Asset Log · Sources and verifiable data

What is Bitcoin? How BTC works, custody and risks

Edition updated: 2026-09-11 · Asset Log operator

Bitcoin is easier to understand when four things are kept separate: the payment network, the asset BTC, exchanges and wallets. Start with how the system works and how value can be lost, not with a price prediction.

Original information checked 2026-08-29; translation reviewed 2026-09-11. Policy and service examples retain the original dates and are not a certification of today’s rules or availability. This beginner’s guide gives general information, not a recommendation to buy BTC or a related product.

The essential distinction

Bitcoin is a peer-to-peer network, not a company. It does not assume that one bank or business controls the transaction ledger. BTC is the asset transferred on that network and can be held, invested in or used for payments. Issuance follows software rules, but its market price is not guaranteed. Lost keys, scams, custody failures and record-keeping obligations remain the user’s risks. Registration of a service provider is not an endorsement or guarantee of the asset.

Bitcoin network: The peer-to-peer system for sharing and validating transactions; not a particular company’s server.
BTC: The asset unit. One BTC contains 100,000,000 satoshis.
Cryptoasset exchange: A business where users trade or deposit assets, such as JPY and BTC. It is separate from Bitcoin.
Wallet: Software or hardware managing keys and spending authorization, not a box containing the coins.

An exchange outage does not necessarily stop Bitcoin. Losing a wallet does not erase the public ledger.

Why Bitcoin was created

In 2008, the paper published under the name Satoshi Nakamoto described electronic payments without requiring a trusted financial intermediary to prevent double-spending. The network began operating in 2009. Participants verify transactions and blocks against shared rules instead of relying on a company to edit account balances.

“No central administrator” does not mean “no rules.” Each participant’s software enforces validation rules. Peer-to-peer describes how participants exchange data; people can still choose intermediary exchanges and wallet providers when accessing the network.

From sending a payment to confirmations

Choose a recipient address and amount.
Construct transaction inputs from available UTXOs, with recipient and change outputs.
Sign using a private key to authorize spending.
Broadcast the transaction to neighboring peers.
Nodes check signatures, format and double-spending conditions.
Miners select transactions for a candidate block.
Proof of work searches for a hash meeting the required target.
Further valid blocks add confirmations and make reversal less likely.

A signature demonstrates the ability to use the relevant key, not a person’s legal identity. Pressing Send is not immediate settlement into a bank account. Whether to accept an unconfirmed payment depends on the recipient’s risk policy and amount.

UTXOs: unspent outputs, not a named bank balance

A UTXO is an unspent transaction output. A displayed balance is the sum of outputs a wallet manages or watches, not a ledger row containing your name and account balance. To send 30,000 satoshis from a 50,000-satoshi output, a transaction can create 30,000 for the recipient and change of 20,000 minus the fee. The entire original output is spent.

It resembles paying with a JPY 10,000 banknote and receiving change, but actual authorization uses signatures and script conditions rather than physical notes.

Full nodes and miners have different jobs

Full nodes: Independently verify blocks and transactions, enforce their software’s rules and relay valid data. A node can run without mining.
Miners: Construct candidate blocks, compete through proof of work and receive the subsidy and fees for valid blocks. Nodes reject invalid blocks.

Miners propose transaction order; full nodes verify the proposal. A miner cannot simply change the issuance rules or spend another person’s outputs and require everyone else to accept that change.

How proof of work and linked blocks protect history

Proof of work requires computational resources to find a suitable hash. Each block refers to the preceding block’s hash. Changing an old block means redoing subsequent work and overtaking the valid chain. This creates economic and computational difficulty, not physical impossibility.

Block 920,001 (previous hash: 00ab…91) → Block 920,002 (008c…42) → Block 920,003 (001f…d7)

Illustrative block numbers and hashes only, not live blockchain evidence. Changing a previous block changes the references that follow.

Proof of work also entails substantial electricity use. Finality is better understood as increasing confidence with additional blocks than as an instantaneous all-or-nothing event.

The supply limit and halving

New BTC is created through the block subsidy for valid mined blocks. Starting at 50 BTC, the subsidy halves every 210,000 blocks. Roughly four years is an estimate based on average block timing, not a fixed calendar schedule.

BTC subsidy per block, not market price
Starting period	Subsidy
2009	50 BTC
2012	25 BTC
2016	12.5 BTC
2020	6.25 BTC
2024	3.125 BTC

A halving reduces new issuance, not an existing holder’s balance. It does not automatically double price. Bitcoin Core represents one BTC as 100,000,000 satoshis; repeated subsidy reductions imply a supply cap of approximately 21 million BTC. Integer rounding and inaccessible coins mean that exactly 21 million spendable BTC will not necessarily be available to people.

Why people assign value to BTC

BTC has no sovereign guarantee or corporate dividend claim. Buyers and sellers assign value to several characteristics, none of which guarantees a future price:

Scarcity: issuance and its limit can be checked against public rules.
Transferability: value can move across the network, including across borders, but legal access varies.
Verifiability: running a node allows independent rule checks.
Durability: many participants retain the ledger, while keys and providers still need protection.
Divisibility: 100,000,000 satoshis per BTC enable small denominations.
Network effects: users, developers and businesses create connections, while competition and regulation remain.

Scarcity alone is insufficient. Demand, usability, confidence, liquidity and regulation can all change the price.

What Lightning adds

The base layer is not designed to record every small payment instantly. Lightning Network uses payment channels anchored in Bitcoin, allowing payments without recording each individual transfer on-chain and allowing final channel states to settle on Bitcoin. On-chain costs and timing depend on block-space demand. Lightning can suit fast, small payments but adds liquidity, routing, online-availability and implementation risks.

Block’s 2025 announcement of Cash App Bitcoin payments using Lightning is one implementation example. It does not establish identical availability for every country, merchant or user.

What documented use actually shows

Holding BTC, trading an investment product, paying, sending money and corporate treasury holdings are different activities. Statistics covering cryptoassets, stablecoins, DeFi and exchanges cannot be relabeled as Bitcoin payment adoption.

United States: the SEC’s 2024 approval of spot Bitcoin ETP listings and trading did not endorse Bitcoin itself.
El Salvador: the original source describes voluntary private acceptance and USD tax payments after the 2025 reforms. A description of mandatory acceptance from 2021 is not the same policy snapshot.
Japan: registered providers offer access to BTC; registration does not guarantee value.
Regional crypto studies: Chainalysis estimates cover multiple assets and services, not a BTC-only adoption rate.

Verified uses and the limits of the evidence
Use	Documented example	What it supports	What it does not establish
Investment products	U.S. spot Bitcoin ETPs	Price exposure through a securities account exists	It does not imply self-custody or transfers of BTC
Corporate treasury	Strategy’s SEC filings	An example of corporate BTC holdings	Not necessarily suitable for companies generally
Payments	Cash App’s Lightning support	A payment implementation using a second layer	Not identical availability everywhere or adoption by all merchants
National framework	El Salvador	The framework’s introduction and 2025 revision are documented	It does not establish current mandatory acceptance by everyone

BTC, yen, gold, shares and other cryptoassets

Compare issuance, sources of value, rights and distinct risks rather than declaring one asset universally superior.

Asset characteristics compared on common criteria
Asset	Issuance / supply	Sources of value	Holder’s rights or claims	Distinctive risks
BTC	New issuance under public rules; cap of approximately 21 million BTC	Scarcity, transferability and network demand	No claim on corporate profits or a government	Price, keys, regulation, technology and liquidity
Japanese yen	Issued by the Bank of Japan; subject to monetary policy	Acceptance and confidence as legal tender	Unit used to settle payments in Japan	Inflation, FX and monetary policy
Gold	Mining supplies a physically scarce material	Jewelry, industrial demand and historical store-of-value use	No claim on an issuer	Storage, authenticity, price and transport
Shares	Issued by companies	Business profits and growth expectations	Dividends, voting and other rights, depending on the security	Business performance, insolvency and market price
Other cryptoassets	Varies by asset	Depends on use, operation and token design	Varies by asset	Centralization, code, liquidity, regulation and other risks

Before adding a volatile asset, consider whether a near-total loss would affect essential living needs and what would happen if its portfolio weight moved beyond your chosen limits. Forecasting an entry price is not a substitute for defining these constraints.

Wallets, private keys and recovery phrases

A wallet authorizes spending with keys and manages addresses and transactions. A person who obtains the relevant private key may be able to spend the associated BTC. Never send a key or recovery phrase to a website, support agent or another person.

Private key: secret information used to sign spending authorization.
Public key: derived from the private key and used for signature verification.
Address: a shareable receiving destination.

The direction matters: the address is not a means to work backwards and recover the secret. A payment transmits a signature, not the private key itself.

Custodial services versus self-custody

An exchange may offer easier operation and account recovery, but the provider controls keys and can experience outages, security incidents, insolvency or withdrawal restrictions. Self-custody gives the user key control and responsibility for loss, incorrect transfers, fake apps and backups.

BIP39 describes mnemonic phrases used to represent deterministic wallet seed material. It is a common wallet convention, not a mandatory feature of the Bitcoin network. Keeping an unprotected photo, email or cloud copy creates additional exposure.

Separate the risks

Large price changes and loss of principal.
Lost or exposed keys, potentially without recovery.
Custodian outages, breaches, insolvency or withdrawal limits.
Wrong address or network; transfers generally cannot be reversed.
Phishing, fake support, fake apps and guaranteed-profit claims.
Tax records: payments and exchanges may matter, not just cash sales.
Changing regulation, tax and service conditions by jurisdiction.
Implementation flaws, concentration in mining or infrastructure, and network splits.

Different risks need different measures: small test transfers, appropriate two-factor authentication, checking destinations, keeping records and separating essential money from speculative exposure. Ledger resistance to alteration does not make the user immune to loss.

Ten checks before buying

Separate emergency reserves and money needed for near-term living, housing or education; do not rely on borrowed money.
Define an amount whose near-total loss would not derail your plans.
For Japan-based services, check the current FSA registration list and official administrative actions.
Compare broker/dealer-style quotes with order-book trading: spreads, execution price, fees and liquidity matter.
Check JPY deposit and withdrawal costs for the specific method and amount.
Separate provider BTC withdrawal fees and minimums from network transaction fees.
Review device security and two-factor options, including authenticator applications rather than assuming SMS is the only choice.
Decide who will manage the keys and who bears recovery responsibility.
Keep purchase, sale, swap, payment, transfer and fee records.
Decide beforehand what to do after a decline, an excessive portfolio weight or a need for cash.

The site’s Japanese service comparisons are linked at the end. A simple interface does not necessarily mean low total cost, and an opaque spread should not be ignored.

Japan’s regulatory and tax context: a dated snapshot

The source’s FSA list as of 2026-08-21 contained 27 registered cryptoasset exchange providers. Registration was not a price guarantee, an absolute safety guarantee or a recommendation to buy.

The December 2025 NTA FAQ used in the source generally classifies an individual’s cryptoasset gains as miscellaneous income, with exceptions depending on scale, bookkeeping and business context. Buying goods with BTC, exchanging it for another cryptoasset or making certain donations can also require gain/loss calculations. The original check date was 2026-08-29.

Rules can change. This translation does not determine current tax treatment, individual filing obligations or the rules outside Japan. Consult the latest NTA guidance, your transaction reports and an appropriate tax professional or tax office.

Frequently asked questions

Who controls Bitcoin?: No single company maintains all balances. Developers, miners, nodes, businesses and users have different kinds of influence and independently choose what software and rules to accept.
Are all 21 million BTC available to spend?: No. The approximate issuance cap is not the same as accessible supply, given rounding and lost keys.
Does a halving make price rise?: No automatic link. It changes issuance; demand, interest rates, liquidity, regulation and sentiment also matter.
Must I buy a whole BTC?: No. BTC is divisible into satoshis, though providers set their own order minimums and fees.
Do I control BTC bought on an exchange?: You generally have an account claim while the custodian controls keys. Moving to self-custody changes both control and responsibility.
Does a broken wallet erase BTC?: No. A suitable backup may restore key access. Losing all key or seed recovery paths can make the BTC inaccessible.
Is Bitcoin anonymous?: Not fully. The public ledger can be traced, and addresses may be linked to identity through provider records or transaction patterns.
Is Lightning the same as Bitcoin?: No. It is a second-layer payment network anchored in the base layer, with different speed, liquidity, fee and failure conditions.
Does growth in crypto use prove everyday BTC payment adoption?: No. Check the asset, purpose, service and study period.
Should a beginner use a broker or an order book?: Compare execution, spreads, fees, order types and liquidity rather than assuming the easiest interface is best.
How much should I buy?: There is no universal amount. Protect necessary funds and consider the option of not buying.
Can spending BTC create tax consequences?: In the dated Japanese source, payments and swaps can create reportable gains or losses. Verify current rules and your own records.

Sources and verification scope

Technical explanations use the original paper, developer documentation, Bitcoin Core and BIPs. Regulatory examples use authorities, international institutions and company disclosures. Chainalysis is identified as supplementary private research with broader cryptoasset scope. Original check: 2026-08-29. Fees, registration, tax and service availability require a fresh official check before actual use.

This is educational information, not solicitation or a price forecast. BTC involves price, principal-loss, key, counterparty, security, regulatory and tax risks. Source update history: first edition 2026-08-29, including the FSA list, NTA FAQ, 2025 El Salvador reforms, U.S. spot ETPs and Lightning examples. The market simulator below uses no real money and remains Japanese-only; no game functionality was changed.