This is post is taken from the Frequently Asked Questions.

Bitcoin is a cryptocurrency in the sense that it too uses cryptography (the technology that the Internet uses for encryption) to create and protect the bitcoin tokens. Bitcoin is different than most in that it uses a consensus mechanism called proof of work. The other major consensus mechanism is called proof of stake.

In Bitcoin, the chain of transactions that has the most work put into it is the real version. This work is costly in the sense that there is a lot of energy that is used to find the next block. This energy has real world costs that can’t be just duplicated on a whim. An easy way to think about it is that you look at someone who is really strong or fit. You can physically see the work that that individual put in to look like that. It isn’t something that can just be faked.

The second most valuable cryptocurrency is called Ethereum. Ethereum started as a proof of work competitor to Bitcoin but has since changed consensus mechanisms to a system called proof of stake. Proof of stake essentially says that the more tokens you hold, the more valuable your voice is in deciding what the correct chain is. It doesn’t require any actual work, only more of the Ethereum tokens.

There are also hundreds of thousands of cryptocurrencies out there. Some claim to do special things. Most of these are outright scams and have no product behind them at all. The few that actually do have a product run into the issue of how the supply of the token is released. Remember that bitcoin has a fixed release schedule that anyone could have joined early on.

Many, including Ethereum sold their tokens to early investors (for bitcoin nonetheless!) before they even hit the market and gave themselves millions of tokens. The reason that so many cryptocurrencies exist is that the creators think that they can convince people to buy their tokens or pump up the price of the tokens through speculation.

All of these altcoins are (or have been) going to zero in terms of bitcoin. Usually the ones “making money” are the founders of the altcoins, the exchanges like Coinbase or Binance that encourage their trading, and the people that get lucky by buying and selling at the right time.

Here’s a chart of the last year of Ethereum (the second largest cryptocurrency in market cap) priced in bitcoin:

The purpose of Bitcoin is not to get rich in the fiat sense, but to create a fair money that people can use to transact in and store today’s work for the future in a currency that will not be debased at the whim of a government.