The world's largest cryptocurrencyBitcoin is the world’s first widely-adopted cryptocurrency. With Bitcoin, people can securely and almost instantly send and receive digital money on the internet.
Bitcoin (from "bit" and English "coin" = coin) is an implementation of cryptocurrency, a digital currency, created in 2009 by Satoshi Nakamoto (probably a pseudonym), whose main purpose is to enable payments over the Internet directly between users without any interference from third party.
Unlike many other currencies, bitcoin does not rely on any central issuer in the form of, for example, a central bank, which protects against political influence and monopoly-like payment systems. To maintain security and privacy, bitcoin relies on cryptography and uses a distributed database spread across the nodes that make up the P2P network to record transactions. This also aims to ensure, for example, that the currency can only be spent by its owner and irrevocably disappears from the said owner’s digital “wallet” and thus can only be spent once.
Bitcoin’s design allows more or less anonymous ownership and transfer of values through the P2P network. Each user’s bitcoin is stored in a wallet file along with an arbitrary number of bitcoin addresses. The wallet file can be saved on the user’s computer or by a third party offering such a service. In either case, bitcoin can be sent over the Internet to anyone with a bitcoin address. Bitcoin’s P2P topology and lack of central administration make it impossible for authorities, for example, to artificially manipulate the value of bitcoin or provoke inflation by producing more of them.
Frequently asked questions about Bitcoin and BCT
What is BTC?
BTC is the abbreviation for bitcoin.
Is Bitcoin cryptocurrency?
Yes, bitcoin is the first widely adopted cryptocurrency, which is just another way of saying digital money.
Is there a simple bitcoin definition?
Bitcoin is digital money that allows seamless and secure peer-to-peer transactions on the internet.
What's the current price of bitcoin?
The current price of Bitcoin can be found below. [vcw-price-label id=”bitcoin” color=”white” currency=”USD” url=”” target=”_blank” fullwidth=”no” show_logo=”yes”]
Is Bitcoin an investment opportunity?
Like any other asset, you can make money by buying BTC low and selling high, or lose money in the inverse scenario. Investments are always connected with risk.
At what price did Bitcoin start?
One BTC was valued at a fraction of a U.S. penny in early 2010. During the first quarter of 2011, it exceeded a dollar. In late 2017, its value skyrocketed for the first time, topping out at close to $20,000. Currently, one bitcoin is valued at around $60,000.
How does bitcoin have value?
Essentially the same way a traditional currency does – because it’s proven itself to be a convenient and viable way to store value, which means it can easily be traded for goods, services, or other assets. It’s scarce, secure, portable, and easily divisible, allowing transactions of all sizes.
What’s the difference between Blockchain and Bitcoin?
All bitcoin transactions and public keys are recorded on a virtual ledger called the blockchain. The ledger is effectively a chronological list of transactions. This ledger is copied—exactly—across every computer that is connected to the bitcoin network, and it is constantly checked and secured using a vast amount of computing power across the globe.
The blockchain concept has turned out to be powerful and adaptable, and there are now a wide variety of non-cryptocurrency-related blockchains that are used for things like supply-chain management. The ‘Bitcoin Blockchain’ specifically refers to the virtual ledger that records bitcoin transactions and private keys.
The technology behind bitcoin was first described in Satoshi Nakamoto’s White Paper in 2008. It is based on two other proposals for alternative electronic currencies: Wei Dai’s b-money proposal and Nick Szabo’s Bitgold proposal.
Bitcoin is a P2P (peer-to-peer) currency, ie a P2P network that keeps track of all transactions in a distributed database. There is no central server that keeps track of them or determines which ones are valid. Each participant (node) in the P2P network stores the transactions, and can enter or leave the P2P network without creating problems.
Previous proposals for P2P currencies suffered from the “double-spending problem”; that the same money could be transferred to two different places, and that the network then had to have a method to determine which transaction was valid. Satoshi Nakamoto solved the problem with the help of a so-called “blockchain”. Each transaction is stored in a block of data, and all blocks are connected in a sequence (chain). If two “competing” blocks were created (two blocks with the same predecessor in the chain), the nodes accept the block that the majority of their neighbors have accepted, and build the next block in the chain on this. If there is a branching of the chain, the network thus makes a decision about which branch is valid (and thus which transaction is valid). The decision is spread quickly through the P2P network, which makes it practically impossible to change. To make it more difficult for an attacker to create blocks that support their own branch of the blockchain, a distributed time server and time-consuming calculations are used to create a block, so-called proof-of-work.
The transactions use asymmetric encryption (more specifically ECDSA) and are public. The history of all transactions must be stored in the database and a Merkle tree is used to reduce the storage space requirement.
How Bitcoin works
Unlike credit card networks like MasterCard and VISA and payment processors like Paypal, bitcoin is not owned by a company or individual. Bitcoin is the world’s first completely open payment network which anyone with an internet connection can participate in. Bitcoin was designed to be used on the internet and doesn’t depend on banks or companies to process transactions.
One of the most important elements of Bitcoin is the blockchain, which tracks who owns what, very similar to how a bank tracks assets on your account. What sets the Bitcoin blockchain apart from a bank’s ledger is that it is decentralized, meaning anyone can view it and no single entity manages or controls it.
Key details about Bitcoin
- Specialized computers are known as ‘mining rigs’ and perform the calculations required to record and verify a new transaction. In the beginning, a normal desktop PC was powerful enough to participate, which allowed pretty much anyone who was curious to try mining bitcoin. Currently, the computers required are massive, specialized, and often owned by businesses or large numbers of individuals combining their resources. (In October 2019, it required 12 trillion times more computing power to mine one bitcoin than it did when Nakamoto mined the first blocks in January 2009.)
- The miners’ collective computing power is used to ensure the accuracy of the ever-growing ledger. Bitcoin is inseparably tied to the blockchain; each new bitcoin is recorded on it, as is each following transaction with all existing coins.
- How does the network motivate miners to participate in the constant and vital work of maintaining the blockchain? The Bitcoin network holds a continuous lottery in which all the miners and mining rigs around the world compete to be the first to solve a math problem. Every 10 min or so, a new winner is found, and the winner updates the ledger with new valid transactions. The prize changes over time, but as of early 2020, each winner of this raffle was awarded 12.5 bitcoin.
- As bitcoin’s value has risen, its easy divisibility (the option to buy a small fraction of one bitcoin) has become a key attribute for its continued success. One bitcoin is currently divisible to eight decimal places (100 millionths of one bitcoin); the bitcoin community refers to the smallest unit as a ‘Satoshi’ to honor its mysterious founder.
- Nakamoto set the bitcoin network up so that the number of bitcoin will never exceed 21 million, ensuring scarcity of the cryptocurrency. There is currently around 3 million bitcoin still available to be mined, which will happen more and more slowly. According to the latest estimate, the last blocks will be mined in 2140.
How to use Bitcoin
Using bitcoin has not always been as easy as it is today, back in 2013, a bitcoin enthusiast named Laszlo Hanyecz created a message-board post offering 10,000 BTC – which then was worth around $25 – to anyone who would deliver two pizzas to his house in Jacksonville, Florida. As the legend goes, those two pizzas, which another bitcoin early-adopter bought from a local Papa John’s, marked the first successful purchase of non-virtual goods using bitcoin. Thankfully it has become a lot easier to use bitcoin nowadays.
What makes bitcoin different from other payment methods?
- Bitcoin is simple: Transactions using BTC aren’t that different from those using a credit or debit card, you’ll simply enter the payment amount and the vendor’s public key (similar to an email address) via a wallet app. When transacting in person you can use a smartphone or tablet, often a QR code will pop up to simplify the process even further.
- Bitcoin is private: One of the big benefits of paying with bitcoin is that doing so limits the amount of personal information connected to the transaction. The only time you would need to share your name and address is if you’re purchasing physical goods that need to be delivered.
- Bitcoin is flexible: So what you do with your bitcoins depends completely on your personal interests. Here are some ideas:
- You can exchange or sell it for cash using a Bitcoin ATM.
- You can spend it online or in a normal store as you would any other currency by using a Bitcoin debit card.
- You can hold on to all or some of it as part of your savings and investment strategy.
How to buy Bitcoin
The simplest way to buy bitcoin is to purchase it through an online exchange like Coinbase. Coinbase makes it easy to buy, sell, send, receive, and store bitcoin without needing to hold it yourself using public and private keys.
However, if you choose to buy and store bitcoin outside of an online exchange, here’s how that works.
- Each person who joins the bitcoin network is issued two keys:
- The public key, which is a long string of letters and numbers that you can think of like an email address.
- The private key, which is equivalent to a password.
- When you buy, send, or receive bitcoin you get a public key, which you can think of like a key that unlocks a virtual vault and gives you access to your bitcoins.
- Anyone can send bitcoin to you via your public key, but only the holder of the private key can access the bitcoin in the “virtual vault”.
- There are many ways to store bitcoin both online and offline. The simplest solution is a virtual wallet.
- Bitcoin is global. You can send it across the planet and everywhere the internet is available as easily as you can pay with cash in the real world. It isn’t closed on weekends, doesn’t charge you a fee to access your money, and doesn’t force any arbitrary limits.
- Bitcoin is private. When paying with bitcoin, there are no credit cards or bank statements, or any need to provide personal information to the retailer. Bitcoin transactions don’t contain any identifying information other than the bitcoin addresses and amounts involved in the specific transaction.
- Bitcoin is irreversible. Bitcoin is like cash, in the sense that transactions cannot be reversed by the sender. Credit cards, other conventional online payment systems, and banking transactions can be reversed after the payment has been made, sometimes months after the initial transaction. This “lag” creates a higher risk for fraud for merchants, which can lead to higher fees for using credit cards.
- Bitcoin is open. All transaction on the Bitcoin network is published publicly, without exception. This means there’s very little to no room for manipulation of transactions or changing the supply of bitcoin. The software that constitutes the essence of Bitcoin is free and open-source so anyone can review the code.
- Bitcoin is more secure. Thanks to the Bitcoin network, bitcoin payments are fundamentally more secure than standard debit or credit card transactions. When making a bitcoin payment, no private information is required to be sent over the internet. As a result, there is a very low risk of your financial information being compromised.
- Bitcoin is safer. In more than ten years of existence, the bitcoin network has never been successfully hacked. As the system is open-sourced and permissionless, countless computer scientists and cryptographers have been able to examine many aspects of the network and its security.
March 25, 2021
March 24, 2021