What is Bitcoin?

Bitcoin is a form of digital currency. But unlike the fiat currencies you're used to, no central bank controls it. Instead, the Bitcoin financial system is run by thousands of computers distributed worldwide. Anyone can participate in the ecosystem by downloading open-source software.

Bitcoin was the first cryptocurrency, announced in 2008 (and launched in 2009). It allows users to send and receive digital currency (bitcoin, denoted by the letter b or BTC). What makes it attractive is that it cannot be censored; what makes it attractive is that it cannot be edited, and transactions can be made at any time and from anywhere.

What is Bitcoin used for?

Bitcoin is used for several reasons. Many people appreciate it because of its no-intermediate feature – anyone with an Internet connection can send and receive bitcoins. It's like cash in that no one can stop you from using it, but being digital means, it can be moved around the globe.

What makes Bitcoin valuable?

Bitcoin is decentralized, censorship-resistant, secure, and borderless.

These characteristics make it attractive for use cases such as international money transfers and payments where the individuals involved in the transaction do not wish to reveal their identities (as with debit cards or credit).

Bitcoin is nicknamed digital gold due to its limited money supply. Many people don't spend their bitcoins, instead choosing to hold them for long periods (also known as holding). Some investors view Bitcoin as a store of value. Because it is scarce and difficult to create, it has been likened to precious metals such as gold or silver.

Holders believe these characteristics – combined with global availability and high liquidity – make it an ideal vehicle for long-term asset storage. They believe that the value of Bitcoin will continue to increase in price over time.

How Bitcoin Works

When Alice makes a transaction with Bob, she doesn't send money as expected. It's not like she sent him a dollar bill via electronic payment. It will look like this: she writes on a note (everyone can see) that she sends a dollar to Bob. When Bob sends the same money to Carol, she sees that Bob has them by looking at the note.

transaction example

This record is a specific type of database called a blockchain. All network participants have an identical copy of this sheet stored on their devices. Participants connect to synchronize new information.

The Bitcoin blockchain uses a special mechanism called mining to add new information. When users make a payment, they broadcast it directly to a peer-to-peer network– – with no banks or centralized institutions to process the transfer. Through this process, new blocks of transactions are recorded in the blockchain.