What is Bitcoin?

First of all, let’s be clear about what Bitcoin isn’t. If you’ve just heard about it on the news or saw  a post on X (Twitter) or TikTok you might think Bitcoin looks like this:

Digital Money

But Bitcoin is not a physical coin. You can’t hold one Bitcoin in your hand, and it certainly won’t come up heads or tails if you flip it into the air. Yet, it is money.  Bitcoin is digital money.  In other words, it exists as  code that lives on the internet.

So if Bitcoin is money, what does that mean? 

Investopedia says money is “...any item or medium of exchange that is accepted by people for the payment of goods and services, as well as the repayment of loans.”

The main functions of money are:

• Medium of exchange: Money is a way to buy and sell things without needing to barter.

• Unit of account: Money is a way to measure the value of things, allowing people to compare prices in order to decide what to buy and sell.

• Store of value: Money can be saved and used to buy things in the future. 

Can Bitcoin do that?  Yes it can, but it’s not that simple:

Medium of Exchange

Bitcoin is a new form of money that was invented in 2009. So, although you can buy lots of things with Bitcoin, you can't walk into any store and try to pay with Bitcoin from your digital wallet. Many stores might not even know what Bitcoin is. Still, as the popularity of Bitcoin grows, this is changing.

Unit of Account

Most of the world displays the price of a cup of coffee or a laptop in Dollars, or Yen or Euros, depending on where you live. That is why you mostly find Bitcoin’s value compared to those traditional currencies. Still, as the popularity of Bitcoin grows, this is changing.

Store of Value

I bet this is why you’re interested in Bitcoin. You’ve heard that the value of Bitcoin is going up. You’ve seen a Bitcoin ETF mentioned on the financial news. You’ve read that people have made (and lost) lots of money by investing in Bitcoin. All of that is true. Many people think Bitcoin is the best store of value, similar to gold, but even better.