Unlike credit card networks like Visa and payment processors like Paypal, bitcoin is not owned by an individual or company. That, in a nutshell, is bitcoin explained. When any two people-wherever they might live-can send payments to each other without encountering those gatekeepers, it creates the potential for an open financial system that is more efficient, more free, and more innovative. When Bitcoin first appeared, it marked a major advance in computer science, because it solved a fundamental problem of commerce on the internet: how do you transfer value between two people without a trusted intermediary (like a bank) in the middle? By solving that problem, the invention of bitcoin has wide-ranging ramifications: As a currency designed for the internet, it allows for financial transactions that range across borders and around the globe without the involvement of banks, credit-card companies, lenders, or even governments.
Each private key is tracked on the virtual ledger called the blockchain. When you hold bitcoin, you control it through a private key-a string of randomized numbers and letters that unlocks a virtual vault containing your purchase. Nakamoto devised a pair of intertwined concepts: the bitcoin private key and the blockchain ledger. This paper wasn’t the first idea for digital money drawing on the fields of cryptography and computer science-in fact, the paper referred to earlier concepts-but it was a uniquely elegant solution to the problem of establishing trust between different online entities, where people may be hidden (like bitcoin’s own creator) by pseudonyms, or physically located on the other side of the planet. The principles behind Bitcoin first appeared in a white paper published online in late 2008 by a person or group going by the name Satoshi Nakamoto. The question of who created bitcoin is a fascinating one, because a decade after inventing the technology-and despite a lot of digging by journalists and members of the crypto community-its creator remains anonymous. To really grasp how bitcoin works, it helps to start at the beginning. Meanwhile, it only exists digitally there is no physical version of it. Is bitcoin money? It’s been used as a medium of exchange, a store of value, and a unit of account-which are all properties of money. It’s accepted as payment by businesses including Microsoft and Expedia. The removal of those gatekeepers creates a whole range of new possibilities, including the potential for money to move around the global internet more quickly and cheaply, and allowing individuals to have maximum control over their own assets.īitcoin is legal to use, hold, and trade, and can be spent on everything from travel to charitable donations. Unlike government-issued currencies such as the dollar or euro, Bitcoin allows online transfers without a middleman such as a bank or payment processor. even just a way to explore an emerging technologyīitcoin is a currency native to the Internet. a way to transfer value around the world It isn’t necessary to buy an entire bitcoin: you can buy just a fraction of one if that’s all you want or need.ĭepending on your goals, bitcoin can function as This is digital money that cannot be inflated or manipulated in any way.
There will only ever be 21 million bitcoin. No company, country, or third party is in control of it and anyone can become part of that network. Unlike a bank’s ledger, the Bitcoin blockchain is distributed across the entire network. In simple terms, it’s a record of every transaction ever made using bitcoin. Unlike services like Venmo and PayPal, which rely on the traditional financial system for permission to transfer money and on existing debit/credit accounts, bitcoin is decentralized: any two people, anywhere in the world, can send bitcoin to each other without the involvement of a bank, government, or other institution.Įvery transaction involving Bitcoin is tracked on the blockchain, which is similar to a bank’s ledger, or log of customers’ funds going in and out of the bank. It’s an appealingly simple concept: bitcoin is digital money that allows for secure peer-to-peer transactions on the internet. With Bitcoin, people can securely and directly send each other digital money on the internet.īitcoin was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology in a 2008 white paper. The world’s first widely-adopted cryptocurrency.
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