You have probably heard about Bitcoin, but do you know what Bitcoin is? Most people don’t but if you’d like me to explain Bitcoin to you, read on…
Bitcoin was priced at $4,500 in March 2020, and recently hit over $61,000 just 12 months later. The price is volatile, but that’s normal for a new asset.
Before we look into Bitcoin, however, let’s look at its short history.
History of Bitcoin
To understand what Bitcoin is and the value it can bring to our world, it is important to understand why it was created in the first place.
Bitcoin first became available to the public in 2009 and did something other digital currencies before it could do: nullify the chances of double spending. Bitcoin is a digital asset that is secured with cryptography – complex mathematical algorithms – and can be used to buy things with like any other currency.
Many people think Bitcoin is anonymous, but it isn’t. Its creator of Bitcoin is an anonymous person or group of people, known as Satoshi Nakamoto. Nobody knows who he/she/they are, but that’s one of the beautiful things about Bitcoin. It doesn’t have a known central leader.
In Bitcoin’s whitepaper Satoshi Nakamoto states that the goal of Bitcoin is to create a new “peer-to-peer electronic cash system” that is completely decentralized with no central authority. Some say Bitcoin was created in response to the global financial crisis in 2008 to put power back in the hands of individuals who suffered from the corruption of large banks and governments.
Others say it wasn’t a response to the banking crisis, but either way, we do know that Bitcoin is a hedge against the crises that come from banking corruption.
What is Bitcoin?
Bitcoin is a digital currency that operates on a decentralised network. Every transaction is recorded in a public ledger. Transactions can be made with no middlemen, and everyone who holds Bitcoin can hold it themselves, which is secured behind encrypted private keys.
That means there is no need for banks, money transmitters or any third party because transactions will definitely go to the intended Bitcoin address.
How Bitcoins are Created
Unlike government money, Bitcoin is limited and nobody can just print them and deflate the value. Every Bitcoin that is on the blockchain has been mined into existence. This is done using specialized computers to solve complex cryptic puzzles.
A miner whose computer answers the cryptography first will win the 6.25 bitcoins that are created with every new block, roughly every 10 minutes. This is known as the block reward, and this halves roughly every four years. It started out as 50, and then 25, and then 12.5 bitcoins until May last year.
The next halving will see the block reward cut to 3.25 bitcoins, some time in 2024.The miners and other computers known as nodes run the Bitcoin network, and between them make the decisions that every transaction is correct.
The combined computing power also secures Bitcoin and makes it the most secure network ever created.
Interesting related article: “What is Digital Currency?“