin?

Someone using the name Satoshi Nakamoto. The first Bitcoin specification and proof of concept were published in 2009. Satoshi left the project in late 2010, and their identity has never been publicly proven.

How many bitcoins are left to mine?

About 900,000. Around 20.10 million of the 21 million had been issued as of 16 October 2026.

Is Bitcoin legal in Singapore?

This post is not legal advice. What MAS has made clear is that firms offering crypto services here fall under its rules for digital payment token services. It has also warned the public many times that crypto is highly speculative.

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About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe). His trade log is public: every trade since April 2024, dated, losses left in.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.

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