Bitcoin is a decentralized, cryptography controlled, digital currency.
In its simplest form, digital currencies are an Internet-based form of currency.
All cryptocurrencies are digital assets designed as a medium of exchange,
All digital currencies use cryptography, the science of analysing and deciphering codes, ciphers and cryptograms, to control its creation and management, which, unlike regular currencies does not rely on any central administration or authority.
Cryptocurrencies are not controlled by governments, financial institutions or federal reserve banks, so their value is not dependent upon factors such as wages, commodity prices, politics, conflict, interest rates, bank and government policies etc.
Also, unlike regular currencies, digital currencies have a cap on how many of each can ever be produced and brought into circulation. For instance, at the moment, there are approximately 16.5 million bitcoins in circulation. When the total number of bitcoins reaches 21 million, no more will ever be produced, ever, that’s it.
This is one of the unique characteristics of digital currency as opposed to regular currencies, and one that makes its long-term success or failure unknown.
Compare this finite structure of digital currencies to regular currencies where dollars can be introduced into circulation at the whim of governments, backed by the banks, a process known as quantitative easing. This is absolute currency control, human and political manipulation of its value.
Cryptocurrency prices are based purely on supply and demand, it is fully organic.
Also, like other currencies, bitcoins can be broken down into units known either as ‘bits’ or ‘Satoshi’s’ in honour of the creator.
The satoshi is currently the smallest unit of the bitcoin currency at one hundred millionth of a single bitcoin (0.00000001 BTC).
The value of the first bitcoin transactions were negotiable, with possibly the first ever commercial transaction of bitcoin being 10,000 Bitcoin used to purchase two pizzas.
The pizzas, bought on 22nd May 2010 by Laszlo Hanyecz, when he paid a fellow Bitcoin Talk forum user 10,000 BTC for two Papa John's pizzas.
Those two pizzas cost the hungry tech-guy approx. US$18,000,000, as that would be the value of those 10,000 Bitcoins today.
Note: There are over 800 alternative cryptocurrencies now in circulation
Note: Altcoin usually refers to all cryptocurrencies besides bitcoin.