What is Bitcoin?

March 2, 2021

Bitcoin first appeared in 2009 after the Wall Street market crash. The cryptocurrency has always been a controversial topic, with many critics and many endorsers. There have been predictions that bitcoin is the way of the future, while others believe that the cryptocurrency is just not lucrative at all.

With all the mainstream adoption happening, we curated some helpful information for new investors about bitcoin and what it could mean for you.  

What is it?

Bitcoin is a digital cryptocurrency created in 2009, which means that it is a type of money that lives online only. Bitcoin is completely decentralized and is not governed by any bank or government institution. It can be used to buy products and services. However, it is not accepted by many retailers yet and some countries have banned it altogether, because of its decentralized nature. There are many companies that are beginning to buy into bitcoins growing influence. These companies include PayPal and Tesla. Bitcoin cannot be withdrawn since physical bitcoins do not exist. The pictures online are used for novelty. If anyone should present you with physical bitcoin it would be completely useless. 

The identity of the person who created bitcoin remains anonymous, but operates under the pseudonym Satoshi Nakamoto. Bitcoins are kept in a public ledger that is accessible to the public. All bitcoin transactions are verified by a massive amount of computing power. Bitcoins cannot be issued by any banks or governments. Although bitcoin is not a legal tender, it is very popular across the world and interests are still growing. 

How Does Bitcoin Work?

Bitcoin is mined when a collection of computers or ‘miners’ run bitcoin’s code and store its blockchain. Currently bitcoin has around 12,000 miners and this number is growing steadily around the world. Bitcoin balances are kept using public and private keys. This is basically long strings of numbers and letters that link to the mathematical encryption algorithm used to create bitcoin. Your private and public keys are basically your account number. This is what people will  use to send bitcoins. 

Bitcoin Uses Peer-to-Peer technology

Bitcoin is most popular for being one of the first virtual currencies to use peer-to-peer technology for transactional purposes. Companies or individuals who own the governing computing power and participate in the bitcoin network “miners” are responsible for processing your transactions on the blockchain. Bitcoin miners are basically the decentralized authority that enforces the credibility of the bitcoin network. New bitcoin will only be released to miners at a fixed rate. This rate gradually declines. Currently there is only 21 million bitcoin that is eligible to mine. 

What is Bitcoin Mining & How Does it Work?

Bitcoin mining is an important part of procuring Bitcoin. It is also a very costly and sporadically rewarding process. Bitcoin mining is basically the process of creating new bitcoin by solving a computational puzzle. Bitcoin mining is necessary for a ledger of transactions to be kept. Bitcoin mining is beneficial in two ways. First, by solving the mathematical computational puzzle new bitcoin is created and Second,  by solving computational math problems, bitcoin miners make the bitcoin payment network trustworthy and secure. These computational problems are very complex and not simple to understand or solve. 

When someone sends you bitcoin, it is called a transaction. Conventionally, when you go into a store or buy products online, you will receive a receipt or when making a transaction you will receive proof of payment from your bank. Bitcoin miners do the same thing. They clump transactions into blocks, then add them to a public ledger known as a blockchain. Bitcoin miners are very meticulous when it comes to transactions. They have the responsibility of checking that all transactions are legitimate.

Related