Bitcoin is a revolutionary digital currency that operates without any central control or oversight of banks or governments. It is based on peer-to-peer software and cryptography, and a public ledger records all bitcoin transactions. A bitcoin is divisible into eight decimal places (100 millionths of a bitcoin), and this smaller unit is known as satoshi. Bitcoin is a type of cryptocurrency, a digital or virtual currency that is protected by cryptography, making it almost impossible to counterfeit or spend twice.
It is decentralized, meaning it is not issued by any central authority, making it theoretically immune to government interference or manipulation. Bitcoin allows online transfers without intermediaries, such as a bank or payment processor. This eliminates the need for transaction manipulation and changing bitcoin supply. The software that forms the core of Bitcoin is free and open source, so anyone can review the code. Bitcoin wallets and similar software technically handle all bitcoins as equivalents, setting the basic level of fungibility.
Bitcoin holders can buy, sell and exchange goods or services without a central authority or a bank as an intermediary. The Bitcoin network is secured by miners who use powerful computers to solve complex puzzles in order to verify transactions. To entice miners to keep running to solve puzzles and support the system in general, the Bitcoin code rewards miners with new Bitcoins. Exchanges are one of the most popular methods to buy bitcoins, as they are companies that allow people to buy and sell by creating an account. When paying with bitcoin, there are no bank statements or need to provide unnecessary personal information to the merchant. Bitcoin-to-Bitcoin transactions are made by digitally exchanging anonymous and heavily encrypted hash codes through a peer-to-peer (P2P) network.
Every Bitcoin is basically a computer file that is stored in a 'digital wallet' application on a smartphone or computer. Some investors who buy and hold the currency are betting that once Bitcoin matures, there will be greater trust and more widespread use, and therefore the value of Bitcoin will grow. A common rule of thumb is to devote only a small part of a diversified portfolio to risky investments, such as Bitcoin or individual stocks. There may be fees associated with transactions on the Bitcoin network, depending on factors including how quickly the bitcoin transaction needs to be confirmed. By design, the supply of bitcoins is limited to 21 million coins, of which 18.77 million have already been mined. This means that there is no room for inflation or manipulation in any way.
Bitcoin is virtually 'mined' by a vast decentralized network (also known as “peer-to-peer”) of computers that constantly verify and ensure blockchain accuracy.
