What is Bitcoin?
Bitcoin is the world’s most popular cryptocurrency. Bitcoin is a virtual currency designed to act as money and a form of payment outside the control of any one person, group, or entity, thus removing the need for third-party involvement in financial transactions. It is rewarded to blockchain miners for the work done to verify transactions and can be purchased on several exchanges. Bitcoin’s primary function is to act as an investment product for saved capital.
However, more and more consumers and businesses are adopting Bitcoin for fast payments. This is due to Bitcoin’s extremely secure peer-to-peer network.
There are no tangible bitcoins, as opposed to conventional cash (Fiat currency). The entire balance is recorded on a public ledger. This public ledger is also accessible to anybody.
A public ledger records all bitcoin transactions, and copies are held on servers around the world. Anyone with a spare computer can set up one of these servers, known as a node. Consensus on who owns which coins is reached cryptographically across these nodes rather than relying on a central source of trust like a bank.
Every transaction is publicly broadcast to the network and shared from node to node. Every ten minutes or so, these transactions are collected together by miners into a group called a block and added permanently to the blockchain. This is the definitive account book for Bitcoin.
Virtual currencies are held in digital wallets and can be accessed from client software or a range of online and hardware tools.
Bitcoin’s History
Bitcoin was introduced to the public in 2009 by an anonymous developer or group of developers using the name Satoshi Nakamoto.
It has since become the most well-known cryptocurrency in the world. Its popularity has inspired the development of many other cryptocurrencies. These competitors either attempt to replace it as a payment system or are used as utility or security tokens in other blockchains and emerging financial technologies.
Understanding Bitcoin
In August 2008, the domain name Bitcoin.org was registered. Today, at least, this domain is WhoisGuard Protected, meaning the identity of the person who registered it is not public information.
In October 2008, a person or group using the name Satoshi Nakamoto announced to the Cryptography Mailing List at metzdowd.com: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” This now-famous white paper published on Bitcoin.org, entitled “Bitcoin: A Peer-to-Peer Electronic Cash System,” would become the Magna Carta for how Bitcoin operates today.
On Jan. 3, 2009, the first Bitcoin block was mined—Block 0. This is also known as the “genesis block” and contains the text: “The Times 03/01/2009 Chancellor on brink of second bailout for banks,” perhaps proof that the block was mined on or after that date, and maybe also as relevant political commentary.
As a form of currency, Bitcoin isn’t too complicated to understand. For example, you can use your cryptocurrency wallet to send smaller portions of that bitcoin as payment for goods or services. However, it becomes very complex when you try to understand how it works.