Bitcoin is a open-source protocol. A network centric platform for recording ownership and trust on a peer-to-peer basis. It may be better though of as a digital bearer instrument, an internet wide value exchange mechanism, currency as a content type or programmable money.
The Bitcoin protocol's major claim is to have solved the elusive "Byzantine Generals Problem".
IE ensuring end-to-end message integrity without corruption. And reaching consensus across a distributed network without the need to trust a central intermediary.
If it proves to have done so it may herald a new network design paradigm and become the most important computer science innovation since the world-wide-web. For which 'currency' like bitcoin is just the first obvious application. Just like email was to the internet.
Crucially this means that embedded devices can conduct complex transactions securely according to programmatic rules. Automatically,
without requiring a 'mediator' or trusting a 'central authority'.
The Bitcoin eco-system secures crypto-currency transactions by leveraging the combined hashing power of a trust-less, dis-intermediated, P2P network.
Bitcoin uses pseudonymous public (addresses) and private key encryption, based upon asynchronous elliptic curve digital signatures [ECDSA] and secure hashing [SHA] algorithms. These combine to instantiate transactions featuring one way mathematical trap doors that are relatively easy to verify but very hard to decompose. The protocol rewards miners for risking energy and computing power to validate transactions by conducting proof-of-work.
The protocol employs game theory to derive majority consensus about transactions assembled into blocks by validating cryptographic inputs to confirm entitlement. This is represented in the form of an immutable shared ledger (the blockchain) constructed on a longest chain wins basis.
Bad actors capable of subverting the network, are dissuaded since, should they posses the vast resources needed to mount a 51% attack, they must suspend self interest. For they stand to gain far more by abiding by the rules and winning bitcoin.
So equilibrium is maintained. New 'coins' are created algorithmically by the protocol. The mining 'block reward' halves every four years. The production 'difficulty' is controlled to be ten minutes hard irrespective of the amount of participating peers. The difficulty of mining decreases if participation falls.
Every peer has access to to an up to date copy, even if nodes leave and re-join the network at will.