Bitcoin is a kind of virtual currency, existing in the digital world. If you read our previous blog comparing bitcoins to gold coins
, it’ll help you understand. A bitcoin is a type of “cryptocurrency.” What is cryptocurrency, you ask? Let’s dissect the word.
As you may already know, the word crypto comes from cryptography. Cryptography comes from an ancient Greek word, “kryptos,” which means “hidden” and “secret.” Cryptography is the practice of making plain text and communication unreadable through “encryption” and then reversing it back to plain text through a process called “decryption.”
Cryptocurrency, therefore, is a digital currency where encryption is used to regulate the generation of currency so it doesn’t get out of control. The concept is similar to that of our federal government regulating the amount of dollars it prints.
The most famous cryptocurrency today is bitcoin, invented by Satoshi Nakamoto, an elusive figure whom not much is known about today. Bitcoin is digital money that you can buy, store, and transfer without needing a central bank. Instead, computers around the world verify the units of bitcoins in order to prevent double spending.
The bitcoin market has increased in recent years and is said to be worth the equivalent of a half trillion US dollars. If you're curious, Wikipedia put together a great visual showing where all currency, physical and digital, falls within the bounds of regulated and unregulated status, which we've published above.