Bitcoin is a digital currency.
A digital currency is one that is used and stored on a computer. By way of comparison Dollars, Euros and Pounds are digital currencies because they can be used to buy things online and sent to others online.
Dollars, Euros and Pounds are examples of fiat currency. A fiat currency is a government issued currency that is not backed by something physical such as gold or silver. The value of fiat currency is determined by supply and demand. Fiat currencies are controlled by banks and governments.
Like Bitcoins gold is decentralised. You can dig up gold, create coins and give it to others, no-one controls the supply of gold. However, it’s difficult to use gold to buy things and you can’t use it over the Internet.
Bitcoin however has all the benefits of gold and digital currencies in one:
- It’s decentralised – no- one entity controls it’s supply and distribution
- It can be used to buy things and can be sent to others
- Bitcoin is stateless it is not owned by any nation
- It is not a company or organisation
Also it does not run the risk of bankruptcy because it doesn’t have, one central point of failure.
No-one can inflate the supply of bitcoin and cause hyperinflation. Because unlike fiat currency bitcoin has a fixed supply. There will only ever be 21 million bitcoin.