What is Bitcoin?
Bitcoin is a digital currency -- also called cryptocurrency -- that can be traded for goods or services with vendors that accept Bitcoin as payment. With Bitcoin, holders can buy, sell and exchange goods or services without a central authority or bank as an intermediary.
Bitcoin is one of the most well-known virtual currencies today, with its value rising dramatically since its launch in 2009. Satoshi Nakamoto, the pseudonym of Bitcoin's creator, stated the purpose of Bitcoin is as an electronic payment system that is based on cryptographic proof, instead of trust. Some holders buy bitcoin as an investment, wanting it to increase in value, while individuals and businesses use or accept payments as currency. PayPal, for example, currently supports Bitcoin transactions, and the country of El Salvador has accepted Bitcoin as a currency.
Bitcoin-to-bitcoin transactions are made by digitally exchanging anonymous, heavily encrypted hash codes across a peer-to-peer (P2P) network. The P2P network monitors and verifies the transfer of bitcoin between users. Each user's bitcoin are stored in a program called a digital wallet, which also holds each address the user sends and receives bitcoin from, as well as a private key known only to the user.
In the U.S., bitcoin are controversial because they can be used to anonymously transfer illicit funds or hide unreported income from the Internal Revenue Service. Bitcoin policy now requires transactions that involve traditional, government-backed currencies to be attached to an identity.
By design, bitcoin supply is limited to 21 million coins of which 18.77 million have already been mined. This makes bitcoin scarce and controls the inflation that might occur if there was an unlimited supply of the cryptocurrency. According to the Gadgets 360 article titled "Bitcoin mining: How Many Coins Can Be Mined in Total and How Does It Impact Pricing?" 83% of all the bitcoin that will ever exist has already been circulated.
