Bitcoin is a digital currency. Unlike U.S. dollars or Chinese yuan, there is no physical paper or metal coins. Many investors liken Bitcoin to “digital gold” — more of a commodity than a currency.
Transactions with Bitcoin are conducted via a public distributed ledger called a blockchain, the infrastructure behind cryptocurrency. The Bitcoin blockchain created by Nakamoto was reportedly the first to solve the double spending problem for digital transactions, effectively preventing someone from sending funds to another wallet while retaining the original coins.
Behind the creation of the crypto asset is the concept of mining coins. Miners verify Bitcoin transactions in a “block” of records which make up the blockchain. One of the key features of Bitcoin when compared to other cryptocurrencies is its limited supply of coins. There will only ever be 21 million Bitcoin in circulation once the last block is mined. Some estimates put this event at roughly the year 2140.
Though Bitcoin and digital currencies have grown by leaps and bounds since their creation, they are still not recognized as legal tender by many private businesses and governments. This has led to numerous legal and regulatory issues by many lawmakers attempting to stymie or encourage adoption of crypto.
Overview for Fast-Readers
- Bitcoin is considered by many to be the original cryptocurrency
- Created in 2008 by a mysterious founder going by Satoshi Nakamoto, which may be a pseudonym
- Nakamoto helped pioneer the underlying technology for cryptocurrency, the blockchain
When was Bitcoin created?
The first recorded example of the word “Bitcoin” as it is known today occurred in August 2008, when someone registered the domain name bitcoin.org. On Oct. 31 that same year, Bitcoin creator Satoshi Nakamoto would publish the cryptocurrency’s white paper — an explanation of the technology behind Bitcoin.
Who created Bitcoin?
Even years later, this question still has members of the crypto community scratching their heads and speculating as to who exactly Satoshi Nakamoto is, or if it is a pseudonym used by a group of programmers to create the cryptocurrency. Many have stepped up — some jokingly — to claim they are the legendary Bitcoin creator over the years, but no one has definitively proven themselves to be the real Satoshi.
Some of the popular theories surrounding Satoshi’s identity are as follows:
- In 2014, Newsweek journalist Leah McGrath Goodman released a report alleging a Japanese-American man named Dorian Satoshi Nakamoto was most likely the creator of Bitcoin or at least associated with some of its early programmers.
- Cryptographer and computer scientist Nick Szabo’s ideas surrounding cryptocurrency actually predate the release of the Bitcoin white paper, leading many to believe he may in fact be Satoshi or a part of the group who is. He has repeatedly denied such claims. Szabo proposed the idea of a decentralized financial system with some of the components of blockchain — cryptography and mining — back in 2005.
- Some speculated that Hal Finney, a computer scientist who passed in 2014, may also have been Satoshi. Finney was reportedly one of the first people to use the original Bitcoin software and report on bugs.
How was Bitcoin created?
Bitcoin “kicked off” so to speak not with the creation of the whitepaper or the registration of the website by the mining of the first block in the blockchain. Satoshi Nakamoto mined this original block — also called a Genesis block — on Jan. 3, 2009.
What is the purpose of Bitcoin?
The Bitcoin Genesis block contained a message referring to an article from U.K. newspaper The Times on bank bailouts in response to the 2008 financial crisis. Many consider this to mean Bitcoin was created to be an alternative to traditional financial systems, given governments’ apparent willingness to print money when needed, putting fiat currency at the risk of inflation.
Why do people buy Bitcoin?
One popular sentiment around the crypto space is that buying Bitcoin may not necessarily make someone rich, but it could stop them from going broke. Many were drawn into crypto during the 2017 Bitcoin bull run, when the crypto asset would reach a record high price that wasn’t broken for three years.
When it comes to Bitcoin, some experts still advise the “don’t put in what you can’t afford to lose” as they might with any other investment given the crypto asset’s volatility. Though there are some crypto users that use the day trading mentality of “buy low, sell high” for Bitcoin, many choose to HODL their coins.
How does Bitcoin work?
Bitcoin runs on a peer-to-peer network, in which computer nodes validate transactions and blocks on the blockchain, effectively preventing someone from double spending coins. Due to the nature of the network, the Bitcoin blockchain is highly decentralized, giving no single entity control.
There are many different types of nodes on the Bitcoin network, but most — aside from mining nodes — work together to process transactions. Every time a user sends BTC to another wallet, the information travels across the network.
Is Bitcoin secure?
Bitcoin’s underlying technology, the blockchain, is extremely unlikely to be hacked or compromised simply because it is decentralized and secure. Any potential risks surrounding Bitcoin transactions can usually be linked to cryptocurrency exchanges — where some users hold their coins — or an individual’s own security measures.
For example, if a Bitcoiner were to hold their Bitcoin wallet and private keys in a cold storage device not connected to the Internet, the chances someone else would be able to ascertain their keys to access the coins would be astronomical. Though some have speculated that a rise in computing power — i.e. quantum computers — would eventually threaten the cryptography of the Bitcoin blockchain, others claim this is also unlikely.
What does the future of Bitcoin look like?
2020 saw Bitcoin reach new all-time highs as institutional players adopted the crypto asset. As the demand for Bitcoin grows and the supply of coins in circulation approaches 21 million, the price could potentially grow. How Bitcoin and other cryptocurrencies will be regulated is an open question, with some governments being more accepting of the technology than others.
Summary
Created in 2008 by Satoshi Nakamoto, Bitcoin currently runs on a decentralized peer-to-peer network designed to prevent double spending and limited to a supply of 21 million coins. The crypto asset is seen by many as an alternative to traditional financial systems.
