Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed 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.
The identity of the person or persons who created Bitcoin is unknown. Satoshi Nakamoto is the name associated with the person or persons who released the original Bitcoin white paper in 2008 and worked on the original Bitcoin software that was released in 2009.
The Bitcoin protocol requires users to enter a birthday upon signup, and we know that an individual named Satoshi Nakamoto registered and put down April 5 as a birth date. And that’s about it.
When you look at a traditional currency like the dollar or euro, you can see who printed it (the U.S. Treasury or European Central Bank, respectively) and you know how much money each country has in its reserves.
With Bitcoin, there is no central authority; instead, there is a decentralized network of computers around the world that keep track of all Bitcoin transactions, similar to how Wikipedia is maintained by a decentralized network of volunteers. This system is intended to make it impossible for anyone to manipulate or counterfeity Bitcoins.
The supply of Bitcoins is automated and released to mining servers; with a limit of 21 million Bitcoins being reached by 2140. The rate at which new Bitcoins are created per block is set to decrease geometrically, with each halving event cutting the rate at which new Bitcoins are created in half (approximately every 4 years).
This reduction in new Bitcoins created per block ensures that inflation will not be an issue as long as demand for Bitcoin remains strong. In addition, the limited supply of Bitcoins can act as an investment opportunity; similar to how investors buy gold because they believe that gold will not lose all of its value even if economies collapsed tomorrow.