Bitcoin – what is it? Think of it as a video game. It has rules but, unlike video games, Bitcoin is “distributed”. This means that the rules cannot be changed without every participant of Bitcoin agreeing. This means that the rules won’t change – ever. If there are better rules then a new Bitcoin will develop.
The rules say that Bitcoins can be exchanged, can be created and have a limit – they cannot exceed 21 million. They can be created by “hard work”, called “mining”. Basically anyone who has the funds can invest in computer hardware to create Bitcoins. The more that are created, the more difficult it is to create new Bitcoins. The return on investment, i.e. the return on investing time and money in “mining” Bitcoins, is high at the beginning and lower towards the end (on the basis of today’s technology).
What is great about Bitcoins is that they can be exchanged without banks, Governments and regulators. It is akin to barter and brings power to the people not to the institutions.
Note that should you buy Bitcoins then changing them back to “country currencies” is under attack by Governments. This is Bitcoins vulnerability but also it’s strength – if Bitcoin takes off, why would you ever want to exchange it for another currency!