For Starters, It’s Not a Coin

What is a bitcoin?

As a virtual currency, it is hardly an easy or intuitive concept. The securities filing for the Winklevoss Bitcoin Trust defines a bitcoin as “one type of a digital math-based asset that is issued by, and transmitted through, an open source, cryptographic protocol platform known as the bitcoin network.”

In plainer terms, a bitcoin is digital money that you cannot hold, but can be bought and sold online in exchange for traditional currencies like dollars and yen.

The value of a bitcoin is set by transactions on online exchanges. (On Monday, one exchange gave a value of $86.30 for one bitcoin.) A limited number of stores and Web sites also accept bitcoins as payment.

The currency was invented in 2009 by a programmer or, possibly, a group of programmers known only as Satoshi Nakamoto. Unlike national currencies backed by central banks, bitcoins are created by a decentralized network of users who solve complex mathematical problems â€" a method known as “minin” â€" to generate bitcoins.

Only a finite number of bitcoins can be created, with the current count at about 11 million. They are stored in “digital wallets” as strings of letters and numbers.