This definition explains the meaning of bitcoin. Bitcoin is the world’s first cryptocurrency or decentralised digital currency and a form of electronic cash.
In 2009, an anonymous software developer going under the alias Satoshi Nakamoto developed the first and most widely known cryptocurrency, Bitcoin. Since its inception, more and more establishments are accepting cryptocurrencies and many investors say it will continue to revolutionise paying for goods and services. The system works without a central bank or single administrator. Bitcoins are sent from user to user on the peer-to-peer bitcoin network directly, with no need for intermediaries. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
Blockchain is a decentralised database of transactions. Each time a new transaction, or block, is created; it is distributed across a network of computers that verify its authenticity. Because there’s no centralised version of the transaction, it’s difficult to tamper with records in the blockchain.
Blockchains use advanced encryption methods, so personal information is kept private. The only thing other participants in the transaction can see are the relevant details pertaining to the purchase and payment. While few people are familiar with blockchain technology, most of them have probably been introduced to the digital currency that utilises it: Bitcoin.
Traditionally, when two strangers exchange money over the internet, they require intermediaries like PayPal or a bank to verify the transaction. The problem with this method, other than the third party charging you a fee, is that; their centralised records can be hacked. Bitcoin cuts out the middleman altogether, making it so that the Bitcoin community verifies every transaction. This significantly reduces the chances of hackers compromising your personal and financial data.
The supply of Bitcoin is also capped at 21 million digital tokens, which solves the inherent inflation problem many regulatory bodies like the Reserve Bank of Australia must induce. Its limited supply is also a huge reason why its value has risen dramatically.