Created in 2009, Bitcoin (BTC) is the first cryptocurrency designed to become a peer-to-peer electronic cash system. It remains as the digital asset with the largest market capitalization in the market despite being the first and the oldest of its kind.
Known to be the brainchild of the still-unknown individual (or may possibly be a group of people) under the pseudonym Satoshi Nakamoto, Bitcoin, aka the ‘grandfather’ of cryptocurrency, is the first well-known application of the novel blockchain technology.
Consequently, Bitcoin has a significant impact on the crypto market by influencing alternative cryptocurrencies simply referred to as altcoins. It continues to serve as the main ‘anchor’ in the market as BTC proves to be the most liquid cryptocurrency having more than 5,000 altcoin trading pairs.
Quick Note: Users should capitalize the word “Bitcoin” when referring to the concept in context. Meanwhile, they can use ‘bitcoin’ in the lower case when talking about the quantity of the currency itself. (e.g Bitcoin is more than 10 years old and yet I have less than 1 bitcoin in my wallet.)
Bitcoin Key Points
|Consensus Protocol||Proof-of-Work (PoW)|
|Block Time||Approximately every 10 minutes|
|Mining Rewards||6.25 BTC every block|
|Bitcoin Halving||Every 4 years at the 210,000th block (Latest one occurred on May 12, 2020, at the 630,000th block)|
|Total Supply||21,000,000 BTC|
How Bitcoin Works
Most people have formed different impressions from hearing Bitcoin-related news or reading about it online. While some show no interest or remain confused about what it really is, a number of cryptocurrency users spent the majority of their time learning how to invest in Bitcoin.
In a nutshell, Bitcoin is a digital currency within a decentralized distributed ledger introduced as a blockchain. To give you a distinction between Bitcoin and blockchain, look at blockchain as a globally-accessible online spreadsheet that contains all Bitcoin transactions on its cells (blocks).
No centralized authority like governments and banks control and back Bitcoin. It has been created to specifically remove the middleman involved within traditional financial transactions. Through bitcoin, users can make safe and instant transactions through the blockchain.
Bitcoin also has a total supply of 21 million, all of which are exclusively available in digital format. With Bitcoin, users can store, trade, and transfer their assets to peers and crypto exchanges worldwide through a unique 26-35 alphanumeric characters (address) that are cryptographically linked in the blockchain.
You may have doubts if it is safe to use Bitcoin. You can keep your bitcoins secure with public and private keys in various crypto wallets. A public key is similar to the bank account number you have, while the private key is needed to authorize any BTC transaction you will conduct.
Read Also: How to Buy, Sell, and Store Bitcoin?
Main Attributes of Bitcoin
No governing entity controls Bitcoin, which makes it an independent asset. Transaction verification and impenetrable security are possible since Bitcoin was designed to function freely through a machine-driven ecosystem. It makes the storing of value one of its main use cases.
Unlike the traditional financial banking system that is mandated by regulators, Bitcoin is strictly run by thousands of trustless nodes. With the combined computing power of the Bitcoin community, the network remains steadfast and highly-resistant to cybersecurity attacks.
Bitcoin values privacy among its users. One of the most highlighted aspects of blockchain transactions is anonymity. For example, users do not need any physical addresses, financial history, or phone numbers to successfully make transactions.
Through Bitcoin wallets, users can send and receive bitcoin and other supported cryptocurrencies seamlessly. You can remove any association to your personal identity when you buy, sell, and store bitcoins. This is a good reason to take advantage of crypto transactions.
Users can track bitcoin transactions in real-time through block explorers. They can also find the details of a transaction by using a search engine and entering the wallet address, transaction hash, or block height within the blockchain.
Blockchain transactions are deemed to be immutable by nature. Also, making changes to any transaction is almost impossible as it requires changing the block hash of the former block. Furthermore, every node gets informed of any activity within the blockchain as it happens.
Read More: How Blockchain Technology Works
The Bitcoin blockchain processes and validates all transactions with the help of over 10,000 operational full nodes. These are computers located around the world that are responsible for maintaining the massive blockchain (roughly 240gb and continuously growing).
Bitcoin creators have created the Bitcoin blockchain to be secure and to avoid any cases of double-spending through the Proof-of-Work (PoW) consensus. The special nodes (miners) do the process of crypto mining, which basically requires solving the Hashcash mathematical puzzle.
Satoshi Nakamoto designed the Bitcoin protocol in such a way that each block will take about 10 minutes to be mined. The network compensates miners with their services in the form of block rewards.
Initially, miners were able to share 50 BTC as block rewards, although Satoshi Nakamoto designed the rewards to periodically decline through Bitcoin halving.
The more miners there are in a network, the lower the chances are of vulnerability to hacking and manipulation. For example, a successful attempt for any hijack on the network requires 51% of the overall computing power.
Early Years of Bitcoin
Satoshi Nakamoto published the Bitcoin whitepaper online.
The genesis block was mined, with a text that says “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”.
Florida programmer Laszlo Hanyecz paid 10,000 BTC for Papa John’s pizza, marking the first real-world Bitcoin transaction.
The Bitcoin market cap exceeded the $1 million mark.
The first mobile Bitcoin transaction occurred as Bitcoin Forum member double compiled Bitcoind on the Nokia N900 mobile computer.
Silk Road, the darknet’s first bitcoin-based marketplace, opened for business.
TIME magazine published the first-ever article about Bitcoin.
BitPay launches as the first e-wallet and bitcoin payment service provider.
P2Pool, the first P2P decentralized pool, P2Pool, mined its first Bitcoin mainnet block at the 142,312th block.
The Bitcoin Foundation began to help create further awareness about Bitcoin and how it can be utilized by everyone globally.
The first halving day occurred at the 210,000th block, reducing the 50 BTC block rewards to 25 BTC.
The Bitcoin market cap exceeded the $1 billion mark.
The first Bitcoin ATM debuted in San Diego, California.
Shopify starts accepting bitcoin for payments.
Considered to be the biggest Bitcoin heist in crypto history, Mt.Gox, the world’s largest Bitcoin exchange at the time, went offline. As a result, the community lost up to 850,000 bitcoins.
More people joined the Bitcoin and altcoin bandwagon. As a result, the price of BTC reached its all-time high (ATH) price of almost $20,000 in December 2017. Many high-investment initial coin offerings (ICO) happened during this time as well.
Read Also: What Is An ICO?
After the unprecedented boom in 2017, the great crypto crash happened in the Q1 of 2018 where the price of Bitcoin fell down to almost 65 percent. It continues to be the leading cryptocurrency in the market today although it has yet to regain its ATH.
Read Also: Why Do Bitcoins Have Value?
Global-Scale Bitcoin Adoption
The United States is undeniably at the leading spot for Bitcoin adoption since it hosts the world’s largest Bitcoin companies. Crypto exchanges Coinbase and Kraken have set up their headquarters in San Francisco, California while Gemini’s is in New York.
The US also recorded the highest number of cryptocurrency users and Bitcoin trading volumes in the world. People within this financial and tech hub can also use their bitcoins as payment for eating and buying merchandise, and for accessing numerous Bitcoin ATMs.
Following the US are Sweden, Estonia, Denmark, South Korea, the Netherlands, and Canada, which are home to numerous Bitcoin startups and bitcoin-friendly merchants. In fact, these countries are at the forefront of embracing Bitcoin as an investment and as a means of exchange.
Statistics revealed that by Q4 of 2019, the number of bitcoin transactions recorded daily amounted to 293,000. Global drivers of cryptocurrency adoption include companies and merchants such as Microsoft, Walmart, Starbucks, and Whole Foods.
Meanwhile, the Japanese Yen, United States Dollar, South Korean Won, and European Euro are the most traded national fiat currencies against bitcoin. Moreover, cryptocurrency trading platforms in all parts of the world cater to crypto-fiat (vice versa) trading options.