Knowledge Base: Bitcoin Basics for Business Leaders (Glossary & FAQ)

You’ve likely heard the buzz about Bitcoin. But what exactly is it, and why should you care? In this page, we break down common Bitcoin terms and answer frequently asked questions. Whether you’re a CFO, financial advisor or just a curious corporate leader, consider this your Bitcoin 101 source. (This is not financial advice and is for informational purposes only)

Glossary of Key Bitcoin Terms

Bitcoin (BTC): Bitcoin is the first and most well-known cryptocurrency, a form of digital money that operates on a peer-to-peer network without any central authority. In practical terms, Bitcoin is like “cash for the Internet” – you can send it to anyone online, much like sending an email, without needing a bank. “Bitcoin” (with a capital B) also refers to the entire system or network, while “bitcoin” (lowercase b) refers to the currency unit itself. There will only ever be 21 million bitcoins created, which makes it a scarce digital asset (no one can print more out of thin air, unlike government money).
Blockchain: The blockchain is the innovative technology behind Bitcoin. It’s essentially a public ledger (a database) that records all Bitcoin transactions in chronological order. Each “block” of transactions is linked to the previous one, forming a chain – hence the name blockchain. This ledger is shared and maintained by computers around the world on the Bitcoin network, ensuring that no single entity controls it and transactions cannot be altered after they’re confirmed. You can think of it as an open and secure spreadsheet that everyone agrees on.
Cryptocurrency: A cryptocurrency is a type of digital or virtual currency that uses cryptography for security. Bitcoin was the first cryptocurrency, introduced in 2009, and it inspired thousands of other coins. The key idea is that cryptocurrencies are typically decentralized (no central bank controls them) and rely on blockchain technology to verify and record transactions. In the U.S., cryptocurrencies like Bitcoin are treated as digital assets (property) for tax purposes, not as legal tender, even though you can exchange them for dollars or use them for payments.
Decentralization: Decentralization means there is no central authority in charge. Bitcoin runs on a decentralized network of computers (nodes) worldwide – no single company, government, or person controls Bitcoin. This is similar to how no one “owns” the internet or email system. Changes to Bitcoin’s rules require broad agreement among participants, which protects it from any one party altering the system for their own benefit. Decentralization is a core strength of Bitcoin, making it censorship-resistant and resilient (the network can’t be easily shut down).
Wallet: A Bitcoin wallet is a software application or device that lets you store, send, and receive bitcoins. It’s called a wallet, but unlike a physical wallet holding paper money, a Bitcoin wallet actually holds your cryptographic keys (see below) that control your bitcoins. There are different types of wallets: mobile apps, hardware devices, even paper printouts of keys. With a wallet, you have one or more Bitcoin addresses (think of them like account numbers) that you can share to receive payments. Important: if you lose access to your wallet (and the backup of your keys), you lose access to your bitcoins – just like losing cash.
Private Key & Public Key: Bitcoin uses public-key cryptography. A public key is like your bank account number – it’s used to generate your Bitcoin addresses that you can share with others to receive funds. A private key is like the secret PIN or password that lets you spend the bitcoins associated with those addresses. The private key must be kept secret – anyone with your private key can access your funds. Wallets manage these keys for you. Often, wallets provide a “seed phrase” (12–24 random words) as a backup; this seed is basically a human-readable form of your private key data – keep it safe!
Bitcoin Mining: Mining is the process that secures the Bitcoin network and mints new bitcoins. In simplified terms, mining involves specialized computers competing to solve a difficult mathematical puzzle. Whichever miner solves the puzzle first earns the right to add the next block of transactions to the blockchain, and is rewarded with newly created bitcoins plus transaction fees. Mining is competitive and energy-intensive by design – the work done by miners (known as Proof of Work) is what makes Bitcoin’s ledger trustworthy and tamper-resistant.
Confirmation: When you send a Bitcoin transaction, it doesn’t finalize immediately – it needs to be included in a block by miners. A confirmation means your transaction has been processed and added to the blockchain. Each additional block that comes after adds another confirmation. Typically, six confirmations (about an hour on Bitcoin’s network) are considered very safe for larger transactions, whereas one confirmation may suffice for smaller ones. Until a transaction is confirmed, it’s considered unfinalized and could theoretically be replaced (though this is rare for legitimate transactions).
Lightning Network: The Lightning Network is a secondary layer built on top of Bitcoin to enable faster and cheaper transactions. It allows users to create payment channels and transact off-chain (outside the main blockchain) with near-instant settlement, and only later settle back to the blockchain. For example, two businesses can transact back and forth on Lightning and only record the net result on the Bitcoin blockchain. This helps Bitcoin scale to handle many more transactions per second and with minimal fees, which is useful for small or everyday payments (think buying a coffee with Bitcoin without paying high fees or waiting 10 minutes). Lightning is an evolving technology, but it’s gaining adoption and can be especially interesting for business use-cases like instant payments.

Frequently Asked Questions about Bitcoin

What is Bitcoin in simple terms?

Bitcoin is basically digital money for the internet. It allows people to securely send value to each other online without needing a bank or payment company in the middle. Think of it as a peer-to-peer version of cash: when you pay someone in cash, no bank is involved – Bitcoin enables the same idea over the internet. It’s powered by its users and protected by math and code instead of governments or banks.

Bitcoin was created in 2009 by a person (or team) using the pseudonym Satoshi Nakamoto. Satoshi’s goal was to invent a new electronic cash system that’s fully decentralized – meaning no single party can control it. Since its launch, Bitcoin has grown into a global network that millions of people use. In summary, Bitcoin is a decentralized, borderless, digital currency – often compared to “digital gold” because it is scarce (only 21 million coins) and is seen by many as a store of value.

How does Bitcoin work?

At a high level, Bitcoin works through a combination of networked computers, cryptography, and a public ledger (blockchain).

Here’s the non-technical rundown:

Every time someone sends Bitcoin, that transaction is broadcast to the network and grouped with others into a “block.”
Miners then compete to add this block to the blockchain (the public ledger of all transactions) by solving a cryptographic puzzle.
Once a block is added, those transactions are considered confirmed and final.

The blockchain ensures that everyone’s copy of the transaction history stays in sync and that bitcoins can’t be spent twice (no double-spending).

From a user’s perspective, using Bitcoin can be as simple as using a mobile app: you have a wallet app that shows your balance and lets you send or receive Bitcoin with a few taps, using addresses or QR codes. The complex stuff (network consensus, cryptographic verification, etc.) happens under the hood.

In short: Bitcoin is run by a network of users and miners, and it uses the blockchain to keep track of who owns what, without needing any central database.

Who controls the Bitcoin network?

No one company or government controls Bitcoin – and that’s a feature, not a bug. Bitcoin is open-source software and the network is maintained by a community of users, miners, and developers all over the world. There is no CEO of Bitcoin, and no central authority can issue more coins or change the rules on a whim.

Changes to the Bitcoin protocol (the underlying rules) are proposed and discussed openly in the community, and only get adopted if a majority of the network agrees. This decentralized design makes Bitcoin resistant to control or censorship. Even if some miners or nodes go offline, the network keeps running.

For business leaders, this decentralized nature means Bitcoin’s policies (like its supply limit or transaction rules) are predictable and not subject to the decisions of any one organization.

Why do bitcoins have value?

Bitcoin’s value comes from a combination of utility, scarcity, and trust.

People value Bitcoin for many of the same reasons they value gold or fiat money (like the U.S. dollar): it’s hard to counterfeit, divisible, durable, portable, and there’s a limited supply. Only 21 million bitcoins will ever exist, and this enforced scarcity makes Bitcoin somewhat analogous to a precious metal – there’s a finite amount, which helps it hold value in the long run.

But scarcity alone isn’t enough: Bitcoin also needs demand and trust. Over the years, trust in Bitcoin has grown as more people, businesses, and even institutional investors choose to hold or use it. The network’s track record (running non-stop since 2009) and open verification (anyone can audit the blockchain) give people confidence.

Bottom line: Bitcoin has value because people collectively believe it has value and are willing to exchange goods, services, or traditional currency for it. This belief is reinforced by Bitcoin’s useful properties (fast global transfers, protection against inflation due to fixed supply, etc.) and its growing adoption.

Is Bitcoin legal in the United States?

Yes. In the U.S., owning and using Bitcoin is legal. U.S. government agencies treat Bitcoin as a form of property or commodity. For example, the Internal Revenue Service (IRS) classifies Bitcoin and other digital assets as property, not currency, for tax purposes. This means if you sell Bitcoin for a profit, it may be subject to capital gains tax (similar to selling stocks or real estate).

Regulators like the Commodity Futures Trading Commission (CFTC) consider Bitcoin a commodity, and the Securities and Exchange Commission (SEC) has indicated Bitcoin is not a security (which is why it’s generally not regulated like a stock).

You can freely buy, hold, and sell bitcoins in the U.S. (through compliant exchanges and brokers) and many states have introduced regulatory frameworks for cryptocurrency businesses. Using Bitcoin for purchases is also allowed, though it’s treated as a sale of property in tax terms.

Is Bitcoin safe and secure?

Bitcoin is often described as very secure when used properly. The Bitcoin network has proven to be robust over the years – the core blockchain itself has never been hacked or compromised at a protocol level. Transactions are secured by strong cryptography and the decentralized network of miners, making it extremely difficult to counterfeit a bitcoin or spend one twice.

However, using Bitcoin safely does require some care. Think of it like managing cash or sensitive data: if you mishandle your private keys, your bitcoins could be stolen.

Most Bitcoin thefts or losses happen because of user error (losing a wallet backup, falling for phishing scams) or breaches of third-party services (like an exchange getting hacked). The good news is there are many best practices and solutions to enhance security, such as hardware wallets (secure USB-like devices), multi-signature wallets (which require multiple approvals to move funds), and simple habits like not sharing your private keys.

As for the network security: Bitcoin’s design (Proof of Work mining and widespread distribution of nodes) makes it extremely costly for any bad actor to try to disrupt it.

In plain terms: the math and technology behind Bitcoin are very strong, but you, as a user, should treat your Bitcoin credentials with care. When stored and managed correctly, Bitcoin lets you hold and transfer value with a high degree of security – often more control than you’d have with a traditional bank.

How are businesses and corporations using Bitcoin?

Businesses are increasingly taking note of Bitcoin in several ways:

Treasury Asset: Some companies have started to hold Bitcoin as part of their treasury reserves or balance sheet. A famous example is MicroStrategy, a U.S. publicly traded company that has adopted Bitcoin as a primary reserve asset, accumulating a significant amount of BTC as a strategic investment. Companies view Bitcoin as a hedge (against inflation or currency risk) and as an asset with high growth potential.
Accepting Bitcoin Payments: Some businesses, large and small, accept Bitcoin as payment for goods and services. Many small businesses use Bitcoin payment processors to accept Bitcoin from customers. Accepting Bitcoin can open doors to new customer segments, especially international customers, and can reduce fees (no chargebacks and potentially lower transaction costs). Typically, a business that accepts Bitcoin can choose to immediately convert it to USD, mitigating volatility while still offering the payment option.
Payroll and Compensation: A few companies have explored paying salaries or bonuses in Bitcoin (or offering it as part of retirement account options). This is not yet widespread, but reflects a trend of Bitcoin being seen as a legitimate store of value.
Financial Services and Products: Many financial institutions and fintech companies are offering Bitcoin-related services because of customer demand. This includes things like Bitcoin custody solutions, Bitcoin trading for clients, Bitcoin rewards programs, and Bitcoin-backed loans.

For any business leader, it’s wise to understand Bitcoin because it may impact treasury strategy, investment portfolios, competitive advantage (accepting new payment forms), or even industry disruption in finance.

How is Bitcoin different from other cryptocurrencies and “blockchain” projects?

You might have heard of Ethereum, Ripple, or hundreds of other coins, as well as generic talk of “blockchain technology” for businesses.

Here’s the key distinction: Bitcoin was the first successful cryptocurrency and remains the largest and most decentralized. Many other cryptocurrencies have emerged, but none have the combination of Bitcoin’s longevity, security, and truly leaderless structure.

Some alternative coins are controlled by a small group of founders or have a more experimental monetary policy. Bitcoin’s code and network, on the other hand, change very slowly and deliberately (if at all), which is a feature for something aiming to be sound money. This conservatism and broad distribution of participants give Bitcoin a unique position as a digital gold-standard in the crypto world.

“Blockchain” has become a buzzword, but a blockchain by itself isn’t a magic bullet – it’s one component (the ledger) of what Bitcoin accomplishes. Many private or enterprise blockchain projects don’t require a cryptocurrency at all, and often a simple database could suffice for those uses.

What makes Bitcoin’s blockchain special is that it’s coupled with the Proof-of-Work mechanism and an open network of incentives (miners, users, etc.) to create digital scarcity and censorship-resistant value transfer.

From an investment or corporate strategy perspective, Bitcoin is often viewed differently than other digital assets: more as a reserve asset or commodity, whereas many other crypto projects resemble venture-stage tech startups (with higher risk).

There’s also regulatory clarity with Bitcoin – regulators classify it more like a commodity, while many newer tokens face regulatory questions. In summary, Bitcoin stands out for its simplicity of purpose (sound money), strongest network effects, and unparalleled track record.

We hope this glossary and FAQ helped demystify Bitcoin for you. Bitcoin represents a new paradigm in money and finance – one that’s global, decentralized, and driven by its users.

For U.S. business leaders and professionals, understanding Bitcoin is increasingly important, whether you’re considering it for an investment, as a payment option, or just to stay informed about financial innovation.

If you’re interested in learning more or exploring a Bitcoin strategy for your organization, The Bitcoin Research Company is here to assist. We offer custom Bitcoin research, strategy consulting, and training programs tailored for corporate needs.

As the Bitcoin landscape evolves, our aim is to help you navigate it with confidence.