What is Bitcoin?
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Bitcoin is a decentralized electronic payment system which is not issued by any single sovereign. Instead, the currency is issued and controlled by everyone through a consensus algorithm. Everyone can join the network by installing the open source software on their computer. An open source software license grants every user the right to use, copy, modify and redistribute without worry of legal recourse. Called a “Permissive” license, Bitcoin was released under the MIT License, (also called the Apache License) which imposes very few restrictions.
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Bitcoin as Money
Medium of Exchange
Similar to emails or internet data, bitcoin will transfer between any two wallets, controlled anywhere with access around the globe. It does this without need of a third party, is almost infinitely divisible and is as durable as your computer hardware.
ComplementaryCurrency.org
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Store of Value
Bitcoin's store of value is controversial. While there is demand to transfer wealth electronically, there is less demand for bitcoin.
As a store of value, Bitcoin has been inconsistent. In the past few years the price of bitcoin has fluctuated quite substantially. Despite this, studies show a majority of private keys are being held and not spent regularly. |
Unit of Account
While each day, more and more items can be purchased in Bitcoin, heavy price fluctuation limits merchant ability to price in bitcoin.
Some argue as Bitcoin evolves and new financial interests enter the market, the price of Bitcoin will stabilize, making it a more useful unit of account. However, it is unclear why these financial interests would join the network until the price stabilizes. |
Bitcoin is Not
Backed by Gold, Silver
Just like fiat currencies today, it is backed by the community’s acceptance of the currency and willingness to use it as a means of exchange, store of value and unit of account.
A Ponzi Scheme.
In a Ponzi scheme there is a central operator who pays returns to current investors from new capital investors. In Bitcoin there is no central operator who can profit from the relocation of funds. Second, there is no mechanism to deflect funds from new investments to pay returns. The only funds recognized in the Bitcoin protocol are bitcoins. Transfers of bitcoins are initiated by the users at their will: the protocol cannot deflect funds from one user to another. Third, a new investment in Bitcoin is always matched with a disinvestment. Investors who put money into bitcoins usually operate through an exchange where they buy the bitcoins from another investor. The amount of sovereign currency that flows into bitcoins matches the amount that flows out of bitcoins.
Bitcoin History
Learn More
Bitcoin (Khan Academy)
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Get Started with Bitcoin
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Bitcoin White Paper
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