In 300 or less. Bitcoin

Bitcoin is a cryptocurrency with a fixed total supply that was developed to enable peer-to-peer digital payments without the use of centralised, third parties known as financial intermediaries.

Typically, when digital transactions occur a third party, such as a bank, keeps track of how many digital dollars were spent and credits or debits each account. If everyone just kept track themselves, digital money wouldn’t work as everyone would lie about how much they have. Therefore, to access digital payments people must give their assets over to a bank or another centrally controlled institution.

With Bitcoin, people don’t need to rely on banks to hold their assets and process transactions. You can instead hold your digital money in your own digital wallet in the same way you hold and have total control of physical cash in your physical wallet. Bitcoin wallets can interact directly with one another, allowing parties to engage in peer-to-peer transactions.

Bitcoin achieved this innovation using a distributed ledger technology known as a blockchain. All the blockchain is, is a record of every transaction that has been made which is viewable by anyone with an internet connection. The record of transactions is maintained and updated not by one person or a single institution but instead by a distributed community of ‘miners’. Each miner independently competes to compile all the transactions which occur and help determine a consensus about the true record of transactions — this is what makes Bitcoin decentralised.

The way that this decentralized network of independent people come to a consensus is through a mechanism known as ‘Proof-of-Work’. It is very complicated so all you need to know is that people get paid in Bitcoin for maintaining the distributed ledger, but it is an extremely energy-intensive process.

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