Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator. The network is peer-to-peer and transactions take place between users directly, without an intermediary.
These transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.
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 purchased through a digital exchange or brokerage, or they can be earned through mining.
Mining is a record-keeping service done through the use of computer processing power. Miners keep the blockchain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block.
Each block contains a cryptographic hash of the previous block, using the SHA-256 hashing algorithm, which links it to the previous block, thus giving the blockchain its name.
The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees. As of May 2018, over 17 million bitcoins have been mined, with a total value of over $140 billion.
Bitcoin’s success has spawned a number of competing cryptocurrencies, known as “altcoins” such as Litecoin, Namecoin and Peercoin, as well as Ethereum, EOS, and Cardano. Today, there are literally thousands of cryptocurrencies in existence with new ones being created all the time.