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Bitcoins are ‘mined’, using computing power in a distributed network.This network also processes transactions made with the virtual currency, effectively making bitcoin its own payment network. The bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners.Around the world, people are using software programs that follow a mathematical formula to produce bitcoins.
However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the founder of bitcoin).
Conventional currency has been based on gold or silver.
That means that, in theory, one central authority can’t tinker with monetary policy and cause a meltdown – or simply decide to take people’s bitcoins away from them, as the Central European Bank decided to do in Cyprus in early 2013.
And if some part of the network goes offline for some reason, the money keeps on flowing.
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No single institution controls the bitcoin network.
This puts some people at ease, because it means that a large bank can’t control their money.
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