Bitcoin is like digital cash that isn't controlled by banks or governments. Instead of being managed by one central place, it's run by a network of computers spread all over the world. Anyone can get involved and help improve Bitcoin since the software is open for everyone to use and change.
Imagine making a Bitcoin transaction like writing in a public notebook everyone can see. This notebook is called the blockchain. It's kept up to date by lots of people, called nodes. To keep everything secure, Bitcoin uses a process called Proof of Work (PoW). Think of PoW as a race where miners (the people who verify transactions) try to solve tough math problems.
The first miner to solve the problem gets to add a new page of transactions to the public notebook and earns a reward. This reward is made up of transaction fees and new bitcoins. The PoW system makes sure it's tough to add new pages (to keep things secure) but easy for everyone else to check them.
Bitcoin's distinct characteristics set it apart from traditional financial systems.
1. Decentralization. No single person or group controls Bitcoin. It's like a group project where everyone can help verify transactions.
2. Permissionless nature. Anyone with internet access can use Bitcoin without needing approval from some central authority. You can send and receive money anywhere in the world without needing permission.
3. Limited supply. There will only ever be 21 million bitcoins. This is like having a limited number of collectible cards, which can make them more valuable over time.
4. Transparency. All Bitcoin transactions are recorded in the public notebook (blockchain) for everyone to see. This means anyone can check the details of any transaction, helping to build trust.
Learn more: What Is Bitcoin and How Does It Work?