Bitcoin is an online cash currency launched in early 2009. Bitcoin was created to be a form of electronic cash that could be sent peer-to-peer without the need for a central bank or other authority to operate and maintain the ledger, much as how physical cash is used.
The Bitcoin can be stored in a virtual wallet and has been described as a cryptocurrency; a decentralized, peer-to-peer currency that relies on cryptography to facilitate currency generation and transactions. To prevent double-spending, computers are known as “miners” to receive transaction fees and free Bitcoins in exchange for running a proof-of-work system.
The engine that runs the bitcoin ledger is the original and largest blockchain, while other blockchains run several hundred other similar currency projects with different rules.
Bitcoin works by paying miners – those that do the computational legwork of posting new transactions – with newly-minted bitcoins. As long as the currency is desirable, it is self-sustaining. The system automatically adjusts the difficulty of posting transactions and the reward for doing so to control inflation.
Bitcoin is attractive to users for several reasons:
payer-borne transaction costs are low;
the valuation of the currency has generally been growing strongly since its creation; and
the system is much less restricted than traditional banking.
As an internet-based currency, bitcoin also observes no international borders, meaning that transfer between territories is no different from any other payment. There are other blockchain projects, such as Ripple, that are looking to capitalize on this for international payments applications in central bank-issued fiat currencies.