About Bitcoin
Bitcoin, the world’s first cryptocurrency, is securely stored and exchanged on the internet through a digital ledger known as a blockchain. Bitcoins can be divided into smaller units known as satoshis, with each satoshi worth 0.00000001 Bitcoin.
What is Bitcoin?
Bitcoin (BTC) is a decentralized cryptocurrency first described in a 2008 whitepaper by an individual or group of individuals using the alias Satoshi Nakamoto. Officially launched in January 2009, Bitcoin is a peer-to-peer online currency that enables direct transactions between equal and independent network participants without the need for any intermediary. This digital money cannot be inflated or manipulated by any individual, company, government, or central bank.
Recognized as one of the first cryptocurrencies to come into use, Bitcoin has inspired the development of thousands of competing projects. There will only ever be 21 million BTC. Bitcoin is highly divisible, with its smallest unit, 0.00000001 BTC, called a “satoshi” or “sat.” As Bitcoin’s value has risen, its easy divisibility has become a key attribute.
How Does Bitcoin Work?
Bitcoin’s key innovation is the blockchain, a piece of software that acts like a ledger, logging every transaction ever made using Bitcoin. Unlike a bank’s ledger, the Bitcoin blockchain is distributed and verified across a network of computers, meaning that no company, country, or third party controls it, and anyone can become part of that network.
New bitcoins are entered into circulation by solving computationally difficult puzzles to discover a new block, which is added to the blockchain. The first individual or group to present a solution to the puzzle is compensated with a certain number of bitcoins. Anyone with internet access can receive, send, and hold Bitcoin using the public version of their key, allowing for secure transactions.
What Are the Potential Use Cases?
One of Bitcoin’s advantages is its status as one of the initial cryptocurrencies to appear on the market, creating a global community and a new industry of enthusiasts who use Bitcoin and other cryptocurrencies in their everyday lives. Often referred to as digital gold, Bitcoin has potential for long-term utility. It serves as a decentralized medium of exchange, providing ownership rights as a physical asset or as a unit of account.
What is the History of Bitcoin?
Bitcoin was launched in January 2009 by an individual or group using the alias Satoshi Nakamoto. The concept wasn’t the first idea for digital money, but it was a unique solution to establishing trust between different online entities. The first block on the Bitcoin network, known as the genesis block, was mined by Nakamoto. The first known Bitcoin transaction occurred on May 22, 2010, when programmer Laszlo Hanyecz traded 10,000 Bitcoins for two pizzas, an event now celebrated as “Bitcoin Pizza Day.”
Over the years, many contributors have improved the cryptocurrency’s software by patching vulnerabilities and adding new features. The fact that Bitcoin is not controlled by a single person or organization is core to its value proposition, and Satoshi Nakamoto’s identity remains unknown.
How Can I Buy Bitcoin?
To buy Bitcoin, you can create an account on platforms like Coinbase or other reputable financial technology companies. Bitcoin is also increasingly accessible via traditional financial portfolios. For instance, in October 2021, the first Bitcoin futures-based ETF was approved, and in January 2024, the first spot Bitcoin ETFs were approved. ETFs provide a popular way for investors to gain exposure to assets like gold, tech stocks, and now Bitcoin.
What is Bitcoin Mining?
Bitcoin mining is the process by which new bitcoins are created and transactions are verified on the network. Specialized computers, known as ‘mining rigs,’ compete to solve equations required to verify and record new transactions. In the early days, a typical desktop PC could participate in mining, but now, mining requires massive, specialized computers, often owned by businesses or large pools of individuals. As of October 2021, U.S.-based miners hold the highest percentage of global mining power, according to Cambridge University researchers.
Bitcoin is often considered a “store of value,” similar to gold. The maximum supply of Bitcoin is capped at 21 million coins.
The Bitcoin Halving explained
What is the Bitcoin Halving?
Every four years, the amount of new Bitcoins created gets cut in half on the halving day. This means that the reward given to the contributors securing the network is reduced by 50%, directly impacting the rate at which new Bitcoins are introduced into circulation.
At the beginning of 2020, 12.5 new Bitcoins were added to the network every 10 minutes via virtual “mining.” In May 2020, that amount was halved to 6.25. In April 2024, it will drop again to around 3.125. This process will continue until all 21 million coins have been mined, which is estimated to occur around the year 2140. This halving mechanism, coded into the Bitcoin protocol by its creator Satoshi Nakamoto, limits the total supply of Bitcoin, thereby increasing its scarcity.
What Happens When Bitcoin Halves?
When Bitcoin undergoes a halving, the number of new Bitcoins produced gets cut in half. In other words, there’s a 50% reduction in the reward miners receive for validating transactions and adding them to the blockchain. This event is programmed into the Bitcoin protocol and occurs approximately every four years, or after every 210,000 blocks.
Why is the Bitcoin Halving Important?
The Bitcoin halving is significant because it reduces the reward given to the contributors securing the network by 50%, directly impacting the rate at which new Bitcoins are introduced into circulation. Given that there will only ever be 21 million Bitcoins, the halving makes them more scarce. This inherent scarcity, combined with the historic increase in demand after previous halving events, fosters a sense of digital rarity that could lead to potential upward pressure on prices.
