Bitcoin drew major influences from prior cryptocurrency attempts, but was remarkably different, in very interesting and profound ways.

The major selling point of Bitcoin, off the bat, was that it was decentralized. It was a digital currency that could be sent to and received at an account address, and the owner of the currency would have a digital key to unlock it. This key was kept privately, and could be stored on a CD or a flash drive... anything with storage, really.

But, from the beginning, it was apparent that Bitcoin fixed one of the major flaws people had with digital currency. Often times, a digital-type of currency led to double-spending. That is when you have a digital coin, for example, and you simply make a copy of it. In prior cryptocurrencies, people who copy the currency once or twice over, and then keep spending the copies. It'd be like you being able to photocopy a dollar bill; it devalues the currency.

To fix this, and become prominent on a global stage, Bitcoin needed to stand apart. This is where peer-to-peer networking came in.

Peer-to-peer networking became the main attraction for Bitcoin, because it created type of public ledger known as the blockchain. The blockchain is constantly being updated, with transactions being added to the blockchain, and the system using a peer-to-peer network to constantly update it.

Essentially, the system operates with no central figure. There's no server, where all of the money is stored. It's stored privately, but each transaction is a public record, and added to the endless blockchain. From there, the peer-to-peer network - every computer connected to the network - keeps the blockchain updated through a process known as "mining."

Bitcoin mining is a system that adds transactions to the blockchain, but also incentivizes users of Bitcoin to remain active. Those that support the blockchain are rewarded in Bitcoin, which is given out for every block added to the chain.

I know that some of you may be somewhat overwhelmed right now, and trust me - you're not alone. I'm a total newbie when it comes to cryptocurrencies, so this is very confusing for me, as well. However, all you really need to know is that Bitcoin was a currency created to cut out the middleman: it made every transaction public, and kept power in the hands of those that participated in the system.

Essentially, it took the "bank's" role from the banking system, and made it an open-source, peer-to-peer network.

Satoshi Nakamoto seemed to be aware that Bitcoin would remain worthless if a cap wasn't established on Bitcoin, so the system was launched with an end goal in-mind. The system was created to reward a grand total of 21 million Bitcoin, when all was said and done, but that will - hopefully - not be for many, many years. Each single bitcoin can be reduced in millions of parts, and the most basic units - 100,000,000 units for every Bitcoin - have since become identified as "Satoshi," named after the currency's founder.

Bitcoin miners - those that participate in the system - can earn bitcoin by mining, but early users were the most well-rewarded. For every 210,000 additions to the blockchain - the public ledger that keeps transactions open-sourced - the reward for miners gets cut in half, and that will continue until all 21 million Bitcoins have eventually been "mined."

It's a very complicated system, and it's one that I hope makes sense for those of you that are as inexperienced as I am. However, it was thoroughly analyzed by the founder of Bitcoin, and seems poised to remain prominent for some time.

Excerpt from:

Satoshi Nakamoto Unresolved