What Is Bitcoin?

Bitcoin is much talked about but little understood. I believe it will continue to grow in significance as more women realize the benefits it can bring as an investment opportunity and as a key weapon in the battle for financial freedom.

In this post, I want to answer the question most women ask when they first encounter bitcoin — what is it?

In a follow up post, I’m going to explore some key truths about Bitcoin that I think complement this introduction. I would love to hear from you if you have any questions about either.

The Bitcoin network is a protocol that facilitates the digital transfer of value without the need for a trusted intermediary. It uses blockchain technology to validate transactions. Bitcoin is the reward given to the validators, often referred to as miners. This reward is given in the form of a digital token — Bitcoin.

The digital part of that description means that Bitcoin has no physical form to touch or hold, unlike a bank note. This is the first slightly strange characteristic of Bitcoin that’s important to wrap your head around. 

A good way to think of it is to compare it to the US dollars that exist in a bank account. If every person, company and government wanted physical notes in exchange for the money in their bank accounts, it wouldn’t be possible. That’s because most money only exists in digital form today.

Taking this a step further, a key difference between the digital money that exists in a bank account and the digital assets that exist within a blockchain network is that digital money is controlled and managed by a bank. The bank stores the information in a database of some kind, which exists on a network of computers that the Federal Reserve uses to communicate with the banks.

Bitcoin is different. Each individual bitcoin exists on a distributed ledger within a decentralized blockchain network. If you’re unfamiliar with these terms, that’s understandable. You are most likely to encounter them in finance, accounting and computer science — but more and more, they’re starting to show up in everyday language.

To understand the distributed ledger, we can compare it to the bank example referenced earlier. Whereas the bank has a centralized database recording the money it controls on behalf of its customers, Bitcoin’s distributed ledger is essentially a transaction history that is shared by a network of computers around the world. The blockchain part of the description refers to how the data is stored, in a series of blocks that are linked one after the other in a chain, each containing the data from before.

This network of computers is referred to as the Bitcoin network and it is decentralized because there is no single central point of control — or attack. The individual bitcoins on the distributed ledger are held at addresses that can be accessed using public/private key cryptography (hence the name “cryptocurrencies”) and every computer on the network has a copy of the Bitcoin ledger. 

This ledger records the number of bitcoins stored within each address. The transferring of bitcoins between addresses is managed through a ‘Proof of Work’ consensus algorithm, which I will explain in greater detail in a follow up post. 

For now though, hopefully this has provided a handy introduction to this much talked about but little understood topic. 

Want to Learn More? Join the Women in Bitcoin Course

We're excited to share some great news: podcaster, journalist and crypto educator Natalie Brunell will be launching a Women in Bitcoin course this October with Pomp's Crypto Academy team. The three-week experience will feature guest speakers Lyn Alden, Hailey Lennon, Claire Jencks, Flori Marquez and Layah Heilpern. This is the perfect opportunity to soak up tons of crypto knowledge, so sign up while there’s still time. You can also check out Brunell’s podcast Coin Stories here.