Crypto EDU

Bitcoin

  • August 2, 2021
  • Beginner
  • bitcoin
  • cryptocurrency
Bitcoin Logo

Although it’s not technically the first cryptocurrency—some precursors, like Bit Gold, were introduced in the 1990s (and ended soon after)—Bitcoin is the first cryptocurrency to receive widespread adoption. The idea for it was published in October 2008 by an anonymous person or a group of people calling themselves Satoshi Nakamoto. Satoshi imagined a digital money that could circulate freely without the need for banks, governments, or any kind of central oversight. In January of 2009, Bitcoin was launched and the first Bitcoins were mined.

Each transfer of money is recorded on a decentralized, cryptographically secured, unalterable public ledger known as a blockchain. In order to validate a transaction between two nodes on the network, a third node, called a miner, must solve a complex mathematical problem whose answer is easy to verify. The first node to get the answer wins the right to create (and get paid for) the next block on the blockchain, which includes a new batch of transactions. With today’s computing technology, the only way to solve this problem is through brute force: Instead of advanced mathematical techniques, the systems simply suggest every possible solution until they find the right one. It’s kind of like trying every combination on a padlock until it finally opens. With this system, Bitcoin doesn’t require anyone to trust anyone else, and no participant on the platform has more control than any other. 

To incentivize participants to perform this expensive and energy-intensive work, the Bitcoin protocol offers them a reward of freshly minted bitcoins. The more Bitcoin is worth, the more miners all over the world will compete to solve these problems. You might think that, as more people get into mining, the Bitcoin supply would balloon, and its value would plummet, but the Bitcoin protocol cleverly guards against this outcome. When more participants join in, the mathematical problem required to release new Bitcoin becomes harder to solve. 

When 21 million Bitcoins have been created, that’s it. There are no more. At that point, miners will no longer be awarded new Bitcoins for every block added to the chain. Instead, they’ll collect fees from each transaction in the block.

As people began to understand the potential of Satoshi’s idea, Bitcoin’s popularity increased along with its value. It took roughly two years for the currency to reach parity with the U.S. dollar. There have been plenty of swings along the way, but the currency’s overall trajectory has been a relatively steady rise—until the fall of 2020, when the rise became meteoric. Although it has risen and fallen since, in April 2021, Bitcoin hit an all-time high of $64,899. (Don’t let that price be a barrier to entering the market. Each Bitcoin is divided into 100 million Satoshis, allowing anyone to be a part of the asset class by buying a tiny amount.)

The success of Bitcoin has spawned thousands of imitators and competitors, but none has reached Bitcoin’s level of popularity or influence. Even so, Bitcoin has not taken the place of fiat currency, and it’s unlikely to do so anytime soon. Paying for goods and services with Bitcoin remains inconvenient. Instead of a peer-to-peer cash, Bitcoin has evolved into a store of value more like digital gold. 

Why should you care about Bitcoin?

The invention of Bitcoin challenged the global financial system and introduced a new paradigm based on the free, secure, and anonymous exchange of digital money. It also brought blockchain technology to the world.

The latest on crypto, delivered to you.

Only the best cryptocurrency content, delivered every other week. No nonsense. Just easy to understand information.