What Is Bitcoin?

Introduction

Bitcoin is a topic that touches many fields, like computer science, economics, sociology, politics, and everyone looks at it differently. A computer scientist (like me) looks at its technology, an economist focuses on incentives and market dynamics, a sociologist studies its impact on society, a politician thinks about control and policy.

For this question ("What Is Bitcoin?") to answer adequately, I read many books and blogs and watched talks and interviews about this phenomenon. Then I took all of that and created two definitions that make sense to me as a computer scientist who is also interested in other fields. The first definition describes Bitcoin as money, the second describes it as a monetary system. These are high-level definitions that intentionally leave out technical details and underlying concepts. The goal is to get a grasp of what Bitcoin is before diving deeper.

If you are curious and want to know more about Bitcoin, e.g. how the technology actually works and how all the parts and concepts fit together, do not worry. I will explain Bitcoin's underlying technology in future articles (see the introduction page for an overview of all upcoming articles).

Terminology

The term "Bitcoin" refers to two related but distinct concepts:

• Bitcoin (uppercase B): The monetary system, i.e. the decentralized protocol and peer-to-peer network.
• bitcoin (lowercase b, symbol BTC): The unit of value within this system.

Money

Bitcoin is the first form of money that exists purely in digital form and combines scarce supply, disinflationary issuance, and self-sovereign ownership.

Digital

Bitcoin exists purely in digital form. There are no physical coins or bills. It can only be stored and transferred over the internet, functioning as a digital bearer asset.

Scarce

The protocol enforces a maximum supply of 21 million bitcoins. This limit is guaranteed by mathematics and cannot be changed without consensus from the entire network. This makes bitcoin fundamentally different from traditional fiat currencies, which in general have no supply limit.

Disinflationary

The rate at which new bitcoins enter circulation decreases over time. Approximately every four years, in an event called the "halving," the issuance rate is cut in half. This process continues until approximately the year 2140, after which no new bitcoins will be created.

Self-Sovereign

Ownership is determined solely by possession of a secret piece of information, not by institutional records or third-party confirmation. This design enables financial sovereignty: users can hold and transfer value without depending on any institution. However, this also means the security of your funds depends entirely on protecting that secret.

Monetary System

Bitcoin is the first decentralized, peer-to-peer monetary system that enables secure, trust-minimized value transfer over the internet. As a global, borderless, and permissionless network, it operates without gatekeepers. Transactions are censorship-resistant, neutral, final, transparent and auditable, and pseudonymous.

Decentralized

No central authority controls Bitcoin. The network consists of thousands of independent participants distributed across the world. Changes to the protocol require broad consensus. No single entity can change the rules or shut down the network on its own.

Peer-to-Peer

Users transact directly without intermediaries. Transactions are broadcast to the network and validated by participants. There is no need for banks or payment processors, which reduces delays and costs that are typical for traditional banking.

Secure

Transactions are protected by mathematical mechanisms, and the network is secured by economic incentives that make attacks extremely expensive. Manipulating the transaction history would require so many resources that it makes no economic sense.

Trust-Minimized

Bitcoin significantly reduces the need for trust, though it does not eliminate it entirely. Users rely on the proven correctness of mathematical principles, the assumption that a majority of computing power acts honestly, and the integrity of their own software and hardware. However, they do not need to trust any institution, counterparty, or central authority.

Global

The network spans the entire globe, with participants distributed across all continents. No region or jurisdiction can claim control over it. Whether you are in Europe, Africa, Asia, or the Americas you connect to the same network and follow the same rules.

Borderless

Value can be transferred between any two locations with internet connectivity, at any time. National boundaries, currency zones, political divisions, banking hours, and holidays are irrelevant to the protocol.

Permissionless

Anyone can participate without approval or identification. Users can send and receive bitcoin without authorization from any entity, regardless of who they are or where they live. The only requirements are internet access and free, compatible software.

Censorship-Resistant

No single party can reliably prevent valid transactions from being confirmed. The decentralized nature of the network makes sustained, network-wide censorship too expensive to maintain.

Neutral

The protocol enforces rules, not policies. It treats all valid transactions equally, regardless of sender, recipient, amount, or purpose.

Final

Once a transaction is included in a block and additional blocks are built on top of it, reversing it becomes computationally impractical. The more blocks are added, the more secure the transaction becomes, as the computational effort required to reorganize the chain grows with each confirmation.

Transparent and Auditable

All transactions are recorded on a publicly accessible ledger called the blockchain. Anyone can verify the entire transaction history from the very first transaction until now, audit the total supply, and confirm that the rules are being followed.

Pseudonymous

Users are identified by unique alphanumeric addresses rather than real-world identities. All transactions are publicly visible, but they are not directly linked to personal information. However, analysis of transaction patterns can potentially link addresses to identities, especially when interacting with services that require identification.

Conclusion

Bitcoin is both a new form of money and a new kind of monetary system. As money, it exists purely in digital form, without a central issuer, without inflation, and without depending on any institution. As a system, it operates without central control, without gatekeepers, and without requiring trust. These properties make Bitcoin unique in the history of money.

In the next article, I will explain where Bitcoin came from and why it was created. If you want to understand the technology behind Bitcoin, like how transactions work, what the blockchain is, and how mining secures the network, stay tuned for the upcoming articles in this series.

If you have questions or feedback, feel free to reach out. And if you found this article helpful, consider sharing it with others who want to understand Bitcoin.