What Is Bitcoin? A Beginner's Guide to How It Works, How to Buy, and Its Future [2026]

"What exactly is Bitcoin?" "The technology seems too complicated to understand." Do you have these kinds of questions or concerns?

In this article, we explain "Bitcoin," the world's first cryptocurrency, in plain language while avoiding technical jargon as much as possible. From how it works to how to buy it and its future prospects, this article will give you a solid understanding of the full picture of Bitcoin.

What you'll learn in this article

✅ What is Bitcoin? Why it's called the "first cryptocurrency"

✅ The basics of blockchain and mining

✅ How to buy Bitcoin step by step

✅ The differences between Bitcoin and Ethereum

✅ How halving works and its impact on price

✅ Bitcoin's future prospects and risks

There are many types of cryptocurrencies, but among them, Bitcoin holds a special place — it's no exaggeration to call it the "King of Crypto."

Bitcoin is the world's first successful "decentralized digital currency."

"Decentralized" means a system that can be managed cooperatively by all participants without a "central authority" like a specific country or bank. Bitcoin was developed based on a paper published in 2008 by a mysterious person (or group) known as "Satoshi Nakamoto," and it began operating in 2009.

Before Bitcoin, most digital money was managed by some company or organization. However, Bitcoin achieved a groundbreaking system where computers around the world connected via the internet cooperate to record and manage transactions and create new coins.

This revolutionary idea of "a monetary system anyone can participate in" continues to attract people worldwide.

"How are transactions recorded safely without a central authority?" Many people wonder about this. The answer lies in Bitcoin's core technology: blockchain.

👉 Learn more about blockchain here

Blockchain Is a "Digital Chain of Transactions"

Bitcoin transactions (such as who sent how much to whom) are recorded in data containers called "blocks." When a block is full, it is linked to the previous block with a chain, and a new block is prepared. Imagine an ever-growing series of blocks connected by chains.

Why Blockchain Is Secure

1. Tampering is extremely difficult It is virtually impossible to alter transactions once they are recorded on the blockchain. Computers around the world hold copies of the same records and constantly verify with each other: "Is this record correct?" Any attempt at fraud is immediately detected by the entire network.

2. High transparency Bitcoin transaction records are essentially viewable by anyone (though personal information of transacting parties is anonymized). This transparency deters fraud and supports the reliability of the entire network.

New Bitcoins are created through a process called "mining." It got this name because it resembles the process of mining gold from a mine.

Mining Is a "Computational Competition" to Verify Transactions

To correctly record Bitcoin transactions on the blockchain, extremely complex mathematical problems must be solved. Participants around the world called "miners" compete using high-performance computers to be the first to solve these problems.

The miner who first solves the problem and successfully writes the transaction records into a new block is rewarded with newly created Bitcoin. This is the mechanism by which new Bitcoin enters the market.

Through this mining mechanism, Bitcoin's network is maintained securely, and new coins are supplied steadily.

Bitcoin has an important event called the "halving." This is a mechanism where mining rewards are cut in half approximately every four years.

Halvings reduce the new supply, so if demand remains unchanged, they are considered a factor for price increases. Significant price increases have been observed after each past halving. However, there is no guarantee that past patterns will repeat in the future.

Bitcoin and Ethereum, the two leading cryptocurrencies, are often compared. Let's organize the key differences.

👉 Learn more about Ethereum here

Bitcoin specializes in storing value as "digital gold," while Ethereum has developed as an application platform for DeFi, NFTs, and more. Neither is inherently superior — they serve different roles.

Here are the basic steps to purchase Bitcoin.

Step 1: Open an account at a cryptocurrency exchange

Choose from major Japanese exchanges (such as bitFlyer, Coincheck, OKJ, etc.) and open an account. You will need identification documents (driver's license or My Number card).

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Don't miss this opportunity to participate!

Step 2: Deposit Japanese yen into your account

Deposit Japanese yen into your exchange account via bank transfer or convenience store payment.

Step 3: Purchase Bitcoin

Specify the amount you want to purchase on the exchange screen and buy Bitcoin. Many exchanges allow purchases starting from just a few hundred yen, so you can start small.

Step 4: Store safely in a wallet

You can keep your purchased Bitcoin on the exchange, but for safer management, we recommend transferring it to a wallet (a dedicated storage tool).

Important points for beginners:

• Private key and seed phrase management: If you lose your wallet's private key or seed phrase, you cannot recover your Bitcoin. Write them down on paper and store them in a safe place.
• Beware of scam sites: Be careful not to be deceived by fake exchange sites or phishing emails. Always verify the URL.
• Verify the sending address: If you send Bitcoin to the wrong address, recovery is virtually impossible. Always double-check the address before sending.
• Invest only with surplus funds: Due to high price volatility, never invest money you need for living expenses.

Benefits

1. Potential for asset value appreciation: Bitcoin has shown a long-term upward price trend over the past decade, attracting worldwide attention as an investment asset.
2. Direct peer-to-peer transfers: You can send money directly to anyone in the world via the internet without going through a bank. International transfers can sometimes be cheaper than traditional bank transfers.
3. Fixed supply cap: The total supply is fixed at approximately 21 million coins. Like gold, the limited supply makes it valued as an inflation-resistant asset.

Risks to Be Aware Of

• Price volatility risk: Significant price fluctuations can occur in short periods. When investing, use only surplus funds and practice diversification.
• Security risk: Managing your private keys and passwords is critically important. If they are lost or stolen, recovering your assets is extremely difficult.
• Regulatory risk: Regulations may change in various countries. In Japan, cryptocurrencies are regulated under the "Payment Services Act," and exchanges are required to register with the Financial Services Agency.
• Transfer error risk: If you send to the wrong address, recovery is virtually impossible. Always verify the address multiple times before sending.

Bitcoin continues to hold various possibilities for the future.

• Institutional investor adoption: Bitcoin spot ETFs were approved in the U.S. in 2024, accelerating institutional investor participation. This is expected to further enhance market credibility and liquidity.
• Establishing its status as digital gold: Like gold, more companies and municipalities are holding Bitcoin as an inflation hedge.
• Expansion as a payment method: Following El Salvador, more countries may adopt Bitcoin as legal tender.
• Technological evolution: Technologies like the Lightning Network are enabling faster and cheaper micropayments.

Of course, uncertainties exist, including changes in the regulatory environment and competition from other cryptocurrencies. However, there is no doubt that Bitcoin will remain a special presence among cryptocurrencies.

Can I buy Bitcoin in small amounts?

Yes, many domestic exchanges allow purchases starting from just a few hundred yen. You don't need to buy in units of 1 BTC — you can trade in small units like 0.0001 BTC. We recommend starting with a small amount to get familiar with how it works.

How are Bitcoin profits taxed?

In Japan, Bitcoin capital gains are classified as "miscellaneous income" and subject to comprehensive taxation. If your annual profit exceeds 200,000 yen, you must file a tax return. The tax rate can be up to 55% (including resident tax) depending on your income, so be sure to check the tax implications before realizing any gains.

Is Bitcoin at risk of being hacked?

There has never been an instance of Bitcoin's blockchain itself being hacked. However, exchanges and wallets have been hacked. To protect your assets, choose a trusted exchange and store large amounts in a hardware wallet.

What's the difference between Bitcoin and electronic money?

Bitcoin is a cryptocurrency managed on a decentralized network with no issuing entity. On the other hand, electronic money (such as Suica or PayPay) is issued and managed by companies and is linked to the Japanese yen. The key difference is that Bitcoin has its own value and its price fluctuates.

In this article, we've provided a comprehensive explanation of what Bitcoin is, from its basic mechanism to how to buy it and its future prospects.

Key takeaways:

• Bitcoin is the world's first decentralized digital currency, created by Satoshi Nakamoto in 2009.
• Transaction records are stored on the blockchain, a system where tampering is extremely difficult.
• New Bitcoins are created through mining, with the supply adjusted by halvings approximately every four years.
• The supply cap is fixed at approximately 21 million coins, valued as "digital gold."
• You can start buying at domestic exchanges for as little as a few hundred yen, but be fully aware of price volatility risks.

Now that you have a deeper understanding of Bitcoin, why not also learn about Ethereum and blockchain next?