Bitcoin

The first cryptocurrency

Bitcoin launched in January 2009, created by a pseudonymous author known as Satoshi Nakamoto whose real identity has never been established. It was the first working answer to an old computer-science problem: how can strangers on the internet agree on who owns what, without a bank in the middle keeping the books? Bitcoin's answer was the blockchain, a public ledger copied across thousands of computers, and every cryptocurrency since is a descendant of that idea.

A fixed supply of 21 million

Bitcoin's defining economic feature is scarcity written into software: no more than 21 million coins will ever exist. New coins enter circulation on a fixed schedule as rewards to the computers that process transactions, and roughly every four years that reward is cut in half, an event called a halving. The result is a supply that grows ever more slowly and eventually stops. Whether that scarcity makes bitcoin valuable is the market's judgment to make; the schedule itself, unlike a central bank's policy, does not bend.

Mining and proof of work

Bitcoin has no company running it, so the ledger is maintained by miners: computers around the world that race to bundle recent transactions into a block by solving a puzzle that takes enormous amounts of computation. The winner adds the block and collects newly created bitcoin plus fees. This system, called proof of work, is what makes the ledger expensive to attack: rewriting history would require out-computing the entire honest network. The same design consumes a great deal of electricity, which supporters defend as the price of security and critics see as waste; both sides of that debate are worth hearing.

Digital gold: the narrative and the counterpoint

The common case for bitcoin is that it is digital gold: scarce, portable, indifferent to any government's printing press, and therefore a long-run store of value. The honest counterpoint is bitcoin's record so far. A store of value is supposed to hold its purchasing power steadily, and bitcoin's realized volatility has been a multiple of what stock markets show, with repeated drawdowns of half or more of its value. It may mature into the steadier asset its supporters describe, or it may not; what it has been to date is a highly volatile speculative asset that some investors choose to hold in small amounts.

Canada listed the world's first spot bitcoin ETFs

A little-known Canadian first: in February 2021, Canadian regulators approved and Toronto listed the world's first spot bitcoin ETFs, funds that hold actual bitcoin and trade as ordinary shares, years before the United States allowed the same structure. For Canadian investors this created a genuinely different way to own the asset.

An ETF holding trades in your regular brokerage account, requires no wallets or private keys, and is eligible for a TFSA or RRSP, which direct coin holdings are not. The costs are ongoing management fees and giving up self-custody: you own units of a fund, not coins you can move or spend. Direct ownership is the reverse trade: no fund fees and full control, in exchange for securing keys yourself, keeping tax records for every transaction, and no registered-account eligibility.

Tax in one paragraph

The CRA treats bitcoin as property, not currency. Selling it, trading it for another coin, or spending it is a disposition that can produce a capital gain, and holding it inside a TFSA or RRSP is possible only through an ETF. The full treatment, including record-keeping and the business-income question for active traders, is covered in the cryptocurrency entry.