The bitcoin is currently having a bit of a moment. It's value has been soaring for the last couple of years, to the extent that that it has just exceeded the value of an ounce of gold. As of 2nd March 2017, it sits at US $1,263.49, compared to about $200 in early 2015. They are even talking about offering a bitcoin-based RTF, which would make it even easier to invest in, and probably bolster its value still further.
So it is with a certain amount of shame that I admit that I don't really know what a bitcoin is. Yes, I have read about it from time to time over the years since it was "invented" in 2009, but I've never really known what it is. I was further confused by a picture of a roll of actual physical gold-coloured coins - I thought it was a purely conceptual digital thing with no physical existence. Fat lot I know!
So, with reference to Wikipedia (of course), here's what a bitcoin actually is.
Bitcoin is a payent system and a cryptocurrency. Now, that didn't help me much either, but apparently a cryptocurrency is a digital asset used as a medium of exchange, which uses some form of cryptography to secure transactions and to control the creation of additional units of the currency. Bitcoin was the first major secure digital currency, and it remains the largest and most widely used, although there are now apparently several.
It was first developed by a mysterious and semi-mythical figure called Satoshi Nakamoto, about whom almost nothing is known except that he is Japanese and "born around 1975". Several individuals, including an Australian man, have claimed to be Satoshi, which is almost certainly a pseudonym, and may even refer to a group of several programmers.
Bitcoin is a peer-to-peer system (meaning that there is no centralized administration), and transactions take place directly, without any intermediary. These transactions are verified by "network nodes" and recorded in a vast public online ledger called the "blockchain", which is essentially a distributed database that does not involve any trusted central authority. New bitcoins can be digitally created or "mined" using special software that solves mathematical problems within a distributed computer network.
Like other currencies, bitcoins can be used to purchase items electronically (it is fast, secure, transparent, and transaction fees are minimal), and a growing number of merchants will accept them nowadays. There are also bitcoin exchanges, both online and offline, and even bitcoin ATMs where cash can be exchanged for bitcoins.
Strictly speaking, bitcoin is purely digital and it is not physically minted or printed like other currencies. However, there are a few companies producing physical bitcoins, which can serve as physical placeholders for the digital currency, but these are really just collectibles, conversation pieces or "geek gifts".
Despite the recent prive surge, the value of bitcoin has historically been notoriously volatile - an estimated 7 times more volatile than gold, and 18 times more than the US dollar - and there have been several bubbles and bursts throughout its short history. This is largely due to insufficient liquidity (it is a very new currency after all), and to the fact that there is no central stabilization mechanism for the currency.
The lack of central oversight has apparently made bitcoins popular for criminal activities, including dark web drug transactions, Ponzi schemes, weapons sales, and even child pornography and murder-for-hire networks. The use of bitcoins is not entirely legal in some countries, and has even been specifically banned in some countries, including Bangladesh, Bolivia and Ecuador.
So, do I know what a bitcoin is now? Well, sort of...