It’s a cryptocurrency, which means it exists only in the digital world.
It was developed in 2009 by someone – we still don’t know who for sure – using the name Satoshi Nakamoto and is based on a payment system that allows one person to pay another, without the need for any middle parties, such as banks.
There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate.
How does it work?
A person holds their bitcoins in a bitcoin wallet – in a mobile app or computer – and can send and receive bitcoins through it.
They get the bitcoins in the first place by accepting them for a good or service, or from an exchange, where they swap real money for bitcoins at the prevailing exchange rate.
Every bitcoin user has their own address – a bit like a bank account number – and controls all the bitcoins coming in and out of that address.
The bitcoin transactions run on a system called blockchain. This is a public ledger, which holds a record of every single transaction.