Bitcoin is a digital currency – what’s known as a cryptocurrency – which is used to buy or exchange products and services. You can use bitcoins to pay for take-away food, computers and airline tickets – just like with normal money.
In record time, bitcoin has revolutionised traditional systems of handling money. As the cryptocurrency on the market that has had the biggest commercial breakthrough, it’s growing every day and is challenging accepted ways of looking at value, stock exchanges and markets.
Unlike cash or other, traditional currencies on the stockmarket, bitcoin is a cryptocurrency – in other words, a digital currency on the internet. Bitcoin is also a decentralised currency, which means that it isn’t bound to one country’s monetary system like the British pound, the American dollar or the euro. Nor does it belong to a specific company. It simply exists between users on the internet. In this way, it’s possible to handle transactions between a seller and a buyer directly without a bank, state or other third party being required. This leads to quick transactions with very low fees.
The blockchain is the system that ensures and authorises all transactions of bitcoins through what are known as cryptographic algorithms. Each exchange, purchase and transaction of bitcoins is registered by the blockchain in an open ledger – a kind of automatic and digital accounting system. Absolutely anyone can take part in the bitcoin network and have complete access to the entire blockchain and the ledger of all transactions – regardless of whether they are a buyer or seller.
Just like those of other currencies, the bitcoin exchange rate is controlled by supply and demand. The price that users are willing to buy and sell for determines the value.
Historically, bitcoin has had high volatility – the exchange rate has gone up and down significantly. Volatility is gradually reducing and stabilising as more and more users choose to be part of the bitcoin world’s ecosystem.
The number of bitcoin users is still relatively low compared with traditional stock markets, but it’s increasing every day. Exactly how many bitcoin owners and users there are is unknown, but the number is estimated to be 10-30 million users as of 2018.
There are currently around 17 million bitcoins in circulation – and there will never be more than 21 million.