What is Bitcoin?

4 Months ago / Wiki / For beginners

Preface

The year of Bitcoin creation is unknown, but it was proposed in 2008, with the first transactions in 2009. 

Since then it has grown into the leading cryptocurrency, an investment vehicle, and a community of users, while the technology behind it (blockchain) enters almost every sphere now. 

In other words bitcoin has become the world-known phenomen and changed lives of many people.

In this article we would like to tell the basics about the thing that has made all this crypto boom started.

(If you want to red more about the history of Bitcoin - read here)

 

Overview

Bitcoin was invented as a peer-to-peer system for online payments that does not require a trusted central authority. The very interesting thing that creator of the world’s first and most popular cryptocurrency is still unknown (read more about Satoshi Nakamoto here). It was the first example of what we call cryptocurrencies today, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography. The idea was to produce means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way.

From most users perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. 

Behind the scenes, the Bitcoin network is sharing a public ledger called the "block chain". This ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction. 

The thing which is hard to realize  is that nobody owns the Bitcoin network, it is controlled by all Bitcoin users around the world, miners (anyone can put their computers to work verifying transactions in the peer-to-peer network mentioned above. These users are rewarded with new bitcoins proportional to the amount of computing power they donate to the network) and independent developers, who are improving the software. 

In order to stay compatible with each other, all users need to use software complying with the same rules. Bitcoin can only work correctly with a complete consensus among all users. Therefore, there is a strong incentive to protect this consensus

To learn more about Bitcoin, you can red  the original White paper https://bitcoin.org/bitcoin.pdf

This is not difficult to buy cryptocurrency. The more important is to store it safely. 

In this article you can learn about different types of wallets

And now

Some interesting facts for you about Bitcoin 

  1. The 22nd of May is celebrated as Bitcoin Pizza Day, because 22 May 2010 was the first time when someone purchased something with bitcoins. two Papa John’s Pizzas were exchanged by Laszlo Hanyecz for 10,000 BTC. This was the first official documented purchase of goods using bitcoins. the worth of 10,000 BTC was $41. (during historic peak in December of 2018 it was approximately 200 mln USD) The real diamond pizza)
  2. Using Bitcoin - your name/identity is unknown to anyone, only your public bitcoin adress is available. But the fun thing about blockchain is that anyone can see how many bitcoins you hold and what transactions you have made. That was the point among how FBI busted the owner of Silk Road
  3. There is no backup if you lose your private key. The very heartbreaking case was with James Howells who lost 7,500 bitcoins in November 2013, throwing away his old computer with the hard disk with the private key to Bitcoins he previously mined in 2010. (during historic peak in December of 2018 it was approximately 150 mln USD). By the way, it was estimated that as much as 25% of all bitcoins have been forever lost.
  4. Mining has become a widespread hobby and business, at present mining power of Bitcoin’s network is 400 times more powerful than the world’s top 5 supercomputers combined
  5. Since 2009, Bitcoin has been making a profit each year (except for 1 year).


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