Bitcoin is digital currency. Like other currencies, including the dollar, it has value鈥攂ecause a group of people agree it has value.聽
Bitcoin first arrived in 2009. It鈥檚 an invention of computer science and cryptography, designed by someone called Satoshi Nakamoto, who has not revealed his or her identity. He or she created a digital currency that didn鈥檛 need a government鈥檚 permission to operate.聽
You can鈥檛 print a bitcoin. You can鈥檛 physically hold it. So how do you know that it鈥檚 yours? When I send you a bitcoin, the transaction is recorded in what鈥檚 called the blockchain: Our transaction goes into a block of data, and when the block is full, it鈥檚 signed with a digital fingerprint. To make the fingerprint for the next block, you have to use the fingerprint of the last one鈥斺榗haining鈥 the blocks together.
Linking these fingerprints requires complex computing. Bitcoin financially incentivizes people who want to do that work. Every time a new block is added, whenever someone finishes computing that fingerprint with information from the previous one, bitcoin is released. Whoever does that gets鈥攔ight now鈥攅xactly 12 1/2 bitcoin. It鈥檚 added to the public record, and then everyone else who鈥檚 trying to 鈥榤ine鈥 bitcoin, including companies like mine, starts working on the next block鈥檚 fingerprint.聽
These blockchains are stored on thousands of computers around the world, so if I wanted to go back and change any information, I鈥檇 have to break into every computer that has a copy and change it. I鈥檇 have to recompute the fingerprints for every other block before anyone noticed, which requires a massive amount of computing power. You鈥檇 have roughly the same odds of doing that as winning Powerball eight times in a row. People have hacked passwords to steal bitcoin, but no one has ever been able to break into the blockchain.聽
Bitcoin started as a very small network, but it鈥檚 grown to thousands of programmers all over the world [who] are not only keeping copies of the bitcoin blockchain but are also competing to compute those fingerprints.聽
Bitcoin is not magic internet money, because you can鈥檛 just make more. Once 21 million are released there won鈥檛 be any more. As of March, 16.95 million have been issued. It鈥檚 the largest player in an increasingly crowded market, which includes more than 1,600 cryptocurrencies.
Its value depends solely on what people are buying and selling it at. When I started this job in 2016, bitcoin was about $400. It shot up around Christmas, then lost about half that gain. On May 11, it was over $8,000. There are millions of bitcoin users, and companies like Microsoft and Overstock accept it.聽
Right now, if you want to send money to someone in another country, there are high fees and slow transaction times鈥攏ot to mention there鈥檚 a good percentage of the world that does not have a bank account. You can send bitcoin using an app on your phone to anyone around the world within a few minutes. There is no substitute for that.