What is Bitcoin?

What is Bitcoin?
Bitcoin is a purely digital currency also referred to as a crypto currency. Its denominations are referred to as bitcoins or BTC for short. It was created by Satoshi Nakumura (a pseudonym) in 2008. Bitcoin is a peer to peer currency that is not controlled or facilitated by any central government, bank or any single entity.  It provides anonymous transactions and is being widely accepted worldwide for anything from products at physical stores, online services and more.  Anyone can accept bitcoin payments very simply. Using a BTC wallet, the user is provided with a unique transaction code to accept payments.

It could be better to think of its units being virtual tokens rather than physical coins or notes.
With this in mind, as with all currencies its value is determined by how much people are willing to exchange it for.

So how do they come into existence?
Bitcoins are generated by a process called "mining".  Think of it as physically mining for gold, however in this case the mining is computational. This involves a computer solving a difficult mathematical problem with a 64-digit solution.

Each problem solved generates one block of bitcoins, at this time a block is 25 Bitcoins.  In exchange for expending processing time, the miner is rewarded with new Bitcoins.
This method of mining provides an incentive for people to provide computer processing power to solve the equations.
Each time a block is generated the difficulty of the problem is adjusted to compensate for the growing power of computer chips, as well as the increasing number of miners, to ensure a stream of approximately 3,600 new bitcoins per day.

At the time of this article there are over 12 million Bitcoins in existence.
To exchange bitcoins each user must have a Bitcoin address, a string of 27-34 letters and numbers, which exists as a kind of virtual postbox from which the bitcoins are sent and received.

Bitcoin is anonymous
No registry exists of these addresses which personally identifies people. There is however a history of all transactions called a blockchain, the blockchain is publicly available.

The Bitcoin addresses are stored in wallets which are used to receive and send the coins.
In many ways they operate like privately run bank accounts, with the exception that if the data is lost, so are the bitcoins owned.