Bitcoin

The Coins

Beginner

By Matt Hussey

Learn

Jan 19, 2019

Bitcoin is the world’s first peer-to-peer cryptocurrency. It was invented by a mysterious inventor Satoshi Nakamoto in 2009 and is regarded as the first digital currency to fix the double spend problem. It also demonstrated how the blockchain could work on a global scale.

What you will learn

What you will learn

Who invented Bitcoin, how it works, what it’s used for and what you can buy using the cryptocurrency.

We'll take you through who invented Bitcoin, how it works, what it’s used for and what you can buy using the cryptocurrency.

What is Bitcoin?

Bitcoin is a peer-to-peer cryptocurrency. What does that mean? It's a new way to pay for goods and services, as well as store value online.

Built using blockchain, a fundamentally new way to transfer value over the internet, everything from sandwiches to houses can be bought using Bitcoin.

Did you know?

The first official purchase using Bitcoin was for pizza in May 2010. Two Papa John’s Pizzas were exchanged for 10,000 BTC. May 22 is now celebrated as Bitcoin Pizza Day.

Who invented Bitcoin?

No one really knows.

The inventor, or inventors go by the name of Satoshi Nakamoto, a mysterious character (or characters) that many have tried to find, some more successfully than others.

A brief history

In November 2008, a paper called Bitcoin: A Peer-to-Peer Electronic Cash System was published on a small mailing list for cryptography fans. The author went by the name Satoshi Nakamoto and he/she/they explained how the currency would work.

The software to create the currency was released in January 2009 and the first ever block on the chain came shortly afterwards.

What was so special about it?

Bitcoin did something that no one had been able to do before. It is:

  • 🚷Decentralised - no-one person or group owns or controls it
  • 🤷Trustless (peer-to-peer) - No more third parties
  • 👥Borderless - no need for exchanges to move currency across borders
  • 🚫Immutabile - It can never be changed or reversed unlike all of today's financial systems
  • 💲💲Prevented double-spending - it solved the problem many digital currencies had tried to crack
  • 📚It’s the first proof-of-concept for blockchain a technology that will change literally everything.

Did you know?

Around 25% of all Bitcoins have been lost. In November 13, an IT consultant accidentally threw away a hard drive with the private keys to 7,500 Bitcoins. That loss is worth somewhere between $15-$20 million today. Whoops.

How is Bitcoin produced?

Imagine gold under the ground. We know it’s there, but its value is hidden until a miner ‘digs’ it up. In the Bitcoin world, a miner discovers Bitcoin by creating ‘blocks’ of all the transactions going on in the network and adds them to the blockchain.

Want to know more about mining? Check out our guide to mining.

We know there are 21 million bitcoins in existence - but not all have been unearthed yet. At the current rate of mining, all Bitcoins will be ‘dug up’ some time in 2140.

How do you get hold of Bitcoins?

There are three main ways of getting hold of Bitcoin

  • 🛒You can buy them using fiat currencies (your $, £ of € for example) at exchanges. You’ll need a Bitcoin wallet and a set of keys to store and exchange them.
  • 👷You can become a Bitcoin miner and try to workout the secret puzzle for the current block, which will reward you with 12.5 BTC.
  • 🎰You can win them! Gambling sites have popped up to help people spend and earn their Bitcoin.

Did you know?

Around 1,000 people own nearly 40% of all Bitcoins currently in circulation.

What can you do with Bitcoin?

  • 🛍️Buy things - everything from a Tesla, a house, a holiday, games, an education and even legal help can all be paid for using Bitcoin.

  • 🎰Gamble - if you’re feeling lucky there are a whole suite of gambling sites that accept Bitcoin

  • 👥An anonymous form of payment - for countries where governments are mismanaging currency, Bitcoin offers an easier route to accessing other fiat currencies.

  • 👨‍💼 Digital Rights Management - Bitcoin - and blockchain, the protocol it’s built on - can be used to help musicians and artists control who has access to their IP.

  • 🎫 Identity - thanks to the unique double key system used in Bitcoin wallets, it could become the main way you identify yourself online.

Did you know?

In 2013, the FBI made $48 million by selling 144,000 Bitcoins it had seized from criminals using the currency.

What is a Bitcoin wallet?

Like a regular wallet, it’s a place to keep your valuables. When it comes to Bitcoin, those valuables are your keys held on a piece of software you can store on your phone, the web or a computer.

In order to buy and sell Bitcoin you need a private and a public key.

A public key is what you share with people to trade Bitcoin.

Your private key is something you keep to yourself. When you trade Bitcoin, you send someone your public key, and your private key is used to authenticate that it’s you who is requesting to send or receive Bitcoin.

Find out more aboutwallets in our handy guide.

Did you know?

Bitcoin uses a lot of electricity. So much so that one Bitcoin transaction consumes nearly 4,000 times the energy used when processing a credit card transaction.

The Future

We know that all Bitcoins will be mined sometime in 2140. In the meantime, the future of Bitcoin and it’s value is uncertain.

The limitations of the cryptocurrency - has lead to the creation of dozens of other altcoins that are more specialised.

There are some that argue Bitcoin could become a store of value, like gold is in the real world. Others meanwhile, want to keep Bitcoin as a way to buy goods and services.

Bitcoin's future is uncertain. However, blockchain's potential is just getting started.

By Matt Hussey

Learn

Jan 19, 2019

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2019 © Decrypt Media, Inc. All Rights Reserved.

2019 © Decrypt Media, Inc. All Rights Reserved.

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