Bitcoin is special. It is the only cryptocurrency that is distributed the most around the world, but that’s not what makes it special. It is special because Bitcoin uses something called “Proof of Work”.
Think about what is valuable. Let us take Gold as an example, because it is the closest to Bitcoin for this analogy. What gives gold its value? Some say it’s the usability of Gold, like in computer chips, but where does it get its value from? If we break it down, it comes down to proof of work.
In order to get gold, you must spend some time and energy to go find gold. You might find a gold-rich plot of land, but in most cases, you come up empty after spending all that time and energy. So now you go try another location, and another, and another, and another, and another and another, and another, and then you find some gold. Now that you’ve found a gold-rich land, you must use energy to mine the gold and separate it from other minerals and stones. Then you must melt it down and purify it and finally make it into gold bars. All of this takes time and energy. This is proof of work. You have done the work, now you may get the reward.
Bitcoin is very similar to Gold. You can’t just make Bitcoin out of nothing. For the most basic explanation, you must use a computer to solve a very hard math function over and over and over and over again until you find a solution that has a specific number of 0’s or 1’s at the beginning. This changes with the difficulty level every 2 weeks to keep the average time to find a new bitcoin block to about 10 minutes.
What other types of systems are out there besides proof of work? There is proof of stake. This means that someone will put up a hefty sum and declare it true. This is a lot like fiat currency where they declare that this piece of plastic or paper is worth what it’s worth. Take the US Dollar for example. 1 US Dollar is worth 1 US Dollar. Why? Because the US Government says so. How does it enforce this? With the full force of the US Army.