Bitcoin (BTC)
9 minutes
Beginner
Bitcoin (BTC) is the world's first cryptocurrency that paved the way for all other cryptocurrencies. Created in 2008 by Satoshi Nakamoto, Bitcoin is currently the most famous and most popular cryptocurrency in circulation.
Bitcoin is a decentralized, 100% digital currency.
- The invention of Bitcoin is one of the first examples of blockchain technology.
- Bitcoin is the world's most popular cryptocurrency in terms of both market capitalization and brand recognition.
- The price of bitcoin reached its all-time high on November 10, 2021, at about 66,233.02 euros.
- The offer is limited to a fixed number of 21,000,000 bitcoins.
What is bitcoin?
Bitcoin is a digital currency created to create a peer-to-peer electronic payment system that allows one party to send a payment to another party without having to go through a central authority such as a financial institution. In addition to functioning as a currency, some view Bitcoin as an investment and buy it on exchanges, like stocks, with the expectation that the value will rise over time. Because Bitcoin is a decentralized, open-source project, anyone can join and participate in its development.
Examples of Bitcoin use
- Bitcoin is a digital currency that can be used for payments between partners and, in some cases, to pay for goods and services.
- Bitcoin is an investment that can be saved for value.
- Bitcoin's open-source technology makes it a resource and source of inspiration for those who want to develop something similar.
Bitcoin history
The idea for Bitcoin was conceived by a person or group under the pseudonym Satoshi Nakamoto. The open-source project was described in an official document entitled "Bitcoin: a peer-to-peer electronic cash system.
During the first few weeks of January 2009, Bitcoin completed its first important steps: it began mining, i.e., creating the first coins; the coins went into circulation, and the first bitcoin-only transaction was completed. Another milestone was reached on May 22, 2010, when someone online paid someone else to buy them a pizza in bitcoins, which is now affectionately known as Bitcoin Pizza Day.
How does Bitcoin work?
Bitcoin and other cryptocurrencies provide decentralized payments using blockchain technology. Blockchain is a publicly available distributed registry of all transactions made with bitcoins. When people send and receive bitcoins, additional blocks are added to the chain in the form of transaction records.
The trust in Bitcoin is based on the fact that Bitcoin transactions are immutable once added to the blockchain, so once a transaction has been verified and recorded, it cannot be undone. Because anyone with an Internet connection can use Bitcoin, it is ideal for those who want quick payments and low fees. People can securely send coins through a secure distributed network directly to someone else (a peer-to-peer network), without having to use traditional financial intermediaries. The entire history of bitcoin transactions is available for anyone to view.
Mining and Proof of Work (PoW)
Bitcoin transactions and the creation of new bitcoins are verified through a process called mining. Mining is based on software applications that run on specially designed computers. Transactions initiate the opening of a block, transaction information is entered, the block is closed and a hash number is created that includes the encoded details of the transaction.
Each new block contains information from the previous block to create a chain that cannot be manipulated or altered, and ensures that no one can spend the same unit of currency twice. The Proof-of-Work (PoW) system, in which computers must verify the energy expended during the mining process, ensures that everything is true and correct.
The benefits of bitcoin:
- Transaction speed: Bitcoin payments are made over the Internet. Transactions from even the remotest corners of the world are confirmed every 10 minutes;
- Security: Every bitcoin transaction is encrypted with the SHA-256 mixing algorithm, which is the most secure in the world;
- Availability: Transactions can be made 24 hours a day, regardless of the day of the week;
- No middleman: P2P system, i.e. transactions without the mediation of banks and superior institutions;
- Anonymity: the owner of the virtual money does not have to have a bank account. Payments are made from a bitcoin wallet. Setting up a wallet does not require filling out a form of data, as in the case of traditional bank accounts, which means that in the Bitcoin network we can remain anonymous;
- Decentralization: The bitcoin network has no overarching organization that can stop or permanently block a transaction; the network is based on independent nodes that independently validate transactions. In blockchain, each user is his own bank;
- Limited quantity: the maximum number of bitcoins is limited to 21,000,000 kopecks of currency. This unique feature has a very positive effect on the bitcoin exchange rate and, unlike fiat currencies, prevents inflation;
- High value: Bitcoin is perceived as a means of savings because its price is broadly rising (despite radical adjustments) and is not subject to the phenomenon of inflation. As the first cryptocurrency, it is particularly trusted by institutions and investors, which is positively reflected in its price outlook.
How to buy bitcoin?
People who want to buy Bitcoin can do so through cryptocurrency exchanges such as Binance, using fiat currencies such as euros or U.S. dollars. Once purchased, your bitcoin investments can be viewed and accessed in a digital wallet, which acts similarly to a banking app. You then have the option to save your bitcoin or sell it again through the exchange.
What is the history of the bitcoin price?
Bitcoin is considered a very volatile asset and its price has fluctuated through many highs and lows throughout its existence. In 2011, the price per bitcoin started at around €0.29 and rose to around €5.13 that year. The price started at around €12.95 in 2013 and rose to €749.99 by the following year. After that, the cryptocurrency market experienced a rapid decline. Although Bitcoin hit its first all-time high of around €19.269 in December 2017, by early 2019 the price was down 81%. Bitcoin's historical price high was on November 10, 2021, at around €66,233.02.
How can you use bitcoin?
Bitcoin is mostly used as a peer-to-peer payment system between individuals, but in recent years the places where you can use bitcoin have expanded. More and more businesses, from large corporations such as Expedia to small and medium-sized businesses, are accepting Bitcoin as a digital payment. Countries are also gradually adopting Bitcoin: El Salvador is one of the first to adopt Bitcoin as its official currency. Currently, one of the easiest ways to use Bitcoins is to load them onto a cryptocurrency debit card and use it to pay for goods and services or to withdraw cash from ATMs.
What are the risks associated with bitcoins?
The biggest concerns with bitcoins are the risks and the risks of hacking, fraud and lack of regulation. The cryptocurrency market is very volatile, and the price of bitcoin can fluctuate wildly. Because of the unprecedented boom, regulation of bitcoins and other cryptocurrencies has also been slow to develop, leaving much of the market unregulated. This can lead to pump-and-dump schemes, where small groups of investors put a lot of money into cryptocurrencies like bitcoin to artificially inflate the price, only to later sell it at a profit before the price falls again.
Although hacking attacks are rare due to the security of blockchain technology, there are bitcoin-related crimes where scammers ask you to pay in bitcoins or offer a way to earn more bitcoins that is too good to be true. Here it is advisable to use common sense and only buy bitcoins through trusted exchanges.
Why is bitcoin popular?
As the world's first cryptocurrency, Bitcoin has maintained its status as the most widely known and, therefore, the most widely accepted and used cryptocurrency. Bitcoin receives almost limitless attention from its devoted followers and communities, endless media coverage and the endorsement of high-profile celebrities.
This is because Bitcoin has managed to establish itself and prove its value as a viable alternative currency. When celebrities like Elon Musk talk about the coin, it only strengthens its credibility. So Bitcoin has become more than just a payment system. It is now close to a way of life for some people who spend most of their time trading and discussing bitcoins online.
Can bitcoin be used for nefarious purposes?
Like traditional fiat money, bitcoin is also used by criminals. However, unlike paper money transactions, bitcoin transactions can be viewed and tracked by anyone. Although bitcoin is often associated in the media with darknet and underground activity, the cryptocurrency is ill-suited for such purposes. There are specialized companies that help government agencies track shady cryptocurrency transactions. The fact that Bitcoin's public ledger is transparent and all transactions are visible, it creates trust in a world full of fraud.
