What is Bitcoin

Bitcoin. You have probably heard of it.

It appears frequently in the news, almost always in connection with its price. Alongside it come terms such as blockchain, mining and wallets, which can sound like they are only for expert investors.

But it is not that complicated.

That is why I have prepared a series of articles explaining everything you need to know about the so-called “digital gold”, so you can decide, with some judgement, whether this type of asset is for you.

Here is the complete list:

What is Bitcoin (the article you are reading)
What is Bitcoin used for
Why Bitcoin is important
How Bitcoin works
Why Bitcoin has value
Advantages of Bitcoin
Disadvantages of Bitcoin
Does buying Bitcoin make sense?
How to buy Bitcoin
Where to buy Bitcoin
How to store or custody Bitcoin
What is a Bitcoin wallet: cold and hot wallets
What are the risks of buying Bitcoin
How to sell Bitcoin and withdraw the money
How Bitcoin is taxed in Spain

But before discussing whether it is worth buying, how much it might rise or where it is stored, it makes sense to start with the basics: understanding what Bitcoin is.

Bitcoin: definition

The simple definition would be this: Bitcoin is a digital system that lets you send, receive and preserve value (money, really) without a company or bank — what is known as a trusted third party— controlling the transactions.

Let us unpack that calmly.

When you have money in a bank account, you do not have banknotes stored in a box with your name on it. What you have is an entry in the bank’s systems showing how much money belongs to you. Understanding this is essential, because it is the basis of bank freezes and seizures.

If you transfer 100 euros, the bank changes its records: it subtracts that amount from your balance, adds it to the other person’s account and checks that you cannot spend the same money twice.

Something similar happens with Bitcoin, but there is no single bank managing the information. The record of transactions is on the blockchain, in other words, distributed among many computers connected to this network (the Bitcoin )network). These machines keep copies of the history and check that transactions follow the system’s rules.

So Bitcoin can refer to two things:

On the one hand, there is the network that allows transactions to be carried out and verified. Strictly speaking, when we mean the network, we write Bitcoin with a capital B.
On the other hand, there are the actual bitcoins that a person buys, sells, sends or receives. The “coins”, for want of a better word. Strictly speaking, this bitcoin is written with a lowercase b.

It is worth clarifying that bitcoins are not physical coins. They exist only within the digital network.

Bitcoin, BTC, blockchain and cryptocurrencies: what each one is

Let us keep clearing up the terminology.

BTC is the abbreviation used to identify bitcoin on platforms and markets, just as EUR is used for the euro.

Another important point about bitcoin is that you do not need to buy a whole one at once: each unit can be divided into 100 million parts, and the smallest is called a satoshi. You can buy 20 or 50 euros’ worth even if a whole bitcoin costs much more.

The blockchain, or chain of blocks, is the record where transactions are stored. You can think of it as a digital ledger with many copies distributed across the network. Transactions are grouped into blocks, and each new block is linked to the previous ones.

That is why Bitcoin and blockchain are not the same. Bitcoin is the complete system, while the blockchain is the network, one of its components, used to record movements.

Bitcoin is a cryptocurrency. There are thousands of them, with very different aims, control structures and risks. Each is different, but bitcoin is clearly the leading one, currently followed by Ethereum , Solana and Hype.

What Bitcoin is used for

Although I will cover this in later articles, the key idea is that Bitcoin lets you send value directly to another person over the Internet without a bank having to approve the transaction.

It can also be kept in your own wallet (a kind of bank account); the link explains this in detail.

In practice, it is used to send money, receive payments, move value between people, organisations and countries, keep part of one’s wealth outside the banking system, or seek a gain if its price rises.

It can also be used to pay for everyday purchases, although a card or Bizum is usually more convenient for that.

Bear in mind, however, that its price changes a lot (what is known as volatility), so a purchase paid for with BTC today may look very expensive a few months later. Also, if you decide to hold it yourself, you will need to protect the keys properly.

In short, the main idea is simple: Bitcoin is a digital network that allows value to be recorded and transferred between people without relying on a central entity that controls the whole system.

Next steps

Below are the next articles in the series. They are designed to be read in order if you know little about Bitcoin, but each one stands alone, so you can jump to whichever interests you most:

Frequently asked questions

What is Bitcoin?

Bitcoin is a digital system that lets you send, receive and preserve value without a bank or company directly controlling the transactions.

Is Bitcoin a physical currency?

No. Bitcoins exist only within the digital network. There are no physical coins or banknotes that you can keep at home.

What is the difference between Bitcoin and bitcoin?

Bitcoin, with a capital B, usually refers to the network and the system. bitcoin, with a lowercase b, refers to the units you can buy, sell, send or receive.

What does BTC mean?

BTC is the abbreviation used to identify bitcoin on platforms and markets, just as EUR is used to represent the euro.

Do I have to buy a whole bitcoin?

No. Each bitcoin can be divided into 100 million parts, so you can buy a small amount, such as 20 or 50 euros’ worth.

What is a satoshi?

A satoshi is the smallest unit of bitcoin. One whole bitcoin equals 100 million satoshis.

What is the Bitcoin blockchain?

The blockchain is the digital record where transactions made with Bitcoin are stored. Transactions are grouped into blocks linked to previous ones.

Are Bitcoin and blockchain the same thing?

No. Bitcoin is the complete system, while the blockchain is the record it uses to store and verify transactions.

Do you need a bank to send Bitcoin?

No. Bitcoin lets you send value directly to another person over the Internet without a bank having to approve the transaction.

What is Bitcoin used for?

It can be used to send money, receive payments, move value between countries, keep part of one’s wealth outside the banking system, or seek a gain if its price rises.

Can you pay for everyday purchases with Bitcoin?

Yes, although a card or Bizum is more convenient in many situations. Its price can also change sharply, so the real value of the purchase may vary over time.

Where are bitcoins stored?

They are stored using a wallet, which lets you access them and manage transactions. When you custody your own bitcoins, you are also responsible for protecting the keys properly.

Is Bitcoin the only cryptocurrency?

No. There are thousands of cryptocurrencies with different characteristics and risks, although bitcoin remains the leading and best-known one.

Does Bitcoin have risks?

Yes. Its price is highly volatile and can rise or fall sharply. If you custody it yourself, you can also lose access if you do not protect the keys properly.