Bitcoin is an asset class whose value is represented not as a physical or even a digital object, but as a record of ownership on the Bitcoin blockchain. Bitcoins aren’t printed, like dollars or euros; they’re produced by a global network of computers and held electronically in programs called wallets. Bitcoin, often abbreviated as BTC, was the first example of what we now call a cryptocurrency.
If you transact with Bitcoin, the experience is similar to any other financial transaction: value is transferred from one person to another, the same as with dollars or real estate. But instead of that transaction being routed through a centralized financial services provider like a bank, Bitcoin transactions are validated, recorded and secured directly on the blockchain by tens of thousands of “nodes,” or individual computers, in the Bitcoin network.
The Bitcoin blockchain is simply a public record or ledger that exists on these nodes, which is updated in real time. No one person or institution controls the computers, making Bitcoin decentralized. When you send a bitcoin—or a fraction of a bitcoin—to another person, the entire network is involved and has responsibility for maintaining the ledger’s accuracy.
There’s a finite supply of 21 million bitcoins, which is stipulated in Bitcoin’s source code. Once miners have unlocked this many bitcoins, the supply will be exhausted. For this reason, Bitcoin has been called “digital gold.” It can be used to make payments for a variety of goods and services, and both retail and institutional investors increasingly view it as an asset class worthy of inclusion in their portfolios.