Beginner guides, explanations, and everything about Bitcoin

Bitcoin is for everyone

Unlike traditional forms of money, bitcoin isn’t backed by physical assets or government policies, instead, it’s backed by a novel system that uses decentralization, incentives, energy, and cryptography.

![](https://www.datocms-assets.com/99305/1734386385-learn-what-is-backing-bitcoin-state-hero.png)

To properly answer “What is backing bitcoin?,” we first need to establish what “backing” means.

In the context of money, “backing” historically meant a currency that was directly linked to a specific quantity of a commodity, like gold. This system, known as the “gold standard,” provided tangible assurances of the currency’s value as it could be exchanged for set quantities of a valuable metal.

In 1971, the US dollar’s gold-backing ended, along with that of all other major currencies. This marked the shift to “fiat” money (from the Latin word for “decree”), where the money’s value relies on government policies and public trust, rather than redeemability for gold. 

Neither gold nor fiat money are backed by redeemability for anything or by any ability to generate cash flows. They are “base-layer” monetary assets, meaning their value relies on their *inherent* properties and the assurances that those properties will persist into the future. People own gold or fiat because they’re useful for storing and/or exchanging value, made possible by their reliable [monetary properties](https://strike.me/learn/what-is-money):
* **Gold:** Gold’s value relies upon its resistance to corrosion, ease of verification, physical weight, measurable purity, and natural scarcity, which are established by the unchanging laws of physics. Additionally, gold’s superior scarcity is safeguarded by the economic barriers of production, since there is no other way to produce gold other than through energy-intensive work.
* **Fiat money:** Fiat’s value relies upon government-mandated acceptance for taxes, debts, and legal transactions, combined with public trust in the issuing authority’s ability to maintain its value. If policies change or the authorities print money excessively, the money’s value could drop and popular trust could be lost (see 1920’s Germany, 1990’s Yugoslavia, 2000’s Zimbabwe, or 2010’s Venezuela).

Base-layer monetary assets are backed by nothing other than themselves and the forces that assure their valuable properties will persist into the future. 

Bitcoin is the same. It’s a base-layer monetary asset, backed by the forces that assure its valuable properties will persist. 

## How is bitcoin backed?
[Bitcoin](https://strike.me/learn/what-is-bitcoin) is a peer-to-peer electronic cash system, letting people acquire, hold, and spend bitcoin in a similar way to traditional forms of money.

Bitcoin has valuable [monetary properties](https://strike.me/learn/what-is-money), including: 
* **Scarcity:** Bitcoin has a fixed supply limit of [21 million bitcoin](https://strike.me/learn/how-many-bitcoin-are-there)
* **Divisibility:** Each bitcoin can be effortlessly subdivided into [100 million satoshis](https://strike.me/learn/what-are-satoshis)
* **Portability:** Bitcoin can be moved digitally and securely transferred from one person to another without a 3rd party intermediary by authorizing the transaction using their unique [private key](https://strike.me/learn/what-are-private-keys-and-public-keys)

These valuable monetary properties are established through a novel system that combines decentralization, incentives, energy, and cryptography. 

Let’s examine.

![](https://www.datocms-assets.com/99305/1704930771-learn-better-ai-agents-state-default.png)

## Decentralization of rule-enforcing nodes
Bitcoin’s monetary properties are defined by its [rules](https://strike.me/learn/how-does-bitcoin-work), which are encoded in Bitcoin’s free and open-source software and run by a global network of independent computers, called “nodes.” The rules determine the operations of the Bitcoin network (uppercase “B”) and the characteristics of the bitcoin asset (lowercase “b”):
* **Network operation rules:** Transaction formatting, node connectivity processes, the block time interval, the mining difficulty adjustment, etc…
* **Asset characteristic rules:** The supply limit, the supply schedule, the divisibility of each bitcoin, the authorization requirements for initiating a transaction, etc…

When you operate a node, it connects to every other node in the network to share valid transaction information. Any transaction that violates the rules is easily detected and automatically rejected by each and every node. Although any node can change their *own* copy of the software, thereby altering *their* version of Bitcoin’s rules, no one can force *other* nodes to adopt those changes. The unchanging nature of the rules is what establishes the reliability of Bitcoin’s monetary properties. 

This network of countless independent nodes forms a globally decentralized system that collectively ensures the integrity of Bitcoin’s rules and operations. Each node operates equally and redundantly, meaning no single node holds unique authority or is critical to the network’s operation. This decentralization ensures that no individual or group can unilaterally change Bitcoin’s rules while safeguarding it from censorship or shutdown.

➔ **Assurance:** The rules that establish Bitcoin’s monetary properties can’t be changed, blocked, or banned by any individual or group.

## Incentives
Although nodes are free to adopt new rules, such as increasing the supply limit, any transactions they process under incompatible rules would conflict with all other nodes’ rules and be instantly rejected. This makes the effort pointless, as their time and resources would be wasted. The same principle applies to [Bitcoin mining:](https://strike.me/learn/what-is-bitcoin-mining) producing a valid block is resource-intensive, and if any transaction within that block violates Bitcoin’s rules, the block will be rejected, the miner’s energy wasted, and no rewards issued.

Nodes and miners are not only incentivized to avoid rule changes, they’re incentivized to strictly enforce established rules. The unchanging nature of Bitcoin’s rules assures its monetary properties are reliable and its operations are stable, giving rise to Bitcoin’s value. Node operators want their own valuable transactions accepted, while miners want to earn valuable bitcoin rewards. This incentive alignment creates a system where:
* **Adopting incompatible rules is costly:** Breaking consensus leads to rejected transactions and wasted resources.
* **Enforcing existing rules is profitable:** Stability in Bitcoin’s rules secures its value, protecting nodes’ transactions and miners’ rewards.

➔ **Assurance:** All network participants are financially incentivized to uphold the existing rules and avoid any rule changes, ensuring the reliability of Bitcoin’s monetary properties and continued operations.

## Energy and computational power (aka “hashpower”)
[Bitcoin mining](https://strike.me/learn/what-is-bitcoin-mining) involves computers performing computational work, called “hashing”, to earn a set reward paid in bitcoin for each block of transactions they add. This is how new bitcoin are issued, new transactions are added, all previous transactions are re-asserted, and the entire network is secured against attack.

The only known way to produce a [valid hash](https://strike.me/learn/what-is-a-hash-function) is by using energy in a computationally-intensive process of trial and error. However, once a valid hash has been found, it’s trivially quick and easy for each node to mathematically verify that it’s correct. This asymmetry between the difficulty of mining and the ease of verification means only miners who have mathematically proven to have expended real world resources can add blocks, while verifying validity remains simple, efficient, and widespread.

A key rule in Bitcoin is the **mining difficulty adjustment**, which ensures blocks are mined roughly every 10 minutes, regardless of the total computational power (hashpower) of all miners. Every 2,016 blocks (roughly 2 weeks), mining difficulty automatically adjusts to maintain this pace, making mining harder if hashpower increases and easier if hashpower decreases. This dynamic scaling keeps block times and the supply schedule consistent, while ensuring mining remains efficient and profitable, incentivizing ongoing participation.

The combination of mining with the difficulty adjustment creates a global, decentralized, scalable, and open competition that ties real-world resources (energy and compute hardware) to the supply and operations of Bitcoin. This system ensures:
* **Predictable supply schedule:** Block intervals and the [supply schedule](https://strike.me/learn/what-is-the-bitcoin-supply-schedule) are maintained by the difficulty adjustment, regardless of the total hashpower deployed by miners. 
* **Transaction processing:** Transactions can’t be blocked by mining bans or miners colluding to produce empty blocks, as mining is an open, global competition where miners can join or relocate freely and empty blocks miss out on [transaction fees](https://strike.me/learn/what-are-bitcoin-fees).
* **Miner incentives:** The difficulty adjustment ensures global mining remains profitable for the most efficient miners by dynamically scaling with network hashpower, keeping revenues above expenses and sustaining or increasing miner participation.
* **Transaction permanence:** Reversing a transaction requires re-mining all subsequent blocks and exceeding the network’s total computational power.

➔ **Assurance:** Bitcoin’s monetary properties and operations are secured by energy, as new bitcoin can only be issued through energy-intensive work, while attacks on its supply consistency and transaction security are deterred by a globally distributed network of incentivized energy resources.

## Cryptography and mathematical principles
Bitcoin relies on cryptographic hash functions and the use of immense numerical spaces to create computational barriers against attacks. [Hash functions](https://strike.me/learn/what-is-a-hash-function), like the industry-standard SHA-256 used in Bitcoin, generate unique outputs from input data. Even the slightest change to the input completely alters the output, and there’s no known way to reverse the process. 

Alongside hash functions, Bitcoin’s use of extremely large numbers ensures the security of private keys, transaction authorization, and mining rewards.
* **Private keys:** Bitcoin [private keys](https://strike.me/learn/what-are-private-keys-and-public-keys/) come from a numerical space with approximately 115 quattuorvigintillion possible combinations (a number with 78 digits). This immense scale ensures it’s computationally impossible for anyone to guess your private key, even with all the computing power on earth.
* **Transaction authorization:** To authorize a transaction, your private key generates a unique [digital signature](https://strike.me/learn/what-is-a-digital-signature/). The strong reliability of hash functions means there is no known method to reverse engineer your private key from the signature or the hash output of a transaction.
* **Bitcoin mining:** To add a block and be rewarded, miners must produce a [valid hash](https://strike.me/learn/what-is-a-hash-function/) that meets the network’s required output and difficulty. There is no known way to produce valid hashes other than completing the energy-intensive proof-of-work. 

➔ **Assurance:** The security of bitcoin ownership and mining operations is assured by industry-standard cryptography and mathematical principles.

## Summary
Bitcoin is a base-layer monetary asset, designed to store and exchange value–a fundamental human need.

Its value relies on its robust monetary properties, which are assured through a novel combination of decentralization, financial incentives, energy resources, and cryptography. 

This assurance isn’t abstract, it’s tangible. Real nodes enforce Bitcoin’s rules globally, real miners use computational resources and energy to secure the network, and industry-standard cryptography underpins its security – the same cryptography that secures global financial and communications networks. The entire system is self-sustaining as *all* participants are aligned through transparent financial incentives to promote Bitcoin’s continuation and defend against attacks.

Dismissing Bitcoin as “unbacked” because it lacks physical presence or government oversight is to miss its revolutionary innovation. Bitcoin is the first successful peer-to-peer electronic cash system – something entirely new – and its innovative design to link real-world resources and established cryptography to let people hold and exchange value is worth your attention.

Decentralization, incentives, energy, and cryptography

What is backing bitcoin?

## Protocols are standardized rules
Bitcoin works as a set of standardized rules. 

In computer terms, standardized rules are known as "protocols", and they enable devices and apps worldwide to communicate with each other. These rules govern how Bitcoin functions as a peer-to-peer electronic cash system. The rules are encoded within the Bitcoin software, so when someone downloads and runs the software on their computer (aka node), they become an enforcer of the rules and an active participant in Bitcoin’s operations. 

![](https://www.datocms-assets.com/99305/1704930859-learn-what-is-a-protocol-state-hero.png)

What this means is that Bitcoin operates as a worldwide network of independent nodes, each running the software containing the standardized rules for adding valid transactions to their own copy of the transaction database (called the blockchain). 

To better understand how this works, it’s helpful to define some terms:
* **The Bitcoin protocol:** The set of standardized rules within the Bitcoin software that determines how Bitcoin works
* **The Bitcoin software:** The software program (aka Bitcoin Core), which can be downloaded and run on computers, thereby making them a node in Bitcoin’s network
* **The Bitcoin network:** The global web of connections between nodes that are running the Bitcoin software, through which transaction information can be shared
* **The bitcoin asset** (lowercase “b”): The amounts that are specified within each transaction
* **The Bitcoin blockchain:** The entire history of all bitcoin transactions, structured as a sequential “chain” of blocks of transactions and which is held and maintained by each node independently 

You can think of it like this: bitcoin is an *asset*, that's transacted through a *network*, which is built on a *protocol*. 

Each node can start or stop running the software (join or leave the network), without any problem since they’re each redundant to the system as a whole. Whenever a node joins or rejoins the network, they simply follow the rules to check the validity of the transactions that took place in their absence.

Alongside the nodes are the Bitcoin miners – the computers that confirm bitcoin transactions by grouping them into blocks and adding them to the blockchain. Miners perform computational work in a lottery-style competition to win the right to add the next block and earn a reward for doing so – a system known as “proof-of-work.” Miners also follow the rules of the Bitcoin protocol, because if they don’t, any block they *attempt* to add risks being rejected as invalid by the nodes, which means their time and efforts will be wasted.

Bitcoin works because nodes and miners follow the same set of rules.

## What are the rules of Bitcoin?
The standardized rules of Bitcoin’s that are encoded within the Bitcoin software define the different aspects of Bitcoin’s operations:

### Supply rules:
* The total possible [supply of bitcoin](https://strike.me/learn/how-many-bitcoin-are-there/) is capped at 21 million. 
* New bitcoin are to be issued with each block, according to a strict [supply schedule](https://strike.me/learn/what-is-the-bitcoin-supply-schedule/) that decreases the issuance amount by half (aka a "[halving](https://strike.me/learn/what-is-the-bitcoin-halving/)") every 210,000 blocks (roughly 4 years) until the 21 million limit is reached.
### Mining rules:
* New blocks are to be created on average every 10 minutes.
* Miners must perform computational work to win the cryptographic “lottery” to add a new block of transactions to the blockchain, thereby confirming that block’s transactions and re-confirming all preceding blocks upon which it is built.
* The difficulty of winning the lottery automatically adjusts every 2,016 blocks (roughly 2 weeks), to maintain the 10 minute block time regardless of the total mining power (aka hashpower) being deployed.
### Transaction rules:
* Transactions require the digital signature that corresponds to the sender’s address, ensuring that only the owner of the bitcoin can send it.
* All transactions must have inputs and outputs to specify the sender, recipient, and amount of bitcoin being sent, except for “coinbase” transactions (the newly issued bitcoin in each block), which lack input details.
* The amount of bitcoin in the inputs must equal the amount in the outputs, less the fee amount to be paid to the miner for the service of confirming the transaction.
* Invalid transactions (e.g., invalid signature, invalid bitcoin amount, or double-spending of the same bitcoin) are to be automatically rejected.
### Consensus rules:
* Nodes accept the longest valid chain with the most cumulative proof-of-work as the correct version of the blockchain (aka the “heaviest chain”) and discard any other version of the blockchain
* To undo a transaction that has been added to the blockchain requires performing a greater amount of proof-of-work than the total accumulated work since the transaction was made, an effort which exponentially increases with time and makes bitcoin transactions effectively unchangeable after a few blocks.
### Scripting language rules:
* Any scripts included in a transaction, which can define bitcoin transaction conditions, must  follow certain rules regarding their size and complexity.
### Connectivity rules:
* Nodes must follow specific rules for how to communicate with each other, such as how data is to be formatted and transmitted.
### Blocksize rules:
* Blocks of transactions have a maximum size of 1 megabyte (with some additional space allowed for other data), which indirectly limits the number of transactions that can be included in a block.

Collectively, these rules define how to form the network, make transactions, and establish the attributes of the bitcoin asset, namely its scarcity and peer-to-peer transactability. When nodes run the software, a network is formed through which bitcoin transactions can be sent.

![](https://www.datocms-assets.com/99305/1702580888-is-bitcoin-money-02.png)

## Incentive-alignment of Bitcoin
As more nodes run the software, the rules become more difficult to change. Changing the rules entails creating a new version of the Bitcoin software and getting nodes to download and run that new version. Unlike mandatory smartphone software updates, the Bitcoin software can’t be forced on nodes, as they’re free to download and run whatever version of software they want. Nodes will only download and run software if it’s in their best interest, and will avoid any software that doesn’t.

Additionally, since any block or transaction that violates the rules is automatically rejected by all other nodes, both miners and nodes are incentivized to avoid adopting incompatible rule changes, lest their time and efforts be wasted. Furthermore, bitcoin’s value as an asset is intrinsically linked to the unchanging nature of the rules, as they establish its scarcity, transactability, and reliability. Since miners are rewarded in bitcoin and nodes process bitcoin transactions that they want added to the blockchain, everybody has a vested interest in maintaining the rules that support the value of bitcoin and the network’s consistent operations.

In this way, Bitcoin benefits from network effects – people run nodes, mine bitcoin, or buy bitcoin because it offers them a way to acquire, transact, and secure an immutable digital asset with desirable and robust attributes. Through their activities, the bitcoin asset is made more robust, immutable, and scarce, further incentivizing others to do the same. It’s a self-reinforcing cycle of network strengthening, rule solidifying, and price appreciation. 

The openness of the Bitcoin protocol stands in contrast to legacy financial systems, which are closed and opaque. There aren’t clear and transparent rules governing the supply of dollars, or who is to receive newly issued dollars and in what quantities and for what reasons. Also, entrepreneurs can’t simply build their own dollar app, capable of holding or transacting dollars independently – that’s a privileged service performed by financial institutions within predetermined limits and jurisdictions. 

What this means is that Bitcoin is structurally different from legacy finance. It’s an open, transparent, and rules-based system, with specific built-in incentives that people can opt-into, rather than being forced into. It’s fair, radically transparent, and therefore opens new possibilities for building products and services, unconstrained by arbitrary rules, privileges, and limits. Those possibilities are set to transform how money can work.

Ultimately, Bitcoin works because well-aligned incentives lead all participants to follow Bitcoin’s rules.

Understanding how standardized rules lead to a global network for transactions

How does Bitcoin work?

## Getting started
The [Strike app](http://strike.me/download) is a fast and easy way to get into Bitcoin. 

Strike is one of the world’s most licensed Bitcoin-focused companies and the Strike app is available in [tons of countries](https://strike.me/faq/where-is-strike-available-wr/) globally. It supports a variety of different payment methods, so you can use your cash to buy bitcoin, starting as little as $0.01.

![](https://www.datocms-assets.com/99305/1704930819-learn-how-to-buy-bitcoin-on-strike-state-hero.png)

Buying bitcoin with Strike is as easy as three steps:
1. Create your free account
2. Connect your cash payment method
3. Buy bitcoin

Let’s get started!

## Create your account
To get started, visit the [App store](https://apps.apple.com/app/apple-store/id1488724463) or [Google Play store](https://play.google.com/store/apps/details?id=zapsolutions.strike) to download the Strike app and complete the signup process. 

Signup is free and can take less than a minute to verify your identity and create your account. Depending on your country, some features such as higher account limits and additional payment methods may only be available after completing the additional verification steps.

Once your signup is complete, you can explore the app and make transactions.

## Connect your cash payment method
Cash payment methods enable you to buy bitcoin, by letting you deposit cash to your Strike account or charge the payment method for your bitcoin purchase. Depending on your country, there are different methods available, such as bank accounts, debit cards, wire transfers, direct deposits, or mobile money accounts. 

To link a payment method, follow these steps:
1. Go to your <UserIcon> Account screen
2. Tap "Payment methods"
3. Tap "Add method"
4. Follow the instructions, which may include retrieving a verification code from your bank account

Wire transfers and direct deposits are available in select countries and can be accessed by going to your Account screen, then tapping on <TransferIcon> Wire transfer or <BankIcon> Direct deposit. Your transfer details will be generated, which can be used to initiate the deposit from either your or your employer’s bank.

![](https://www.datocms-assets.com/99305/1705011631-learn-how-to-buy-bitcoin-support.png)

## Buy bitcoin
With a payment method connected or cash deposited into your account, you can now buy bitcoin.

To buy bitcoin, visit your Bitcoin screen and follow these steps:
1. Tap “Buy”
2. Enter the cash amount to purchase
3. Tap “Next”
4. Confirm the purchase

When the purchase is complete, the bitcoin will be added to your bitcoin balance and you’re done!

You can buy as much bitcoin as you want from your cash balance or up to your payment method’s deposit limit. You can view your limits for adding cash and sending bitcoin by going to your <UserIcon> Account screen and tapping <LimitsIcon> Limits. The cash for your bitcoin purchase needs to settle before you can send your bitcoin, which can take a few business days depending on your bank or method.
	
Strike also lets you buy bitcoin via recurring purchase or target orders:
* **Recurring purchases:** Set up [automatic purchases](https://strike.me/learn/how-to-dollar-cost-average-into-bitcoin/) on an hourly, daily, weekly, or monthly basis to help smooth out price fluctuation. At Strike, recurring purchases incur no trading fees after the first week.
* **Target orders:** Set specific [target prices](https://strike.me/learn/what-is-a-bitcoin-target-order/) to buy or sell bitcoin, and your trade will only execute if your desired price is reached.
	
With bitcoin in your account, you can:
* Make borderless peer-to-peer transactions
* Pay for goods and services with bitcoin
* Send your bitcoin to your own custody
* Sell your bitcoin for cash
* Hold your bitcoin

Let’s go!

It has never been easier to buy bitcoin through Strike

How to buy bitcoin

## Lightning as a payments network
The Lightning Network was proposed in 2015 as a payments network for transacting bitcoin *outside* the Bitcoin blockchain.

Essentially, the Lightning Network is a way to transact bitcoin faster, cheaper, and more privately than on the Bitcoin blockchain. 

![](https://www.datocms-assets.com/99305/1702580934-what-is-the-lightning-network-01.png)

Unlike legacy networks for inter-bank cash transfers or credit and debit card payments, the Lightning Network offers instant settlement, no chargebacks, and uses bitcoin as the underlying asset. 

It helps solve a key obstacle for Bitcoin, mainly the ability to scale to lots of users making lots of payments. Whereas the Bitcoin blockchain is designed first and foremost for security and decentralization, the Lightning Network is designed for speed, cost, and volume of payments. 

Lightning is a new kind of payments network, one that’s borderless, open, low-cost, and instant.

## How does the Lightning Network work?
The Lightning Network is kinda like the Bitcoin Network, in that it’s made up of computers (nodes) all running the Lightning Network software. Unlike Bitcoin, Lightning transactions aren’t publicly broadcast on the blockchain; instead they’re made privately and directly between nodes. 

Also like Bitcoin, the Lightning software is a standardized set of rules (aka protocol) that’s open and free to use for anyone or any company who wants to join.

So how does it work?

It all starts with bitcoin. Every bitcoin on Lightning begins with a transaction on the Bitcoin blockchain. That on-chain transaction is shared between two parties and serves as the reference point to start transacting *outside* the blockchain. 

With that on-chain bitcoin secured, the two nodes can then open a payment “channel” – a peer-to-peer connection through which bitcoin can be transacted. It’s like a direct link between two computers that update their own mini, private bitcoin ledger, with the start of their ledger being that first on-chain transaction. 

In their channel, they can transact as fast and often as they want by simply updating their private record, and when they’re done, they can close the channel by settling the original on-chain transaction. 

It’s like opening a tab at a bar, so that you don’t have to pay the bartender each time you buy a drink. Once you open the tab, you can order lots of drinks and just have the tab updated each time. At the end of the night, you make one single payment to settle up. 

It’s the same with Lightning. One on-chain transaction to start, countless off-chain transactions, and one on-chain transaction to close. 

What’s more, each node can open as many channels with as many nodes as they want, forming a global web of connections. Through this web, nodes can “route” payments to other nodes, even if they’re not directly connected. This means person A can send to person C, via their shared connections with person B. These *indirect* payments open a global network of payment possibilities, since each node can be indirectly connected with every other node in the network.

Lightning is a peer-to-peer payments network that helps scale the Bitcoin blockchain, without making tons of on-chain transactions.

![](https://www.datocms-assets.com/99305/1702580946-what-is-the-lightning-network-03.png)

## Lightning and global money transfers
Lightning helps deliver instant, low-cost, and interoperable payments for the world.

Payments routed via Lightning move at lightspeed. When they arrive, they’re final. Instant plus final is what legacy networks can’t do. Legacy cash payments sit in “pending” status for days, with the risk of failing or reversing, adding to merchants’ costs and headaches. 

On top of that is Lightning’s extreme low cost. Lightning payments are just information sent between computers, which costs little to nothing. When indirect payments are routed, a routing fee is paid to any in-between nodes, and those fees are typically a couple satoshis (a fraction of a penny). Payments themselves can be that small, unlocking new possibilities for micro-payments. Compare that to card payment processors, who take a couple percent per transaction in fees and can’t practically process penny transactions (let alone sub-penny amounts).

What’s more is Lightning’s interoperability. Like Bitcoin, Lightning is an open protocol, which means any person, any company, or any app can join and start making Lightning payments themselves. It’s the opposite of how bank or card networks operate, which are closed and don’t allow people to hold electronic money themselves.

With Lightning, you can make payments across apps, for less than a penny, and the payment will be instantly spendable. 

To really get it, you have to see a Lightning app in action. 

People send payments from Miami to Mumbai, via Manila, Mexico City, and Munich. Each person uses a different app, each transaction is sent for fractions of a penny, each payment is finalized and immediately spendable. No 1-5 business days, no bank holidays, no manual approvals, no opaque fees. Secure global payments that just work. 

And since bitcoin is traded 24/7/365 across all major currencies, you can use cash to buy bitcoin, send via Lightning, and sell back into cash. That’s exactly what the Strike app and Strike API do. 

The Lightning Network is a new standard for payments. 
It’s fair — nobody has privileged access.
It’s global — across the street as across the world.
It’s interoperable — across apps, across companies, across borders.
It’s secure — it all begins and ends with Bitcoin, verifiably secure and scarce.

The global bitcoin payments network that’s instant, private, and low-to-no cost 

What is the Lightning Network?

## Bitcoin ETFs
First of all, what’s an ETF?

ETF stands for Exchange Traded Fund, which is a type of investment product that can be traded on stock exchanges. ETFs hold assets, such as stocks, bonds, or commodities, and then issue shares, which investors can buy to get investment exposure to those underlying assets. 

![](https://www.datocms-assets.com/99305/1705929799-learn-what-is-a-bitcoin-etf-state-hero.png)

The idea is that the shares of the ETF *track* the price of the underlying assets, which means that as the assets go up or down in price, the shares in the ETF go up or down in a similar way. For example, if you buy shares in a Gold ETF, your investment would go up or down alongside the price of gold. It's a way of getting investment exposure to gold, without having to buy physical gold coins yourself. 

For the service of operating the ETF, the company that manages it (aka ETF Provider) charges a fee, typically a percentage of the total value of the fund’s assets.

So what’s a Bitcoin ETF?

A Bitcoin ETF is simply an ETF that holds bitcoin. It holds no other underlying asset – no other crypto, coin, or token… just [bitcoin](https://strike.me/learn/what-is-bitcoin). 

When the price of bitcoin goes up or down, the share price of the Bitcoin ETF goes up or down too. It’s a way to get investment exposure to bitcoin, without actually buying and owning the bitcoin *directly*.

Bitcoin ETFs differ from direct ownership of bitcoin, most notably in that ETFs incur ongoing management fees and don’t let you send, withdraw, and control your bitcoin yourself. The [Strike app](https://strike.me/download) is a way to buy, sell, hold, send, and receive bitcoin, as well as withdraw it to your own custody, without incurring any management fees.

![](https://www.datocms-assets.com/99305/1705598787-engineering_06-blended-bitcoin-fee-estimations-default.png)

## How does a Bitcoin ETF work?
From a high-level perspective, all you really need to know is that you can buy shares of a Bitcoin ETF in a brokerage account, and then as bitcoin’s price goes up or down, so too does your investment. 

Under the hood, the operations of a Bitcoin ETF are a bit more technical and involve creating and redeeming shares. Before digging in, there are a few terms you might need to know:

* **Net Asset Value (NAV):** The value of the ETF’s holdings
* **Authorized Participants (AP’s):** Special designated partners (usually large financial institutions) that can participate in creating or redeeming shares of the ETF
* **Custodian:** The company that actually holds the bitcoin, which could be the ETF Provider itself or a 3rd party company

So how does a Bitcoin ETF work?

1. Bitcoin ETF shares each represent a certain portion of the fund’s underlying bitcoin holdings (for example, 1 bitcoin per 1,000 shares), and are traded on a stock exchange.
2. The share price rises and falls according to supply and demand.
3. When there’s increased demand, the ETF share price rises, leading to a *premium to NAV*, meaning the ETF shares are higher in price than the underlying bitcoin they represent.
4. This premium to NAV acts as a signal to the APs to create new ETF shares, which they do by delivering cash to the ETF Provider who buys bitcoin and deposits it to the fund’s custodian.
5. The NAV of the Bitcoin ETF is updated to reflect the fund’s newly acquired bitcoin and the APs receive newly created ETF shares.
6. The APs can then trade the shares in the open market, thereby collecting and closing any premium to NAV.

The reverse can also occur when there’s a *discount to NAV*, meaning the ETF shares are lower in price than the underlying bitcoin they represent. This leads APs to gather shares and return them to the ETF Provider, *redeeming* them in exchange for the cash value of the bitcoin they represent. The ETF Provider delivers the cash to the APs by selling the underlying bitcoin.

This whole system is designed so that the ETF tracks the market price of bitcoin. Whenever there’s a premium or discount to NAV, either due to trading of ETF shares or price fluctuations of the underlying bitcoin, the APs are able to bring the share price back in line with the value of the bitcoin they represent. This system also provides liquidity, as the APs are able to participate in trading of shares, even when regular investors may be reluctant or illiquid.

The above scenario describes cash-create type ETFs, where the APs create or redeem shares by exchanging cash with the ETF Provider, rather than bitcoin. Different Bitcoin ETFs around the world may operate with different creation/redemption processes, bitcoin-per-share ratios, management fee amounts or schedules, or settlement times for when the bitcoin or cash need to be exchanged. You can read about each ETF’s details on their website.

Overall, APs and ETF Providers work to keep deviations from NAV to a minimum, so that the share price tracks the price movements of bitcoin. A 5% move in bitcoin’s market price should result in a corresponding 5% price move in the Bitcoin ETF share price. 

![](https://www.datocms-assets.com/99305/1705011631-learn-how-to-buy-bitcoin-support.png)

## Should you buy into a Bitcoin ETF?
If you’re getting into bitcoin, the question arises: should you buy shares of a Bitcoin ETF or buy bitcoin directly?

Ultimately, it’s up to you. 

For some, the convenience and familiarity of buying within their brokerage account is a big plus. For others, they might be swayed by “unit bias” – feeling better about owning *whole* shares of an ETF rather than owning *fractions* of a bitcoin, despite the fact that shares themselves represent a fraction of a bitcoin. 

Before deciding what’s best for you, there are some factors to consider:

### Management fees:
Bitcoin ETFs incur management fees, typically as a percentage of the total value of the fund’s holdings, while direct ownership has no ongoing management fees. From a long-term perspective, fees add up and are compounding, which steadily erodes the value of your holdings.

### Control of funds:
Owning bitcoin directly gives you the freedom to move your assets where, when, and how you want, while ETF shares can only be held via a brokerage service and have limited or no ability to be transferred to an alternate brokerage or custodian.

### Trading access:
Bitcoin ETFs can only be traded during market hours on business days, whereas owning bitcoin directly affords you the ability to buy and sell, any time, any day. During periods of high volatility, ETF-holders have to wait until markets open to be able to trade, while direct bitcoin-holders are free to trade and transfer when they please.

### Counterparty risk:
Bitcoin ETFs require trust in certain 3rd parties: the ETF Provider and custodian must securely manage the bitcoin, the Authorized Participants must ensure liquidity and limit deviations from NAV, and your brokerage service must provide reliable trading and access to your holdings. With direct ownership, you can decide where your bitcoin is held and by who, including self-custodying where you are the holder and sole authority over your assets.

### Future opportunities:
As the Bitcoin ecosystem grows, new use cases may arise for bitcoin holders, including using bitcoin to collect routing fees within the [Lightning Network](https://strike.me/learn/what-is-the-lightning-network) or posting bitcoin as collateral into escrow accounts to borrow against. Although these use cases are nascent and come with their own set of risks and complexities, they’re simply unavailable if your holdings are locked inside an ETF.

When considering whether to buy shares of an ETF, it’s important to consider the tradeoffs compared to buying bitcoin directly. 

The [Strike app](https://strike.me/download) offers a way to get into Bitcoin that’s simple and secure. You can sign up and buy bitcoin in minutes using regular cash payment methods, with little as $0.01 or as much as you want. Strike Private (private@strike.me) also provides OTC-desk bitcoin buying and selling for large orders from individuals, businesses, or institutions. 

With Strike, you control how you trade, hold, transact, or withdraw your bitcoin – and never pay any ongoing “management fee”. 

*Please note: this content is for educational purposes only. Strike does not provide financial advice.*

Bitcoin Exchange Traded Funds – what they are and how they work

What is a Bitcoin ETF?

Taking self-custody of your bitcoin is a process involving setting up a self-custodial wallet then sending your bitcoin to one of your addresses.

![](https://www.datocms-assets.com/99305/1704930777-learn-better-ai-agents-state-hero.png)

[Private keys](https://strike.me/learn/what-are-private-keys-and-public-keys) are central to bitcoin ownership.

Every bitcoin transaction must be authorized using the correct private key, meaning if you exclusively hold the private key, then you alone can spend the bitcoin associated with that key. The control of private keys– their creation, security, and management – is how you own bitcoin without relying on any 3rd party.

Custodial wallets, like [Strike](https://strike.me/download), handle private keys on behalf of their users. The process of taking [self-custody](https://strike.me/learn/what-is-self-custody) of your bitcoin involves setting up a new self-custodial wallet, then sending your bitcoin to an address created from that wallet. 

There are two basic types of self-custodial wallets:
* **Hardware wallet:** A physical device, usually with a screen, that runs its own wallet app to generate a [seed phrase](https://strike.me/learn/what-is-a-seed-phrase) and manage private keys directly on the device.
* **Software wallet:** A mobile or desktop app that you download, which generates a seed phrase and manages private keys within the app.

One of the major threats to your private keys is malicious or faulty software. If bad software infiltrates your wallet app, it could compromise your bitcoin. For this reason, it’s crucial to be cautious about your wallet’s connection to the Internet. 

Wallets can be further categorized based on their Internet connection:
* **Hot wallet:** A wallet that’s connected to the Internet
* **Cold wallet:** A wallet that’s disconnected from the Internet
* **Air-gapped wallet:** A wallet that is never connected to the Internet, and which passes transaction information via physical SD card or some other means.

## When should I take self-custody
Many people start their Bitcoin journey using a custodial app, like Strike, since it offers convenience, simplicity, and security. However, as you gain a deeper understanding of Bitcoin or allocate an increasingly significant portion of your wealth into it, self-custody should become an essential part of your financial plan.

Before proceeding with self-custody of your bitcoin, it’s best to understand key concepts:
* **Private and public keys:** Learn how bitcoin transactions are created and authorized via [private and public keys](https://strike.me/learn/what-are-private-keys-and-public-keys).
* **Seed phrases:** Understand how your private keys are generated from a [seed phrase](https://strike.me/learn/what-is-a-seed-phrase) and how to recover them in case your wallet is lost, damaged, or destroyed.
* **Private key security best practices:** Know the best practices to [properly safeguard](https://strike.me/learn/how-do-i-protect-my-private-keys) your private keys and seed phrase to prevent loss or theft.
* **Mult-signature setups:** Especially for large amounts of bitcoin, consider multi-signature (multi-sig) wallets that require multiple, geographically distributed private keys to authorize transactions.
* **Cold vs. hot vs. air gapped wallets:** Understand the differences between cold wallets (offline storage), hot wallets (online storage) and air-gapped wallets (never-connected storage), and how to use each safely.
* **The UTXO system:** Learn how [UTXOs](https://strike.me/learn/what-is-a-utxo) (Unspent Transaction Outputs) work to avoid issues that could make your bitcoin uneconomical or unspendable and protect your privacy.

Once you have a strong grasp of these concepts, research and choose the right self-custodial wallet that suits your needs. Many people opt for a hardware wallet, which can cost around $100 or more. Whether you choose a hardware or software wallet, be prepared to stay updated on the latest software or firmware to protect against security vulnerabilities.

Online tutorials, videos, and step-by-step walkthroughs are great resources for researching wallets and how to use them.

## How to take self custody
Here’s how to take self-custody of your bitcoin using a hardware wallet:

1. **Buy a hardware wallet:** Research and choose a reputable hardware wallet and follow the setup instructions provided in the package. For security reasons, it’s best to purchase the wallet from the manufacturer, rather than from a reseller.
2. **Set up your wallet:** Turn on the device, follow the on-screen instructions to begin creating your new wallet.
3. **Record your seed phrase:** As part of the setup process you’ll be prompted to write down a 12, 18, or 24-word [seed phrase](https://strike.me/learn/what-is-a-seed-phrase), which can be used to recover your wallet if it’s lost or damaged. It’s vital to record the words accurately and in the correct order, and to follow [best practices](https://strike.me/learn/how-do-i-protect-my-private-keys) when storing them for safekeeping.
4. **Generate a Bitcoin address:** Initiate a “receive” transaction in your wallet to generate a new Bitcoin address.
5. **Copy and paste the address:** Copy the address and paste it into the service you’re using to send bitcoin (like [Strike](https://strike.me/faq/how-do-i-send-bitcoin/)). This can be done either by having your wallet generate a QR-code, or by sharing the address to yourself, preferably using a secure and encrypted message app. Double check that the address’s characters are correct.
6. **Set your fee and amount:** Choose a transaction fee and enter the amount of bitcoin you want to send, making sure it aligns with [UTXO best practices](https://strike.me/learn/what-is-a-utxo).
7. **Send a test transaction:** As an optional step, you can send a small “test” transaction to your Bitcoin address to be absolutely sure that the address is correct. 
8. **Initiate the transaction:** After reviewing all details, initiate the transaction to your address.
9. **View the transaction on the blockchain:** Once your transaction has been initiated, it will typically appear as a pending transaction. As a final step, you can monitor your transaction’s progress on a [blockchain explorer](https://mempool.space) by searching for your Bitcoin address.

Once your transaction has six confirmations (~60 minutes), it is generally considered complete. 

At this point, you exclusively own the bitcoin because you control the wallet with your private keys, and you have securely stored your seed phrase.

Sending your bitcoin to an address where you control the private keys

How do I take self-custody of my bitcoin?

## Cash –> Bitcoin –> Cash
Send Globally is a feature in the Strike app that lets you send cash through the [Bitcoin Lightning Network](https://strike.me/learn/what-is-the-lightning-network) and have it delivered as local currency to bank or mobile money accounts. It’s a way of sending money globally or locally that can cut out unnecessary middlemen, achieve lower costs, and deliver at faster speeds.

It’s cash, sent through Bitcoin, delivered as local currency.

![](https://www.datocms-assets.com/99305/1702407736-learn-what-is-send-globally-state-title.png)

To understand how it works, let’s take a look at Bitcoin.

[Bitcoin](https://strike.me/learn/what-is-bitcoin) is a digital asset that trades 24/7/365, uninterrupted. People worldwide buy and sell bitcoin across all major currencies. This means you can buy bitcoin with your local currency, send the bitcoin to someone else, who can then sell that bitcoin for a different currency. Cash to bitcoin to cash.

On top of Bitcoin is the Lightning Network, a second-layer scaling solution that lets people securely send real bitcoin faster and cheaper. With Lightning, people can now send and receive bitcoin, anywhere in the world at lightspeed, for low-to-no cost. 

With Bitcoin and Lightning, all you need are cash on/off ramps to make global cash transfers… which is where Strike comes in.

The [Strike app](https://strike.me/download) has full functionality for Bitcoin, Lightning, and cash. Strike has also built a global network of partnerships with bitcoin-powered companies. These global partners can receive bitcoin, convert it to their local currency, and deposit it directly to bank or mobile money accounts. 

So, how does it work?

With cash in your Strike account, you add your recipient’s bank or mobile account details, enter an amount to send, and hit “Confirm”. Immediately, your cash is converted to bitcoin, bitcoin is sent via Lightning to the global partner, the global partner sells the bitcoin for local currency, and the local currency is deposited into your recipient’s account.

The entire operation is automated, and can be done in seconds. Neither you, nor your recipient, ever owns bitcoin. It’s a cash to foreign currency transaction, made possible through Bitcoin.

![](https://www.datocms-assets.com/99305/1702580906-using-bitcoin-to-send-money-abroad-02.png)

## Bitcoin as public payments infrastructure
This is a new approach to using Bitcoin. 

It’s using Bitcoin, not as an asset, but as a network to transfer value. It’s Bitcoin as public payments infrastructure for the world – an alternative to traditional money transfers.

In traditional finance, sending money internationally to friends and family (aka remittances) is slow and expensive. The average cost to remit money globally is roughly [6.20%](https://remittanceprices.worldbank.org/sites/default/files/rpw_main_report_and_annex_q223.pdf) — as in you send $100 and $6.20 is lost to fees, exchange rates, and/or middlemen. 

There’s also delays. The money can take hours, days, or even weeks to arrive and be spendable. You’re also limited if you’re trying to send really small or really large amounts. It all depends on the country, currency, or companies involved.

But why is that?

Put simply, international banking processes.

To transfer local cash in a local bank to foreign cash in a foreign bank involves payment batching, net clearance schedules, chargeback risks, business hours, bank holidays, and of course fees for all middlemen involved. If the countries or currency-pairs are small or uncommon, then the rates, delivery times, and limitations are going to be worse. 

It’s an inefficient system, not designed for speed and savings.

![](https://www.datocms-assets.com/99305/1702580912-using-bitcoin-to-send-money-abroad-03.png)


## Lightning delivers real savings and real value
Send Globally is for saving time and money.

By using Bitcoin as the network to send value, Strike can deliver even better cross-currency exchange rates. That’s because the transfer is able to bypass a lot of the processes and middlemen that drive up costs. And since the money is sent through Lightning, it can arrive much faster than traditional money transfers.

Strike has already launched in a [number of countries](https://strike.me/faq/which-countries-are-available-for-send-globally/) (with more to come), each with super low minimums. All you need is your recipient’s bank or mobile account details, and then you can send to them in their local currency, typically in seconds. 

It’s as easy as texting.

You can also use it for travel. Airport money changers charge crazy high fees and bad rates, so why not use the cash in your Strike app while traveling abroad? On your next trip to the Philippines, just use your cash to pay people in pesos, by Sending Globally right to their mobile money account.

If your recipient doesn’t live in one of the supported countries, that’s okay. The Strike app is available in [countries worldwide](https://strike.me/faq/where-is-strike-available-wr), so you can send them cash or bitcoin instantly to their Strike account. Or they can use any other Lightning-enabled wallet app to receive payments. Bitcoin is interoperable, and is traded across all major currencies. It just works.

You can use Send Globally the Strike app today, or check out this [step-by-step walkthrough](https://strike.me/learn/how-to-use-send-globally) to learn more.

Happy sending.


Bitcoin's Lightning Network makes global money transfers faster and cheaper

Using Bitcoin to send money abroad

UTXO stands for Unspent Transaction Output, and is the technical term for a discrete portion of bitcoin. Put simply, your UTXOs are your bitcoin that you’ve received, but not yet spent.

![](https://www.datocms-assets.com/99305/1721348184-learn-what-is-a-utxo-state-hero.png)

Amounts of bitcoin exist as records of transactions on the Bitcoin [blockchain](/learn/what-is-a-blockchain). Owning bitcoin means that there’s a transaction on the blockchain to an address for which you control the private keys. That record of an amount of bitcoin is called a UTXO.

The way Bitcoin works is that transactions have inputs and outputs. When a transaction is made, the sender specifies one or more inputs and one or more outputs, which can be of any amount, ranging from fractions of a bitcoin to multiple whole bitcoin:
* **Input(s):** An input in a bitcoin transaction references a previous unspent transaction output (UTXO) and is used to fund the new transaction. It includes the previous transaction’s ID, the specific output being spent, and a signature to prove ownership.
* **Output(s):** An output in a bitcoin transaction specifies the recipient of the bitcoin and the amount to be transferred, which can be an address controlled by the sender.

When a UTXO is spent as an input, it’s destroyed, and one or more UTXOs are created as the output. The one exception to this input-output system is the first transaction in each block, called the “coinbase.” The coinbase transaction has no input since it is newly issued bitcoin entering circulation as a reward to the miner, according to the strict [supply schedule](/learn/what-is-the-bitcoin-supply-schedule).

You can look at any given block on the [blockchain](https://mempool.space) for yourself and find the assorted transactions, each with one or more inputs and outputs, alongside the inputless coinbase. The network of nodes running Bitcoin’s software maintains a record of all UTXOs, known as the “UTXO set,” which represents all valid coins in the system. 

## Comparison with the account model
This UTXO model is different from the “Account model” used by banks. In the Account model, balances are tracked as single figures that are adjusted with each transaction, while the UTXO model treats each transaction output as a discrete, spendable unit.
* **Account model:** Balances are updated by debiting and crediting accounts, similar to how banks manage cash balances. When you deposit or withdraw any amount, your balance will adjust accordingly.
* **UTXO model:** Each transaction output is like a separate piece of physical cash (paper notes and metal coins). When you make a payment, you must select specific notes or coins to use. As part of the transaction, you might receive change in return, which are new notes or coins in your wallet.

A key difference to this physical cash analogy is that the recipient of a bitcoin payment receives it as a unified UTXO, not as an assortment that matches the inputs. Overall, what this means is that your bitcoin holdings are simply a collection of outputs from previous transactions that you haven’t yet spent, hence “Unspent Transaction Outputs” or UTXOs.

## Understanding UTXOs and fees
When you make a transaction on the Bitcoin blockchain, you need to pay a [transaction fee](/learn/what-are-bitcoin-fees) (aka on-chain fee) to get it added to a block and be “confirmed.” Transaction fees are paid to the [miner](/learn/what-is-bitcoin-mining) who adds the block and offers an incentive to get transactions confirmed sooner.

In any given transaction, the fee amount is simply the difference in amounts between the inputs and outputs. If the total amount of the inputs is 1 bitcoin, and the total amount of the outputs is 0.99 bitcoin, then the fee payable to the miner is 0.01 bitcoin.

Bitcoin blocks have a limited amount of space and are only added on average every 10 minutes. This ensures the entire blockchain remains small enough to be downloaded and verified on an average laptop computer, helping Bitcoin stay decentralized by keeping participation open to all. Fees are therefore based on the *amount of data* a transaction requires, rather than its *financial value*. Transactions that occupy more bytes of data, such as those with many inputs and outputs, pay more in fees, since they’re using more of the scarce resource of block space. 

![](https://www.datocms-assets.com/99305/1702407727-learn-how-to-buy-bitcoin-state-title.png)

## Fees and UTXO sizes
Fees are measured in [satoshis](/learn/what-are-satoshis/) per virtual byte (aka “sats/vbyte”). Since the market for fees is free and open, anyone can include any amount of fee for their transaction, and miners can select which transactions to include in a block. Fees can be competitively bid up, especially during periods of high network traffic. Higher fees means it’s more expensive to have your transaction added to the blockchain, even for transactions with a single input and output, since each input and output incur a cost based on the bytes of data they require.

This becomes a problem for low-value UTXOs. 

When fees are high, using a low-value UTXO as an input can become uneconomical, since the fee cost to include that UTXO could be a significant percentage of its value – as in you might end up spending half of the UTXO’s value just on fees. What’s more, if the cost of including a specific UTXO as an input surpasses its value, it effectively becomes unspendable. Such low-value UTXOs, which cost more in fees to spend than they’re worth, are often referred to as “dust” – they’re lost.

For example, a [single input](https://bitcoinops.org/en/tools/calc-size/) could require between 57.5 vbytes for a Taproot transaction to 148 vbytes for standard P2PKH transaction (or more for complex transactions like multi-sig), so if fee rates were to reach [200 sats/vbyte](https://mempool.space/graphs/mining/block-fee-rates#1y), the following UTXO sizes or smaller would become unspendable, depending on the transaction type:
* 57.5 vbytes * 200 sats/vbyte = 11,500 satoshis UTXO 
* 148 vbytes * 200 sats/vbyte = 29,600 satoshis UTXO

What this means is that as fees rise, smaller UTXOs can become uneconomical or even unspendable. UTXOs worth thouands, tens of thouands, or even low hundreds of thouands of sats might cost a third, half, or even their entire value in fees to add to the blockchain. In the long term, fees are expected to rise with increased Bitcoin adoption, as more individuals, businesses, apps, and even governments begin to transact on-chain. When self-custodying your bitcoin, you need to plan accordingly to manage your UTXOs effectively.

## How to manage your UTXOs
Using an app like [Strike](https://strike.me/download) to custody your bitcoin is a way to delegate UTXO management, including the selection of inputs and the setting of fee rates to process your transactions economically. With Strike, you can buy as little as $0.01 of bitcoin either as a one-time purchase or through dollar cost averaging (DCA) via recurring purchase, without affecting UTXOs, since the purchases aren't recorded on the blockchain. However, when you make an on-chain transaction, like sending bitcoin to your own custody, you'll need to manage your UTXOs, as your bitcoin purchases on Strike will be combined into a single UTXO sent to your chosen Bitcoin address.

When you’re ready to take self-custody of your bitcoin, managing your UTXOs becomes crucial and requires that you consider a number of factors, suchas fee rates, privacy, and the economic viability of your future transactions. 

Below are some UTXO management best practices to follow: 
* **Not too small:** Keep your UTXO’s at least around 1 million satoshis (0.01 bitcoin), to ensure they remain economically viable, even as fees rise. UTXOs as low as 10,000’s or even 100,000’s satoshis may become uneconomical or unspendable in high-fee environments.
* **Not too big:** Avoid having all your bitcoin in a single large UTXO. Using a large UTXO as an input in a future transaction can reveal your holdings to your recipient, as they can see which UTXO was used as an input and where the change was sent, potentially affecting your privacy.
* **Diversify your UTXO sizes:** If possible, maintain a mix of UTXO sizes, to give yourself options when selecting appropriately sized inputs for future transactions. 
* **Segregate UTXOs:** Keep UTXOs from different sources separate, including any non-kyc sources, to maintain privacy and prevent traceability by transaction recipients.
* **Time your sends:** Monitor [fee rates](https://mempool.space/graphs/mining/block-fee-rates#1y) and aim to send transactions when fees are relatively low, but avoid waiting too long as your desired fee rate may not materialize.
* **Avoid reusing addresses:** To promote privacy and avoid traceability by your recipients, use a new Bitcoin address each time you transact on-chain.
* **Consolidate when fees are low:** Use periods of low fees to combine smaller UTXOs as inputs into larger outputs to ensure future economic viability.
* **Be wary of fee spikes:** Sudden increases in fees may be temporary and could subside within hours or days. For non-urgent transactions, waiting might be wise, though long-term fees are expected to rise with increased Bitcoin adoption.
* **Use Lightning:** For small transactions, use the [Lightning Network](/learn/what-is-the-lightning-network). Lightning enables real bitcoin transactions, without recording each one on the blockchain, avoiding on-chain fees and wait times. Transactions on Lightning are instant and low-to-no cost, allowing you to send even single satoshis to friends or your own Lightning wallet.

For a more in-depth explanation of UTXO management and best practices, read [this article](https://strike.me/learn/how-to-manage-utxos/).

By carefully managing your UTXOs, you can optimize your transaction costs, maintain privacy, and ensure you’re able to spend your bitcoin in the future the way you want, regardless of future fee market conditions. 

Unspent transaction outputs are discrete portions of bitcoin

What is a UTXO?

Make your move into bitcoin.

Learn

The Bitcoin supply schedule is the preprogrammed pace at which bitcoin are issued into circulation.

This schedule began at zero when Bitcoin was launched on January 3rd, 2009 and is steadily progressing towards the terminal supply limit of 21 million bitcoin in the year 2140.

![](https://www.datocms-assets.com/99305/1710202382-learn-what-is-the-bitcoin-supply-schedule-state-hero.png)

When Bitcoin was launched as peer-to-peer electronic cash, there needed to be a way to distribute the bitcoin into circulation. The solution to this challenge was to pair bitcoin distribution with the processing of transactions, in a system commonly called “Bitcoin mining”. 

Mining is the process whereby computers compete in successive lottery-style competitions to win the rights to add the next block of transactions to Bitcoin’s blockchain and get paid a bitcoin reward for doing so. That bitcoin reward comes in two parts:
* **Block subsidy:** The amount of newly issued bitcoin entering circulation 
* **Transaction fees:** The bitcoin fees paid by individuals to get their transaction added to the blockchain more quickly

The block subsidy is how bitcoin enters circulation.

The subsidy amount and all other [supply-related rules](https://strike.me/learn/how-does-bitcoin-work) are encoded in the Bitcoin software. The basics of these rules are as follows:
* **Start at 50:** At launch, the block subsidy was set at 50 bitcoin per block.
* **Halvings:** Every 210,000 blocks, the block subsidy is automatically reduced by half – an event known as a “[halving](https://strike.me/learn/what-is-the-bitcoin-halving).”
* **10-minute blocks:** The Bitcoin software targets a 10-minute block time.
* **Divisibility limit:** Each bitcoin can be subdivided into 100 million sub-units called “[satoshis](https://strike.me/learn/what-are-satoshis/)” (₿0.00000001), which are indivisible. 

The result of the supply rules is a type of schedule, which sets the quantity and timing of bitcoin’s supply issuance – the “supply schedule.”

## How is Bitcoin’s supply schedule calculated?
Bitcoin’s supply schedule isn’t based on time, but rather on blocks. 

The Bitcoin software targets block times of 10 minutes. When more computational power is deployed by miners, blocks can occur faster than 10 minutes, since more computation means increased likelihood of winning the “lottery-style” competition. To compensate, the Bitcoin software automatically re-adjusts the difficulty of mining every 2,016 blocks (called the “difficulty adjustment”) to maintain an average block time of about 10 minutes.

This means the timing of future blocks are projections, which depends on how much or little computational power is deployed by miners over time. Therefore, Bitcoin’s supply schedule doesn’t exist as a calendar with dates set in stone, but as a set of rules that take into account certain variables.

The calculation of the supply can be expressed in terms of a mathematical equation:

![](https://www.datocms-assets.com/99305/1713370060-bitcoin-supply-equation-t2.png)

Let’s break this equation down into simple terms:
* ∑: This is the symbol for a summation equation
* i: The current halving cycle of Bitcoin
* 0: The initial cycle is set at zero
* 32: The number of cycle repetitions
* 210,000: The number of blocks during each cycle, or "epoch"
* 50: The maximum allowable block subsidy for the first epoch
* /2: The halving, whereby the block subsidy is reduced by half

In this formula every 210,000 blocks the cycle (“i”) increments by one, meaning the 1st epoch's maximum block subsidy is set at 50/20 (50), the 2nd is 50/21 (25), the 3rd is 50/22 (12.5), and so on. There are 33 total halving cycles, since the initial cycle starts at 0 and repeats 32 times.

## When do Bitcoin halvings occur? 
The exact dates of future halvings are projections, since they are based on blocks rather than time and blocks can occur slightly faster or slower than 10 minutes, depending on mining activity. Bitcoin’s supply schedule can be shown in table format. 

| **Year** | **Epoch** | **Halving** | **Block** | **Block subsidy** | **Supply at epoch’s end** |
|------|-------|---------|---------|----------------|--------------------------------|
| 2009 | 1 | 0 | 0 | ₿50 | ₿10500000 |
| 2012 | 2 | 1 | 210000 | ₿25 | ₿15750000 |
| 2016 | 3 | 2 | 420000 | ₿12.5 | ₿18375000 |
| 2020 | 4 | 3 | 630000 | ₿6.25 | ₿19687500 |
| 2024 | 5 | 4 | 840000 | ₿3.125 | ₿20343750 |
| 2028 | 6 | 5 | 1050000 | ₿1.5625 | ₿20671875 |
| 2032 | 7 | 6 | 1260000 | ₿0.78125 | ₿20835937.5 |
| 2036 | 8 | 7 | 1470000 | ₿0.390625 | ₿20917968.75 |
| 2040 | 9 | 8 | 1680000 | ₿0.1953125 | ₿20958984.375 |
| 2044 | 10 | 9 | 1890000 | ₿0.09765625 | ₿20979492.1875 |
| 2048 | 11 | 10 | 2100000 | ₿0.04882812 | ₿20989746.0927 |
| 2052 | 12 | 11 | 2310000 | ₿0.02441406 | ₿20994873.0453 |
| 2056 | 13 | 12 | 2520000 | ₿0.01220703 | ₿20997436.5216 |
| 2060 | 14 | 13 | 2730000 | ₿0.00610351 | ₿20998718.2587 |
| 2064 | 15 | 14 | 2940000 | ₿0.00305175 | ₿20999359.1262 |
| 2068 | 16 | 15 | 3150000 | ₿0.00152587 | ₿20999679.5589 |
| 2072 | 17 | 16 | 3360000 | ₿0.00076293 | ₿20999839.7742 |
| 2076 | 18 | 17 | 3570000 | ₿0.00038146 | ₿20999919.8808 |
| 2080 | 19 | 18 | 3780000 | ₿0.00019073 | ₿20999959.9341 |
| 2084 | 20 | 19 | 3990000 | ₿0.00009536 | ₿20999979.9597 |
| 2088 | 21 | 20 | 4200000 | ₿0.00004768 | ₿20999989.9725 |
| 2092 | 22 | 21 | 4410000 | ₿0.00002384 | ₿20999994.9789 |
| 2096 | 23 | 22 | 4620000 | ₿0.00001192 | ₿20999997.4821 |
| 2100 | 24 | 23 | 4830000 | ₿0.00000596 | ₿20999998.7337 |
| 2104 | 25 | 24 | 5040000 | ₿0.00000298 | ₿20999999.3595 |
| 2108 | 26 | 25 | 5250000 | ₿0.00000149 | ₿20999999.6724 |
| 2112 | 27 | 26 | 5460000 | ₿0.00000074 | ₿20999999.8278 |
| 2116 | 28 | 27 | 5670000 | ₿0.00000037 | ₿20999999.9055 |
| 2120 | 29 | 28 | 5880000 | ₿0.00000018 | ₿20999999.9433 |
| 2124 | 30 | 29 | 6090000 | ₿0.00000009 | ₿20999999.9622 |
| 2128 | 31 | 30 | 6300000 | ₿0.00000004 | ₿20999999.9706 |
| 2132 | 32 | 31 | 6510000 | ₿0.00000002 | ₿20999999.9748 |
| 2136 | 33 | 32 | 6720000 | ₿0.00000001 | ₿20999999.9769 |
| 2140 | 34 | 33 | 6930000 | ₿0 | ₿20999999.9769 |

Some notes on the supply schedule:
* In the 1st epoch, 50% of all bitcoin were issued when the block subsidy was 50/block. Similarly, in the 2nd epoch, 25% of bitcoin were issued when the block subsidy was 25/block, and so on.
* The final “halving” that occurs in the year 2140 is actually a 100% reduction in the block subsidy, and will be the start of the final epoch, which lasts indefinitely. Bitcoin miners will henceforth be incentivized exclusively through transaction fees.
* Each halving reduces the block subsidy by exactly half up until the 10th halving, when it becomes impossible to do so, since the preceding subsidy is an odd number and satoshis are the indivisible amount of Bitcoin. As a result, the 10th halving reduces the block subsidy by 50.00000512%. In technical terms, this is due to Bitcoin using a bitwise shift operator.
* There are 10 halvings where the subsidy is reduced by slightly more than 50%: the 10th, 13th, 14th, 15th, 16th, 17th, 19th, 26th, 28th, and 30th.
* Due to certain halvings reducing the subsidy by more than 50%, the [terminal bitcoin supply](https://strike.me/learn/how-many-bitcoin-are-there/) is actually 20,999,999.9769, which most people simply refer to as 21 million.

The pre-programmed pace from zero to 21 million

What is the bitcoin supply schedule?

## Peer-to-peer electronic cash
Bitcoin was announced on October 31st, 2008 with a document, known as the [Bitcoin Whitepaper](https://strike.me/bitcoin.pdf), written by a pseudonymous creator by the name of Satoshi Nakamoto.

![](https://www.datocms-assets.com/99305/1702580918-what-is-bitcoin-01.png)

The document’s headline reads: “Bitcoin: A Peer-to-Peer Electronic Cash System”

… So what does that mean?

Physical cash (paper money and metal coins) is peer-to-peer cash. When you pay someone $10 of *physical* cash, that transaction is peer-to-peer – as in the money is handed from one person to another without anybody in between. It’s direct, instant, and final.

*Electronic* cash, on the other hand, isn’t peer-to-peer. 

Electronic cash always involves one or more 3rd-parties (banks or financial institutions) to hold or transact. When you pay someone $10 with *electronic* cash, you need a bank to hold the cash in the first place and to actually make the payment go through. It’s not direct, and payments usually sit in “pending” status for hours or days.

People themselves can’t hold or transact their own cash electronically without a bank involved. Banks are like the mandatory middlemen for everything involving electronic cash… that is, until Bitcoin.

Bitcoin is a radical change for how money can work. It’s an electronic cash that can be held by you, and transacted peer-to-peer, without involving a bank. 

## A decentralized ledger
So how does Bitcoin work?

Let’s first compare it to the cash in your bank account. Your bank cash balance doesn’t actually exist as a bag of paper money in a vault with your name printed on it. Your cash balance is just digits on the bank’s own centralized, private ledger – the financial record of balances or transactions.

As an electronic cash, bitcoin (lowercase “b” for the asset) also exists as digits on a ledger, except that the Bitcoin ledger is different. 

The Bitcoin ledger is *decentralized* – as in no central authority owns it or manages it. The Bitcoin ledger is a public record of all transactions, which is independently held and maintained by all participants in the network (called nodes). Anyone, anywhere can download their own copy of the ledger’s transaction history and actively check the transactions themselves.

A decentralized ledger is how you make transactions peer-to-peer.

But how do you get a network of independent participants to all agree on the correct, most up-to-date version of the ledger? How can bitcoin transactions be recorded on all copies of the ledger?

The answer is a process called “Bitcoin mining”. Essentially, mining is a way to award the rights to update the Bitcoin ledger in a fair, public, and transparent way. 

Mining is kinda like a public lottery system, where any computer (called a miner) can participate in the lottery by doing computational work, known as “hashing”. The more computational power you deploy towards hashing, the more likely you’ll be to win the rights to update the ledger (and get paid a reward for doing so). The rewards for winning this lottery are paid in bitcoin, which is how bitcoin are issued. 

When a miner wins the lottery, it broadcasts proof of its win to the network, along with a set of node-approved transaction updates for the ledger (known as a “block”). The nodes check that the lottery was legitimately won and the transactions are valid, then they update their copy of the ledger to include the new block of transactions. A piece of that new block forms the basis of the next round of the lottery, and the process repeats in a never-ending “chain” of blocks… hence “blockchain”. 

This system of a decentralized ledger and mining is designed so that a global network of ledgers can all be on the same page, without having any central authority. 

![](https://www.datocms-assets.com/99305/1702580928-what-is-bitcoin-03.png)

## Rules, not rulers
The Bitcoin software, including its decentralized ledger, is open and free to download. When you download and run the Bitcoin software, your computer acts as a node in the Bitcoin network. Your node not only checks all the previous transactions, it actively participates in the enforcement of [Bitcoin’s rules](https://strike.me/learn/how-does-bitcoin-work/).

These rules, known as a “protocol” in computer terms, govern how bitcoin are mined, sent, received, and secured. A couple of the most notable rules are those governing Bitcoin's supply and the authorization of transactions:

* **Bitcoin's supply:** Bitcoin has a [supply schedule](https://strike.me/learn/what-is-the-bitcoin-supply-schedule/) – the steadily diminishing pace at which new bitcoin are issued as a reward for mining a block. This ever-diminishing supply issuance schedule leads to a total terminal supply of 21 million bitcoin. 
* **Authorization of transactions:** Only the holder of the private keys can authorize the spending of the associated bitcoin. Private keys are used to digitally “sign” a transaction, kinda like how your signature is needed on a paper check to authorize a payment from your checking account. This means that holding your own private keys is how you hold your own bitcoin, as it’s the only way to spend your bitcoin.

All participants running the Bitcoin software (nodes) are actively enforcing its rules.
* Was the mining lottery legitimately won?
* Are all the transactions signed by the holder of private keys?
* Do all the transaction amounts comply with the supply schedule?

If any block or transaction doesn’t follow the rules, it’s rejected. The countless nodes, each independently running the Bitcoin software, are enforcing the rules 24/7/365, making Bitcoin work.

It’s a rules-based money system, where the supply of money or the authority to transact isn’t decided by central bank committees, bankers, or politicians.

It’s money you can hold, spend, send, save, and receive… electronically.

Bitcoin is peer-to-peer electronic cash. 

The definitive peer-to-peer electronic cash system… plus so much more

What is Bitcoin?

## Satoshis are subunits
A satoshi (aka a “sat”) is a subunit of bitcoin. 1 satoshi is equal to 0.00000001 bitcoin (one-hundred-millionth of a bitcoin).

It’s kinda like how $1 US dollar can be divided into 100 pennies, except that with bitcoin it can be divided into 100 million satoshis. One bitcoin or 100 million sats, same thing. 

![](https://www.datocms-assets.com/99305/1704930872-learn-what-is-a-satoshi-state-hero.png)

What this means is that when you buy bitcoin, you don’t have to buy an entire bitcoin (100 million sats), you can just buy a fraction of bitcoin. As the price of bitcoin continues to rise, it’s become much more common for people’s first bitcoin purchase to be just a small fraction of a bitcoin. The [Strike app](http://strike.me/download) lets you buy as little as $0.01 worth of bitcoin, enabling you to get into bitcoin in an amount that best suits your budget.

Satoshis are named in honor of Bitcoin’s pseudonymous creator: Satoshi Nakamoto. For convenience, people often use whole bitcoin units when referring to amounts greater than one bitcoin, and use satoshis (or sats) when referring to amounts much less than one bitcoin.

Satoshis are the smallest possible unit that can be denominated on the Bitcoin blockchain, according to Bitcoin’s rules. This means you can’t create a transaction in an amount less than one satoshi, making satoshis the indivisible unit of bitcoin.

## A whole bitcoin or a piece of a bitcoin
The difference between a whole bitcoin and a part of a bitcoin is just a matter of scale. You can buy fractions of a Bitcoin (satoshis), a whole bitcoin (100 million satoshis) or multiple bitcoin (100’s of millions of satoshis). The idea of owning a whole bitcoin is really only a psychological threshold. A “wholecoiner” is someone who owns at least 1 bitcoin, but that’s just an arbitrary milestone, just like 100,000 sats, 1 million sats, or 10 million sats. 

When buying, you can denominate in bitcoin terms, such as buying ₿0.001 bitcoin (aka 100,000 sats), or in cash terms, such as buying $100 USD worth of bitcoin. 

The total possible supply of bitcoin is [21 million](http://strike.me/learn/how-many-bitcoin-are-there) (₿21,000,000), as defined in the Bitcoin software. 21 million bitcoin is the same as saying 2.1 quadrillion satoshis (2,100,000,000,000,000).

![](https://www.datocms-assets.com/99305/1705011649-learn-what-are-satoshis-support.png)

## What are millisatoshis?
Millisatoshis (aka millisats) are equal to 1/1000th of a satoshi (or a one-hundred-billionth of a bitcoin), and can be used to denominate transactions outside the Bitcoin blockchain, such as on the [Lightning Network](http://strike.me/learn/what-is-the-lightning-network).

In the Lightning Network’s “off-chain” payment channels, transactions can be denominated in amounts as small as a millisatoshi, however, since the smallest amount that can exist on the Bitcoin blockchain is 1 satoshi, any sub-satoshi amount can never be settled on-chain. This means millisatoshis don’t exist as a real amount of bitcoin (an amount transactable on the Bitcoin blockchain), only as a tool for expressing micro amounts off-chain.

It’s kinda like how you could have a dollar-denominated contract for sub-penny amounts, such as a professional writer who earns $0.0955 per word. The writer can track her ongoing earnings, but when it comes to actually being paid, the amount will need to be rounded to a whole penny for the payment to be realized. 

Subdividing bitcoin off-chain, such as millisats on Lightning, doesn’t increase the Bitcoin supply, it just takes the existing supply and denominates it in smaller units. It’s like how slicing a pizza into ever-thinner slices doesn’t create more pizza, it just takes the pizza you already have and cuts into tinier portions. 

For global commerce, satoshis are likely a small enough denomination for pretty much all basic payment purposes. 

TLDR; “stack sats” means “accumulate bitcoin”.


1 satoshi equals ₿0.00000001 

What are satoshis (sats)?

## The supply schedule
Bitcoin has a predetermined supply limit. This limit is encoded in the Bitcoin software and comes in the form of a [supply schedule](https://strike.me/learn/what-is-the-bitcoin-supply-schedule/)  – a preprogrammed pace at which new bitcoin are issued into circulation.

![](https://www.datocms-assets.com/99305/1704930806-learn-how-many-bitcoin-are-there-state-hero.png)

This supply schedule is public, transparent, and implemented by every participant in the Bitcoin Network. A few important notes about Bitcoin’s supply schedule:

1. **Starting at zero:** Bitcoin officially started on January 3rd, 2009, with a supply of zero bitcoin.
2. **Issuance with each block:** Bitcoin are issued into circulation through the process of [mining](https://strike.me/learn/what-is-bitcoin-mining/), where computers perform computational work and are rewarded with newly issued bitcoin.
3. **Diminishing pace:** The schedule states that after every 210,000 blocks, the rate of new bitcoin per block automatically diminishes by half (called a “[halving](https://strike.me/learn/what-is-the-bitcoin-halving/)”)
4. **Terminal supply:** The terminal supply of 21 million bitcoin will be reached in the year 2140.
5. **Circulating supply:** So far, more than 19.5 million bitcoin have already been issued.

What this means is Bitcoin has a terminal supply and a circulating supply. The terminal supply is the total possible amount of bitcoin according to the supply schedule encoded in Bitcoin’s software. The circulating supply is the amount of bitcoin that has so far entered into circulation. For the most up to date numbers on current circulating supply, check out this [dashboard](https://bitcoin.clarkmoody.com/dashboard/).

Given Bitcoin’s strict and unchanging supply schedule, the amount of 21 million is often cited as the supply of Bitcoin.

![](https://www.datocms-assets.com/99305/1705011643-learn-how-many-bitcoin-are-there-support.png)


## Where do bitcoin come from?
Bitcoin are issued through [mining](https://strike.me/learn/what-is-bitcoin-mining/). Mining is the process whereby computers (called miners) perform computational work in an effort to add the next block of transactions to the Bitcoin blockchain.

The basics of Bitcoin mining works:
1. Bitcoin transactions are broadcast to the network of computers running the Bitcoin software (called nodes).
2. Each node checks the validity of each transaction to ensure it follows Bitcoin’s [rules](https://strike.me/learn/how-does-bitcoin-work/), including following the supply schedule.
3. Miners collect valid transactions into groups, known as “blocks.”
4. Miners perform specific computational work in a lottery-style competition to win the right to add the next block of transactions.
5. When a miner “wins the lottery,” they broadcast their new block of transactions to the network, which includes a “block reward” consisting of both [transaction fees](https://strike.me/learn/what-are-bitcoin-fees/) and a “block subsidy” of newly issued bitcoin payable to themselves.
6. All nodes check that the block is valid, then they add that block to their own copy of the blockchain and the process repeats.

The block subsidy is an amount of bitcoin that doesn’t come from another person – it’s newly issued bitcoin entering circulation. The [supply schedule](https://strike.me/learn/what-is-the-bitcoin-supply-schedule/) determines what amount the block subsidy can be for the given block. According to the schedule, the subsidy begins at 50 bitcoin per block and automatically decreases by half every 210,000 blocks (called a "[halving](https://strike.me/learn/what-is-the-bitcoin-halving/)") until it reaches zero and no more bitcoin will be issued.

Every node running the Bitcoin software is actively enforcing the supply schedule. Any transaction that violates the schedule, including miners granting themselves excess block subsidies or people trying to spend amounts of bitcoin they don’t have, is easily detected and rejected by each and every node.

It’s like having a global team of auditors meticulously, independently, and automatically checking every single transaction to make sure no one’s cheating.

The supply schedule is also immutable. The only possible way to change the schedule would be to create a new version of Bitcoin’s software and convince node operators to download and run that new version. Since Bitcoin’s fixed and scarce supply limit is fundamental to its value, every node is therefore incentivized to stick to the schedule and enforce Bitcoin’s scarce supply.

![](https://www.datocms-assets.com/99305/1705011637-learn-where-do-bitcoin-come-from-support.png)

## Details about Bitcoin’s supply
Bitcoin’s supply limit is 21 million.

From a high-level perspective, that’s close enough, but technically speaking it’s a tiny bit less than that. According to the supply schedule, the actual predetermined limit is 20,999,999.9769 bitcoin, or 0.0231 bitcoin shy of 21 million. Additionally, other factors and events in Bitcoin’s history will mean that the total possible supply of bitcoin will be even less. 

### Rounding down of block subsidies
Each bitcoin can be subdivided into [100 million satoshis](https://strike.me/learn/what-are-satoshis) (aka sats), which are the indivisible units on the Bitcoin blockchain. According to the supply schedule, Bitcoin will undergo its 10th halving in the year 2048, reducing the block subsidy of 0.09765625 bitcoin (aka 9,765,625 satoshis) by half. However, since 9,765,625 is an odd number and satoshis are indivisible, the new block subsidy will be 0.04882812 bitcoin, which is slightly less than half. Because of this policy of “rounding down”, the terminal supply ends up being 20,999,999.9769 bitcoin.

### Omitted bitcoin
The supply schedule sets the limit on how much the block subsidy can be, but not what it *must* be. There have been a number of instances in Bitcoin’s history where the block subsidy was either not paid in full or omitted altogether, such as [this block](https://mempool.space/block/0000000000000000004b27f9ee7ba33d6f048f684aaeb0eea4befd80f1701126) and [this block](https://mempool.space/block/0000000000000000002ba5a1fb96f93e6c215d62db4280f1cbd30e82c7c71fba). This is usually due to miner error and it means that some bitcoin simply weren’t issued into circulation on schedule.

### Lost bitcoin
Some bitcoin have been permanently lost. This can happen due to different reasons, including sending bitcoin to a wrong address, losing access to your private keys, or simply forgetting that you owned bitcoin.

These “lost” bitcoin are still technically in circulation, since they exist on the blockchain, it’s just that they’re permanently unspendable. Although it’s difficult to know exactly how many bitcoin are truly lost or simply being held by long-term holders, some estimates for lost bitcoin range up to a couple million bitcoin. 

### Genesis bitcoin
The [initial block](https://mempool.space/block/000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f) in Bitcoin’s history is commonly referred to as the “Genesis Block”, and it contains the single transaction of 50 bitcoin as the block subsidy. Due to the way Bitcoin is configured, those 50 bitcoin are not spendable, similar to lost coins.

The only assurance in the supply schedule is that 1 bitcoin will always be at least 1/21 millionth of the total possible supply. 

For convenience, simplicity, and discussion purposes, it’s often best to just say “21 million bitcoin” is the supply limit.

Bitcoin follows a strict supply schedule towards 21 million

How many bitcoin are there?

Every year on May 22nd, Bitcoin supporters around the world celebrate Bitcoin Pizza Day, a special tradition marking a significant event in the history of Bitcoin.

![](https://www.datocms-assets.com/99305/1715906715-learn-what-is-bitcoin-pizza-day-state-hero.png)

Bitcoin Pizza Day commemorates May 22nd, 2010, when a programmer named Laszlo Hanyecz made what is believed to be the first real-world commercial transaction using bitcoin. Laszlo posted on a [Bitcoin forum](https://bitcointalk.org/index.php?topic=137.msg1195) that he would pay 10,000 bitcoin for a couple of pizzas.

A fellow Bitcoin enthusiast from the UK took him up on the offer and ordered two large pizzas for him in exchange for the 10,000 bitcoin. At the time, 10,000 bitcoin was worth about $41 in trading markets.

Five years later, those bitcoin were worth ~$2.4 million, and five years after that they were worth ~$90 million. Nowadays, that amount of bitcoin is worth substantially more. Every year on May 22, the Bitcoin community celebrates this quirky and significant day, often by eating pizza.

Bitcoin Pizza Day has since evolved into a symbol of how far Bitcoin has come from its early days as a niche interest among cryptographers to a global financial asset. Each year, the day serves as a moment for Bitcoiners to reflect and celebrate the growth in Bitcoin's value and utility, and its potential for the future.

## A milestone in Bitcoin
Bitcoin Pizza Day represents a significant event in the history of Bitcoin.

Prior to this day, Bitcoin was primarily a digital asset that was transacted peer-to-peer, but carried no widely agreed-upon real-world value. People could mine bitcoin using their computers, which meant they viewed bitcoin as having more value than any costs they incurred, but there wasn’t any established real-world way to discover a true dollar price of bitcoin.

Bitcoin Pizza Day set off a new era in Bitcoin, and to this day serves as a milestone in different respects:
* **Price discovery:** By buying pizzas with bitcoin, a commercial price was set in a free market exchange of goods. It created a benchmark value from which all future valuations could follow.
* **Alternative network:** The transaction demonstrated Bitcoin’s use case to transfer value through a leaderless, electronic network. Laszlo mined bitcoin, then traded his bitcoin for pizza — an international commercial transaction that didn’t require a centralized 3rd-party financial institution (a bank).
* **Store of value:** Every year people reflect on how much Bitcoin has increased in value over its lifetime by comparing that original price point to today’s prices. This comparison  serves to highlight the value of a truly scarce digital asset and the benefits of hodling long-term.

To this day, people continue to use bitcoin for commercial transactions, including buying pizza. Many hold bitcoin as a form of savings to protect against government-induced inflation, but bitcoin has also seen substantial growth as a medium of exchange, particularly in the form of Bitcoin’s [Lightning Network](https://strike.me/learn/what-is-the-lightning-network). 

Whereas Laszlo bought pizza via a request on a forum and sending an on-chain transaction, the Lightning Network lets people seamlessly send and receive borderless payments instantly, directly, and at low-to-no cost. Through its rapidly expanding network of apps and wallets, Lightning makes real bitcoin payments that can move as seamlessly as you need. The Strike app is a fully functional Bitcoin and Lightning wallet, which lets people transact with either cash or bitcoin through the Lightning Network to any other Lightning-enabled wallet globally. 

By spending bitcoin in the same way that Laszlo did, Bitcoiners contribute to the growth of a community, support the development of a peer-to-peer economy, and exercise their freedom to choose their preferred money and network through which to transact.

Bitcoin Pizza Day isn’t just about remembering the purchase of two pizzas, but celebrating the incredible journey of Bitcoin from obscurity to a widely recognized and revolutionary digital form of money.

On May 22nd, if you’re looking to buy some pizza, search online for “Pizza shops that accept bitcoin,” and use your Strike app to make your purchase.

Happy Bitcoin Pizza Day!