Bitcoin solved the problem that had stopped every earlier attempt at digital money. Here is how its design gives bitcoin its properties.
Digital files can be copied perfectly and for free. Without some form of control, the same digital coin could therefore be spent several times, a problem known as double spending.
In ordinary payment systems, this is solved by a bank keeping the books. All earlier attempts at digital cash depended on such a central party.
Bitcoin solved the problem with an open blockchain and proof of work. Transactions are placed in blocks that are locked to each other, and creating a new block takes a lot of computing power.
Anyone who wants to change the history must redo the work faster than the rest of the network. That is so costly that transactions in practice become final after a few confirmations.
There will never be more than 21 million bitcoin, and new bitcoin are issued according to a fixed schedule. No authority can change this.
At the same time, each bitcoin can be divided into a hundred million units, called satoshis. Both very small and very large amounts can therefore be handled in the same system.
Anyone can run their own copy of the software, called a node, and check every transaction back to the start. Trust lies in the rules, not in an institution.
The network does not distinguish between users. No one needs permission to take part, and valid transactions are hard to block. This is called censorship resistance.
Proof of work ties security to real energy use. Supporters argue that this anchors the digital system in the physical world and makes attacks expensive.
Critics point to the environmental footprint and note that other consensus models use far less energy. The debate about energy use still follows bitcoin.