What is Bitcoin?
Bitcoin was originally created in 2009 as a digital version of money. Bitcoin wasn’t the first attempt to create digital money, but it has arguably been the most successful. Today, it’s used by hundreds of millions of people around the world.
The reason Bitcoin succeeded where other attempts at digital money failed is that it’s so difficult to counterfeit. A big part of this is that there is no one group like a bank or government in charge of Bitcoin. This is why you will often hear Bitcoin referred to as ‘decentralised’. Instead, Bitcoin is managed and controlled by a global network of computers working together to verify and approve all transactions made using Bitcoin. This network also has to approve any changes to the rules that Bitcoin follows. These computers can be owned by anyone – even you.
When a transaction is verified, it’s recorded and stored on a piece of technology that was invented specifically for Bitcoin, which is called the blockchain. This can be thought of like a a traditional bank ledger, which used to record transactions made using your everyday money, only there is no single owner and anyone can see it (don’t worry, all transactions are anonymous). The Bitcoin blockchain is basically a permanent record of every time ownership of the Bitcoin is transferred to someone else.
Bitcoin is no longer really seen as just digital money. As the technology has become better understood, people have also started to use it as a store of value similar to gold. The main reason for this is that its supply is limited, which makes it rare and means it holds its value better than other forms of currency. It’s also because it can easily be broken up into smaller units (these are known as satoshis in Bitcoin’s case, named after its inventor), it doesn’t degrade, and again because it’s so difficult to counterfeit.