Bitcoin is a type of digital currency, commonly known as cryptocurrency. There are many different cryptocurrencies, including bitcoin, bitcoin cash, ethereum, etc. There are also some cryptocurrencies, like GUSD and USDC, that are “pegged” to the value of certain fiat currencies, like USD.
Bitcoin and other cryptocurrencies are digital cash for the internet. With cryptocurrency, you can send money over the Internet directly and securely to another person, without needing a credit card or bank, for the first time. Instead of the credit card company or bank, thousands of networked computers process bitcoin transactions and verify that they are legitimate.
You can download software called wallets on your smartphone or computer that store your bitcoin and work with the bitcoin network to let you send and receive payments without the risk of fraud and chargebacks. You own your bitcoin by keeping track of a private key. It's a digital signature that no one can forge or fake. Because you're the only one who owns this signature, there is no reset or recovery without your private key. You have total control and total responsibility.
Instead of entering all of your personal information when you pay, usually all you need to do is scan a QR code or copy and paste a string of letters and numbers to buy something with bitcoin. Then, with a swipe or the press of a button, you can send funds to anyone anywhere in the world in minutes.
However, if you would like to dive deeper, continue reading:
Bitcoin: A Protocol, a Network, a Ledger, an Asset
Bitcoin is a protocol for transferring value over the internet. It involves a network of thousands of computers around the world verifying transactions in a shared ledger. Bitcoin miners use an incredible amount of computing power to secure those transactions and make sure they are authentic. Because people trust this expansive network of computers and the incredible computing power of the bitcoin miners, they see bitcoin as valuable and an asset.
Protocol can be an intimidating word. But you've been using at least one for years now. You got to this page using a protocol called HTTP or HyperText Transfer Protocol. It's how computers and smartphones talk to servers and retrieve web pages.
The Bitcoin protocol is a set of rules that allow a massive distributed network of people and computers to agree on the accuracy of a record of transactions.
Network and Ledger
Governments that issue currencies go to great lengths to prevent counterfeiters from making and spending fake physical money. There is a similar problem for any kind of digital money, whether it's a cryptocurrency, a credit card transaction, or a bank transfer. How can the people you pay know that you aren't trying to spend the same funds twice?
To solve this problem, banks and credit card companies maintain massive centralized transaction ledgers to keep track of how digital funds change hands. Those ledgers work for some kinds of payments. However, because they're centralized in the hands of one group of people, they can be lost, accidentally changed, purposefully manipulated, or destroyed.
Bitcoin solves the problem of fraudulent double-spending in digital payments. And it solves that problem without the weaknesses of a central transaction ledger. Instead of relying on one bank, company, or government to maintain a fair, transparent ledger of transactions, Bitcoin relies on a massive global network of computers. That network of computers is the Bitcoin network, and the computers are called Bitcoin "miners".
Bitcoin miners solve special mathematical problems to add transactions to Bitcoin's shared, public transaction ledger, called a "blockchain." The amount of computing power required to solve these mathematical problems is breathtaking. A single human being cannot complete just one of these mathematical puzzles by hand in a full day. The bitcoin network completes a little over 5,000,000,000,000,000,000,000 every second.
Once a miner adds a group of transactions to the Bitcoin blockchain, other computers in the Bitcoin network called "nodes" all update their full copies of the Bitcoin blockchain. This is Bitcoin's built-in protection against fraudulent double spending and manipulation of transaction history. The miners will not add double-spent transactions to the Bitcoin blockchain. And since so many nodes have copies of the true blockchain, no one can trick the rest of the Bitcoin network into using a fake, edited, or corrupted version.
Because Bitcoin's blockchain provides the world's most secure ledger for transactions – or for any kind of record – many people value the tokens for using the Bitcoin blockchain. Those tokens are what you probably think of as "bitcoin." They're the bitcoin you have in your wallet. Since 2009, millions of people have bought, sold, saved, invested, and shopped using this digital asset, just like they would with dollars or euros.