Definition
Bitcoin is a digital asset and payment network that runs on its own public blockchain without a central issuer. Software rules enforced by network participants cap its supply at 21 million coins.
How it works
New bitcoin is issued to miners as a reward for adding blocks, and the reward halves about every four years (every 210,000 blocks). Transactions are checked by network nodes and secured by proof-of-work, so no single company approves them. Addresses are pseudonymous rather than anonymous, because the ledger is public.
Bitcoin has no cash flows or earnings, so its price rests on supply, demand and sentiment, and it has historically swung much more than major currencies or stock indices. It trades around the clock on many venues, and prices can differ between them.
Formula / convention
Holding value = number of coins × price per coin; 1 bitcoin = 100,000,000 satoshis
Illustrative example
Illustrative: the price is 60,000 US dollars per bitcoin. A holding of 0.025 bitcoin is worth 0.025 × 60,000 = 1,500 US dollars and equals 0.025 × 100,000,000 = 2,500,000 satoshis. If the price fell 30% to 42,000, the same holding would be worth 0.025 × 42,000 = 1,050 US dollars.
What to watch for
Bitcoin prices can fall sharply and quickly, and holdings are generally not covered by deposit protection or the guarantees that apply to bank accounts. Transactions are usually irreversible, so a mistake in an address or amount is rarely recoverable.