Beginner
Lesson 5
3 min

What is Bitcoin?

Bitcoin (BTC) was the world’s first cryptocurrency that paved the way for all other cryptocurrencies to follow. Bitcoin was invented in 2008 by Satoshi Nakamoto, whose real identity is unknown. The position of Bitcoin as the best known and most popular cryptocurrency in the world has remained unrivalled to this day. 

  • Bitcoin was the first decentralised cryptocurrency 
  • The invention of Bitcoin was the first example of concrete application of the blockchain technology
  • Bitcoin is the world’s most popular cryptocurrency, both in terms of market capitalisation and dominance
  • Supply is limited to a fixed number of 21,000,000 bitcoins
  • Bitcoin inspired all other cryptocurrencies, also known as “alternative coins” (or “altcoins” for short)
  • Nobody knows who really invented Bitcoin

In this lesson, you will learn the basics about Bitcoin.


What is Bitcoin?

Bitcoin is a digitally encrypted currency running on a blockchain - an immutable, distributed transaction database.

Bitcoin was created in 2008 by a person or group of persons known under the pseudonym “Satoshi Nakamoto”. It was released as open source software in 2009, meaning anyone can join the community and participate in its development.

Bitcoin was the world’s first cryptocurrency and is still the most prolific. It also acts as a type of anchor for all other cryptocurrencies that have evolved in the meantime, commonly known as “altcoins”.

The trust in Bitcoin is vested in the fact that all transactions are recorded and visible in the Bitcoin blockchain. Cryptographic technology ensures that no one can spend the exact same units of the currency twice.  

What is the purpose of Bitcoin?

As outlined in the original Bitcoin whitepaper, Bitcoin is the world’s first “peer-to-peer electronic cash system”, that “allows online payments to be sent directly from one party to another without going through a financial institution.”

In a way Bitcoin deviated from this original idea based on scaling issues as a result of limits on the amounts of transactions the Bitcoin network can process. At the moment, Bitcoin is primarily used as a speculative store of value, much like digital gold or gold 2.0.

The debate around Bitcoin’s scalability eventually led to the creation of a new blockchain called Bitcoin Cash, which emerged from a hard fork of the original Bitcoin blockchain on August 1, 2017.

Can Bitcoin be used for negative purposes?

Just like traditional fiat money, Bitcoin is also used by criminals. However, unlike transactions with traditional paper money, Bitcoin transactions can be viewed and traced by anyone. 

Despite Bitcoin often being associated in the media with the “Dark Net” and various criminal activities, the cryptocurrency is actually poorly suited for such purposes. There are specialised companies that help government agencies track shady cryptocurrency transactions. 

The fact that the Bitcoin public ledger is transparent and all transactions are visible creates trust in a world full of deception. Thus, against all odds, Bitcoin continues to be the most widely used cryptocurrency around the globe thanks to a number of factors - read on below for more details. 

 

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FURTHER READING

BOOKS

  • Saifedean Ammous - The Bitcoin Standard: The Decentralized Alternative to Central Banking
  • Andreas M. Antonopoulos - Mastering Bitcoin: Programming the Open Blockchain
  • Andreas M. Antonopoulos - The Internet of Money
  • Nathaniel Popper - Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money

LINKS

How much currency can a country print at a time?

Bitcoin: An alternative financial system

The Faketoshi Circus: Even Bitcoin can’t escape the politics of money

Hack Flashback: The Mt. Gox hack