1.1 Definition Summary
Bitcoin (symbol BTC or XBT) is a digital currency, created, held and exchanged electronically. Bitcoin is based on strong cryptographic principles, and designed to enable users to send money over the Internet without needing a credit card or a bank account. Bitcoin is run collectively by the users who uses the Bitcoin Client. Bitcoins are produced by lots of running computers all around the world (the Bitcoin Network), using software that solves mathematical problems. Bitcoin issuance has been pre-determined by a complex matematical formula, the Bitcoin Protocol. Bitcoin transactions are effected collectively by the Bitcoin Network. As such, Bitcoin is a decentralized currency, with no central authority, no government, company, or bank in charge of Bitcoin. Bitcoin is not based on gold; it is based on mathematics.
1.2 Bitcoin in-depth
A decentralized world currency :
Bitcoins are created, issued and controlled by the Bitcoin Network, a group of voluntary people who dedicated some computing capacity units to perform the equivalent mission of a Central Bank. Bitcoin’s most important characteristic is that it is decentralized. No single institution controls the bitcoin network. That means no central authority can devaluate it neither take it from holder (at least without legal approval), contrary to what the European Central Bank did in Cyprus and recommends to do in the future.
A non-inflationist money :
The mining process currently creates 25 Bitcoins every 10 minutes and the total number of issued Bitcoins has been capped to 21 million Bitcoins. It should be reached in 2040. After this date, the total number of Bitcoins will remain unchanged. It is a trememdous difference with printed currencies such as dollars and euros, instead of Central Banks which constantly issue new money, creating a permanent inflationist monetary system.
A peer-to-peer Network :
Bitcoin is a digital currency which uses peer-to-peer technology to facilitate instant payments. Bitcoin uses cryptography for security and some transactions. It is hard to counterfeit as each Bitcoin. Bitcoins are created through a “mining” process that uses computing power in a distributed network. This network also processed and controlled transactions made with bitcoins.
A transparent network : the Block Chain
Every Bitcoin transaction is recorded in a huge version of a general ledger, called the block chain. The block chain is a public ledger of all transactions in the Bitcoin network.
A user-friendly payment solution:
Bitcoin can be used to buy goods and services electronically, or can be changed for major printed currencies. In that regards, Bitcoin looks like conventional printed money such as dollars and euros, which can be also traded digitally.
Bitcoins are divisible to 8 decimal places; Bitcoin fractions are called satoshis in reference to the pseudonym of the Bitcoin’s creator : Satoshi Nakamoto. Users are called « Bitcoiners » and store their Bitcoins in a digital wallet, while transactions are verified by a digital signature known as a public-encryption key.
In conclusion, Bitcoin is more than just a Digital Money, it is also a revolutionnary Technology and a new network. Some Bitcoiners called Bitcoin the « Money of Internet », while others pretend it is « the Internet of Money ».