To understand bitcoin gambling, then you need to understand bitcoin. So, what is bitcoin?
Bitcoin is an open sourced, peer to peer technology linked to currency. Bitcoin, as a product, represents transactions that are verified by the underlying network. The network incentivizes people (often called miners) to verify the transactions because miners receive bitcoin as a result of the confirmation process. The underlying network, which records all of the transactions, is called the blockchain (and is essentially a big public database).
The bitcoin system, which was created by Satoshi Nakamoto, was shared publically with the release of Bitcoin: A Peer-to-Peer Electronic Cash System. The paper details how the open sourced network replaces a centralized source of power that controls the flow of money. This is important because the system has its own supply and demand, which drives the value of a bitcoin. The value of a bitcoin is needed to incentivize miners to confirm the transactions on the blockchain.
Bitcoin is often referred to as a cryptocurrency because it is a technology that represents money. It is important to note the many governments classify bitcoin as a commodity (like gold) compared to a currency (like the U.S. Dollar or Euro).
Since bitcoin has monetary value and a system of trust, there is now an emerging number of online casinos that use bitcoins.