A bitcoin isn’t the same as your credit card. Your credit card is a means to make a digital transaction of government-regulated currency. A bitcoin is de-regulated virtual currency whose value fluctuates with demand and open-market bidding, similar to the stock market exchange. Think of it like owning a gold coin. The bank can’t put a set value on a gold coin like they do our currency. But it can still be bought, sold or traded for goods or services like cash.
A bitcoin isn’t a digital transaction of real money, it’s literally “virtual money” that can only be used within a virtual framework. Even though Monopoly money is a tangible thing, it still works as a parallel example of money that is only good for buying things within the framework of the Monopoly game. Another good example is when you use virtual money in an online game to purchase things like special powers or avatars.
Bitcoins work like these examples, they’re only bought and sold in a virtual world. But unlike play money, they have real monetary value attached to them. We’ll go deeper in our next blog.