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What is bitcoin?

What is bitcoin?

Before you join the bitcoin movement, learn more about what it is, why people are enthusiastic about it, and what you can do with it.

You've probably heard a lot about bitcoin. But are you ready to buy it? Before you join the bitcoin movement, learn more about what it is, why people are enthusiastic about it, and what you can do with it.

Bitcoin is a type of cryptocurrency. Just like you can hold dollars, euros, or pounds, you can also hold bitcoin. Unlike traditional currencies, though, there's no such thing as a physical bitcoin; you won't get anything tangible to put in your piggy bank.

That's because bitcoin is currency that is purely digital. That may sound limiting, but in a world where we're already used to swiping and clicking our way through transactions, it can actually make a lot of sense. After all, who really needs paper bills anymore? (And don't get us started on coins.)

Why do I hear so much about it?

Just like there are different currencies in different countries, there are also many types of cryptocurrencies. However, bitcoin has a few advantages that make it one of the most well-known cryptocurrencies out there.

First and foremost, it's been around for longer than its competitors. Bitcoin's origin story begins in 2008, with a white paper called "Bitcoin: A Peer-to-Peer Electronic Cash System."1 The white paper laid out the principles for a secure digital currency that would allow individuals to pay each other without going through a third-party financial institution.

The paper took off, and so did bitcoin. Its success encouraged the creation of a host of other cryptocurrencies, but bitcoin still enjoys its first-mover advantage and widespread name recognition. It's the only cryptocurrency to ever reach a market capitalization of $1 trillion, and even its nearest rival, Ethereum, doesn't come close.2

Bitcoin has also won over many mainstream and institutional investors. In October 2021, the SEC-approved the first Bitcoin-linked exchange traded fund (ETF), making it easier for everyday investors to gain exposure to the cryptocurrency in their portfolios.3

What's so great about it?

There are lots of reasons bitcoin has piqued people's interest, not least of all because it's different than anything that ever existed before it. These differences are fully outlined in Satoshi Nakamoto's original white paper describing his vision for Bitcoin.4 It holds a dual role as both a currency and an investment, it's not bound by national borders like many traditional government-backed currencies, and it offers a decentralized option for transferring funds directly to other people—all at the same time.

There's also a network effect in play—the more people who own cryptocurrencies, the more attractive they have become. And in the U.S. alone, 16% of all respondents in a Pew Research Center survey said that they've used cryptocurrencies, including 31% of respondents between the ages of 18 and 29.5 Bitcoin consistently tops the list of cryptocurrencies with the highest trading volume, making its network that much more appealing.6

What's can I spend it on?

You don't have to spend it on anything; given its anti-inflationary properties (like a fixed, permanent cap on how many bitcoin can exist) many people view bitcoin as an excellent store of value.7

That being said, you can spend it on just about anything. Crypto credit cards and crypto debit cards let you pay with your bitcoin in many places. You can even earn rewards in bitcoin as well. Additionally, you can easily transfer bitcoin from your own digital "wallet" to someone else's (remember that peer-to-peer banking was one of the original goals of bitcoin).

Whether you're paying your cousin back for lunch, using your crypto credit card to buy some new clothes, or looking for a long-term investment, bitcoin provides plenty of options.

This does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell, or otherwise transact in any investment, including any of the product(s) mentioned herein, or an invitation, offer or solicitation to engage in any investment activity. This information is provided solely on the basis that you will make your own investment decisions, and Bakkt does not take account of any investor's investment objectives, particular needs, or financial situation. It is strongly recommended that you seek professional investment advice before making any investment decision. "Bitcoin: A Peer-to-Peer Electronic Cash System." Accessed March, 2022.

2Visual Capitalist. "Bitcoin is the Fastest Asset to Reach a $1 Trillion Market Cap." Accessed March, 2022.

3NextAdvisor. "New Bitcoin ETF Grows at Record Speed. Here’s What Investors Should Know." Accessed March, 2022. "Bitcoin: A Peer-to-Peer Electronic Cash System." Accessed March, 2022.

5Pew Research Center. "16% of Americans Say They Have Invested In, Traded, or Used Cryptocurrenc." Accessed March, 2022.

6Yahoo Finance. "Top Cryptos by Volume (All Currencies, 24hr)." Accessed March, 2022.

7The Motley Fool. "3 Reasons Why Bitcoin Is a Better Inflation Hedge Than Gold." Accessed March, 2022.