Bitcoin functions as a digital currency, by following the same three rules that traditional, or fiat currencies follow.

 1. They need to be difficult to produce (cash) or find (gold or other precious metals) 

2. They need have a limited supply 

3. They need to be recognized by other humans as having value When we examine Bitcoin, it ticks the boxes of all three of these characteristics:

 i. Bitcoin uses complex computer algorithms in its production which take a lot of computational power and proof-of-work, so it cannot be replicated easily or at a discount

 ii. There are a finite supply of Bitcoins - 21 Million to be exact. As of 2015, roughly 2/3 of this number had been mined 

iii. There are hundreds of Bitcoin exchanges and Bitcoin is accepted as payment everywhere from Subway to OKCupid Bitcoin miners have incentive to mine as they receive Bitcoin as a reward for their computer’s endeavors. 

Bitcoin was designed to be a deflationary currency, so unlike fiat currencies, the supply of money is fixed. This, combined with the decentralization principle ensure that no single person or government can simply create additional coins once the supply is mined. Once all the coins are mined, the value of the currency will in theory, continue to rise. Bitcoin transactions are recorded on a digital ledger (or record) known as the blockchain. The core concept that upholds Bitcoin’s usefulness is decentralization. With decentralization, the blockchain is not owned by one single person or entity. In fact, everyone has access to it. Therefore transactions are publicly broadcasted across the network, which ensures that both parties have upheld their end of the agreement. The code is open source (like Linux or Android Operating Systems) so anyone can view it, this ensures transparency among all parties.