What is Bitcoin?

Ah..Bitcoin. As the currency has blown up in the workings of the media as a controversial medium of exchange, with countries, financial institutions and others backing away from this relatively new and unknown financial instrument.

Bitcoin, formally, should be defined as the two smaller terms that compose it: the token aspect and the protocol aspect. The former, the more common definition, defines Bitcoin as the piece of code living on a decentralized network that secures your ownership of value. The protocol aspect refers to the decentralized network of computers that power the transactions and ledgers behind the Bitcoin network.

By its very nature, Bitcoin is a cryptocurrency that has no basis in any physical location, can be used as a form of payment across the world, and has no intrinsic value. The latter point is the most concerning for many potential investors: because Bitcoin is not gold-backed (unlike a coin like GoldMoney, which is a cryptocurrency backed by physical reserves of gold), its value is based solely on the demand for the coin, and how much people are willing to pay for it. As a result, the cryptocurrency is extremely volatile.

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