Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain.
Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.
Bitcoin can be used to pay for things electronically, if both parties are willing. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.
However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network.
This puts some people at ease, because it means that a large bank can’t control their money.
The flip side of this decentralization is that there is no central authority to ensure that things run smoothly or to back the value of a bitcoin. bitcoins are valuable because people are willing to trade them for real goods and services, and even cash.
If you’re thinking about investing in bitcoins, you need to understand the risks before you jump in.