What is Bitcoin, the digital gold?

Writing a description for this thing for general audiences is bloody hard. There’s nothing to relate it to

Satoshi Nakamoto, inventor of Bitcoin

Open-source money

With Bitcoin, you can send money digitally and securely without relying on any kind of third party - exit banks, payment gateways like PayPal or card issuers like Visa.
It is the first currency that operates safely and independently from government authority or any centralised authority for that matter.

Bitcoin is the first “cryptocurrency”, a new kind of financial instruments that offers an alternative to fiat currencies controlled by central banks, as they are encrypted (and therefore secured) by cryptography.

To put it simply, Bitcoin is the first decentralised financial system that works. It's like sending money via e-mail.

It's hard to understand, Ferdinando Maria Ametrano explains it well:

Ferdinando Maria Ametrano

Why Bitcoin is hard to understand? Because it is at the crossroads of (1) game theory, (2) cryptography, (3) computer networking and data transmission, (4) economic and monetary theory. [It] is) mainly not a technology, [but] a cultural paradigm shift instead.

Here are four value propositions of cryptocurrencies against fiat:

  1. Trusting third party
    You are obliged to trust a bank to hold your wealth in fiat currencies, whereas with Bitcoin, you are the sole owner of your digital coins and do not have to trust anyone to store them.
  2. Planned emission rate
    Central banks regulate their respective currencies and have the power to inflate or dilute the total supply. (FED in the USA, ECB in Europe, BOE in the UK, RBI in India etc…).
    On the other hand, Bitcoin future emission is planned, immutable and not controlled by a centralised authority.
  3. Transparent disbursement
    In fiat, we are not aware of how governments and large financial institutions spend freshly issued money. Bitcoin addresses this issue by storing every single transaction on a distributed ledger, called the blockchain, which is available to everyone.
  4. Private transactions
    Bitcoin holders have the choice to dissociate their wealth and their identity - something not possible with a traditional bank account as there is extensive Know Your Customer (KYC) compliance.

Founding team

I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party…

Satoshi Nakamoto

"Satoshi Nakamoto" is the name used by the inventor or the group of inventors who created Bitcoin and managed its early development. Satoshi's last communication was around 2013 via a forum post.

In 2008, Satoshi Nakamoto published "Bitcoin: A Peer-to-Peer Electronic Cash System", and introduced to the world the concept of decentralised money. In 2009, Bitcoin launched.

The Bitcoin protocol only came to notice to a wider audience in 2010, when Slashdot published a piece on the new technology.

Let's review two basic fundamentals of Bitcoin:

One bitcoin is divisible to the 8th pace. This means you can split a Bitcoin into 100,000,000 units. One of those units is commonly called a "Satoshi".

There will be only 21 million Bitcoins issued – and 99% of them will be available by 2031.

Bitcoin is the first and largest cryptocurrency by market capitalisation, but over a thousand cryptocurrencies and digital assets exist and each of them follow different fundamentals. For instance, Litecoin, nicknamed the "digital silver" has a maximum supply of 84 million units.

Features

Here are some of Bitcoin’s core value propositions, but to summarise, Bitcoin is to banks what e-mails are to postal services.

Geography

Just like the internet, Bitcoin has no borders and belongs to no country. Geography is never taken into account in transaction fees.

Accessible

Unlike bank accounts, there is no prerequisites, screening process, charging structures, consumer limits, nor account freezing. You have complete control over your capital.

Speed

Transferring cryptocurrencies can be as fast as sending an e-mail. You do not need banks, payment gateways or transaction agents.

Safe

Bitcoins stored in wallets are all only accessible to their owners. On the other hand, funds stored in a traditional bank accounts are vulnerable to bank insolvency, freeze, seize and inflation.

Cheap

There are no brokers or third party agents involved in the process, making the transaction fees considerably lower and more straightforward than with fiat.

Trustless

Unlike fiat, no one can print additional Bitcoins. The total amount is capped at 21 million, the supply is controlled, planned and transparent.

Transparent

The Bitcoin blockchain records every transaction on an open-source distributed ledger along with the funds stored in every "Bitcoin account". Everyone knows how many Bitcoin are kept in wallets and when an operation occurs.

Private

With Bitcoin, we have perfect knowledge of all the information regarding transactions (amount, sender, recipient) but with imperfect disclosure of identity. In other words, a wallet does not have to be clearly associated with a person's name.

Finally, here is a summary of how cryptocurrency are different from fiat: