What is Bitcoin?
What is Bitcoin?
Farhan avatar
Written by Farhan
Updated over a week ago

What is Bitcoin?

Here at Bitcoin.com, we use the term ‘Bitcoin’ as a blanket term to describe what is actually two separate digital currencies, Bitcoin (BTC) and Bitcoin Cash (BCH). To understand why Bitcoin exists as two separate currencies, please continue reading to the end of this article. For now, let’s cover the basics of what Bitcoin actually is.

Bitcoin is the first and most widely used form of a new type of digital currency called a cryptocurrency. Cryptocurrencies are decentralized digital assets that exist on a network of computers and servers located around the world.

Computers on these networks work together to solve increasingly difficult cryptographic problems in order to verify transactions and uncover new coins in a process called mining.

Once transactions have been processed and verified by the network, they are permanently recorded on a public ledger called a blockchain. This public ledger exists on all computers connected to the Bitcoin network and cannot be modified or manipulated by any individual or entity.

In a nutshell, Bitcoin is a new peer to peer digital currency that eliminates the need for banks, thus giving users total control of their finances and the freedom to conduct financial transactions worldwide without a middleman.

Here are some key features that differentiate Bitcoin from the traditional currencies that you’re already used to.

You are in control.

Just like a traditional currency, Bitcoin is a medium of exchange that can be stored, traded, and used for payments.

Where Bitcoin differs from the currency that you’ve used before is that traditional, or fiat, currencies are issued and controlled by unelected private corporations that form the global central banking system.

As Bitcoin is a decentralized peer to peer digital currency, no single person or entity will ever be able seize control of Bitcoin or manipulate its value.

The fact that all Bitcoin transactions take place on a peer to peer basis means that you can send, receive, and store any amount of the currency independent of financial institutions. This paradigm shift in personal finance means that banking fees, financial intermediaries, identity theft, and banking delays are all relics of the past.

Immune to Inflation and Currency Manipulation

Because no single person owns or controls the Bitcoin network, Bitcoin and cryptocurrencies like it are not subject to the same inflation and currency manipulation schemes that are commonplace with fiat currencies.

The fixed supply of Bitcoin, capped at 21 million coins, means that Quantitative Easing and other manipulative tactics regularly employed by central banks to control the flow and value of fiat currencies cannot be levied against the Bitcoin network.

Skip The Middleman

Whereas sending money through traditional means often requires intermediary banks, “trusted partners”, and 3rd party payment processors, the peer to peer nature of Bitcoin means that you can send any amount of money to any individual or business anywhere in the world almost instantly, and for a fraction of the cost of a traditional money transfer.

Once completed, all transactions are permanently engraved on a public ledger, which can be accessed and viewed by anyone. This transparent public record, the blockchain, eliminates the ability of nefarious actors to commit the types of fraud that are typically associated with the traditional banking system.

In short, Bitcoin’s strength and value is derived from its transparency, decentralization, and ease of use.

Why Are There Different ‘Types’ Of Bitcoin?

As we previously stated, here at Bitcoin.com, we use the term ‘Bitcoin’ to refer to two separate currencies that combine to make up the current Bitcoin network. These currencies are Bitcoin (BTC) and Bitcoin Cash (BCH). Here’s a quick explanation of why these two different currencies exist:

Open To Everyone

Bitcoin is open-source software. This means that as Bitcoin grows in use and popularity, anyone can propose changes to improve the network’s functionality. As Bitcoin is a currency that is reliant upon a network rather than an individual entity, any proposed changes to the network’s functionality require consensus from the diverse community which upholds it.

If changes are proposed which are not supported by the entire community, the proponents of the disputed changes may break off and create an entirely new currency based off of the original currency’s code. This process is called a ‘hard fork’, and this is precisely what happened with the original Bitcoin network.

What’s The Difference Between Bitcoin (BTC) and Bitcoin Cash (BCH)?

By original design, Bitcoin was built to be an electronic monetary exchange system. In other words, it was designed to be used in the same manner in which we’ve used fiat currencies in the past. During the early years of Bitcoin, this is exactly how the currency was used.

As Bitcoin grew in popularity though, the network struggled to meet the demands of the increased traffic. Higher traffic on the network meant slower processing times and higher transaction fees, which undermined the original purpose of the new currency.

In the beginning of 2017, a segment of the Bitcoin community decided that an update to the original network was necessary to cope with the increased demand.

In order to address the increased traffic, slower processing times, and higher fees that the Bitcoin network was experiencing, a segment of the community proposed increasing the network’s capacity, or block size, from 1MB to 8MB.

This increase in block size would increase the network’s capacity for processing transactions, thus reducing processing times and transaction fees, and enabling users to transact with the currency with greater ease.

As we mentioned before, the open source nature of the Bitcoin network means that any proposed changes require general consensus before they can be implemented. In 2017, this consensus proved impossible to attain, and so on August 1st of that year a hard fork of the Bitcoin network took place.

The new currency, Bitcoin Cash, was created to fulfill the original goal of replacing fiat– the goal that was set forth at the inception of the Bitcoin project. Today, Bitcoin Cash (BCH) fulfills this role, with faster processing times and lower transaction fees when compared with the original Bitcoin network (BTC).

Here at Bitcoin.com, we support both digital currencies, with Bitcoin Cash acting as a quicker and easier method of conducting daily transactions, and Bitcoin (BTC) acting as a great store of value, similar to gold, silver, and other precious commodities.

Now that you understand the foundations of these revolutionary digital currencies, you can get started with Bitcoin by downloading The Bitcoin.com Wallet from The App Store on iOS devices or The Google Play Store on Android devices.

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