What is Bitcoin?
Bitcoin in a Nutshell
Bitcoin is a cryptocurrency that was launched in 2009 by its pseudo-anonymous creator who goes by the name of Satoshi Nakamoto.
Bitcoin is described as a peer-to-peer version of electronic cash that allows payments to be sent directly from one party to another without going through a financial institution.
What makes bitcoin special compared to other previous attempts at making electronic cash is that it is the first one that successfully solves the problem of “double spending” – a risk that comes with digital currencies because, by nature, they exist entirely online.
Double spending makes it possible for a holder of a digital currency to make a copy of it, send the copy to someone else to pay for goods or services, and retain the original so he can use or spend it again.
Bitcoin also makes it easier to transfer value without the complications brought about by going through banks and other middlemen while keeping transactions fast, secure, and transparent.
As such, Bitcoin is immune to seizure as nobody can confiscate it since it is not stored in a bank. It is transparent yet allows anonymity because all details about Bitcoin transactions and supply can be viewed by anyone using a blockchain explorer while keeping personal information hidden.
Lastly, it is fast and secure because it works on a globally distributed peer-to-peer network that doesn’t charge exuberant transfer fees.
Bitcoin was able to overcome this challenge by using blockchain – an ingenious way of keeping records in a secure, public, and transparent way.
The Technology Behind Bitcoin
Blockchain is a decentralized public ledger that keeps a perfect record of every bitcoin and bitcoin transaction. It allows information to be stored and shared, but not edited, hence it is immutable and makes it next to impossible to hack.
The bitcoin blockchain is operated by nodes, which are powerful computers run by people or pools called miners, and they are located all over the world. They maintain the bitcoin network and work on the blockchain as “administrators”.
Each of these nodes has a copy of the bitcoin blockchain (the ledger with all the recorded bitcoin transactions). Whenever a new transaction is added, these nodes compete against each other as to who can verify a transaction first and add it to the blockchain.
This process is called mining, which involves solving complex mathematical puzzles using state-of-the-art computers with powerful computational powers.
In return, the miner who’s able to solve the puzzle first, verify the transaction, and add it to the blockchain gets rewarded with newly minted bitcoin.
The significance of blockchain technology is that it powers a truly decentralized platform that paves the way for digital freedom and decentralized services. By being decentralized, there is no single point of authority controlling the network hence it is virtually impossible to manipulate.
In the case of bitcoin, it ushered in the first real-use case of the technology which makes it an invaluable development in terms of technology.
At present, the amount of bitcoin reward that a miner earns is 6.25 BTC per block. This has not always been the case as bitcoin goes through a regular event called bitcoin halving.
Why Bitcoin Halving Happens
Once every 210,000 blocks are mined, roughly estimated to occur every four years, bitcoin goes through an event called halving. When halving occurs, the amount of bitcoin that miners can gain as a reward for mining bitcoin is cut in half.
Bitcoin halving is significant because of Bitcoin’s finite supply, which is set at 21 million BTC. As of May 2021, 18.7 million bitcoin are already mined, thus leaving just around 2.2 million bitcoin left to be released as mining rewards. At this rate, the last bitcoin halving is estimated to occur in 2140.
When that happens, there will be no more new bitcoins that can be mined. Instead, miners will be rewarded with bitcoins that are already in circulation
Here’s a quick look at all previous bitcoin halving events:
|Event||Year||Bitcoin Reward Per Block|
|Launch||January 2009||50 BTC|
|First bitcoin halving||November 2012||25 BTC|
|Second bitcoin halving||July 2016||12.5 BTC|
|Third bitcoin halving||May 2020||6.25 BTC|
5 Bitcoin Trivia
- The first block of the bitcoin blockchain is called genesis block. It generated the first 50 BTC and was mined by bitcoin’s creator himself, Satoshi Nakamoto.
- The identity of bitcoin’s creator remains unknown as of writing. Some believe that Satoshi Nakamoto stands for the companies Samsung, Toshiba, Nakamichi, and Motorola.
- May 22 is known as Bitcoin Pizza Day. This marks the anniversary date when a Florida man named Laszlo Hanyecz bought two boxes of pizza from Papa Johns and paid 10,000 BTC for it.
- Casascius coins are physical metal coins created by Bitcoin user Mike Caldwell. They were sold until November 26, 2013, with each Casascius coin containing a piece of paper with digital Bitcoin value and secured by a tamper-resistant hologram. They came in increments of 1, 10, 25, 100, and 1000 BTC.
- The smallest unit of bitcoin is called Satoshi, aka SAT, which is 0.00000001 of a bitcoin.
How Do You Own Bitcoin?
One doesn’t have to be a bitcoin miner in order to buy and own bitcoin. By simply signing up on a cryptocurrency exchange or trading platform like 1Market and complying with the verification requirements, anyone can buy or trade cryptocurrencies like bitcoin easily and directly.
Among the most attractive aspects of trading cryptocurrencies is that anyone can do so regardless of trading experience or financial background. Unlike the stock market, the cryptocurrency market is also open 24/7, so there is no limit as to when one can buy, sell, trade, and take advantage of the current price movements.
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