What Is Bitcoin? Introduction To Digital Cash And BTC
Bitcoin is the number one cryptocurrency in the world.
What Is Bitcoin?
Bitcoin is the first mainstream cryptocurrency. Created by Satoshi Nakomoto (a pseudonym for an anonymous developer or development team), Bitcoin was created in 2009 with the goal of creating an alternative to legacy banks, using blockchain distributed ledger technology as its backbone.
It quickly rose to notoriety, and by 2012, it made mainstream media airwaves as the currency of choice for the Deep Web’s infamous Silk Road marketplace. Soon BTC was being traded among journalists, activists, entrepreneurs, and tech savvy people worldwide, and thousands of blockchain-based crypto projects followed.
In the third quarter of 2017, Bitcoin grabbed the world’s attention as pricing rose astronomically. Suddenly black-market dealers and first adopters could afford Lambos and build businesses. Bitcoin can make and break billionaires, and it’s the flagship cryptocurrency that jump started the market.
Before explaining what Bitcoin is and why it’s so important, let’s review BTC’s market performance.
Market Summary of BTC
Bitcoin has a maximum supply of 21,000,000 BTC. Its peak price so far occurred on December 17, 2017 at $19,909.50 per BTC and the price of Bitcoin, for better or worse, is a constant feature in the cryptocurrency news.
Because it was the first cryptocurrency to reach public recognition, its name is tied to cryptocurrency on the general market. What Bitcoin BTC does, the rest of cryptocurrencies do in response. Bitcoin and cryptocurrency in general tend to move together, for good and bad.
Traders love the volatility of Bitcoin, which is at times extreme. For example, between October 2017 and January 2018, the value nearly quadrupled from $5,000 to $20,000, but then gradually settled back down to $6,000 multiple times throughout 2018.
It then dove to the $3000 to $4000 range in 2019.
BTC is mined using a Proof-of-Work consensus algorithm called Hashcash. It was originally mined on CPUs, then GPUs, and by the end of 2012, ASIC mining rigs were hitting the market. It’s now impossible for you mine BTC using a consumer PC’s hardware.
As more bitcoins are mined, the ledger gets longer and processing a block takes more complicated computations. These computations require more energy, and less bitcoins are rewarded.
BTC is the most accepted cryptocurrency on the market. It’s the crypto coin used to funnel most other coins and tokens in to pull out fiat cash or make purchases. The highest BTC trading volume occurs on BitForex and BitMEX, with CoinsBank, Bithumb, Binance, and other exchanges lagging further and further behind.
Aside from exchange wallets, BTC can be stored in a ton of wallets, including Trezor, BitGo, BTC.com, Ledger Nano S, and the official Bitcoin Wallet.
Bitcoin Is Digital Currency
You don’t become the belle of the ball without packing a lot of power under the hood. We have a variety of digital payment options these days. Everyone from Google/Apple to Samsung, Amazon, Paypal, Visa, and even our banks and credit unions are trying to figure out what will make us ditch our wallets for our smartphones.
Bitcoin promised something different – the decentralized blockchain uses a digital ledger to keep a public history of every transfer of every bitcoin ever created. It’s open-source, P2P, and all it takes to get started is creating a wallet with a public and private key.
These keys encrypt your bitcoin balance and enable secure transfers. And you’re not limited to the same kind of transactions fiat currencies have. Bitcoin is divisible by .00000001 (which is lovingly called a Satoshi) and could get even more divisible as its value rises and mining rewards are cut short.
Even public keys don’t necessarily need to have identifying information attached to them, but regulation around the globe is quickly changing that. We initially assumed bitcoin was anonymous, but researchers at Qatar University showed in 2018 how easily big data analysis could dredge up personally identifiable information on old Silk Road transactions from years prior.
While a promising coin, Bitcoin’s performance in the wild led to literally thousands of imitators creating new blockchain networks to alleviate scalability, security, and speed issues. Still, Bitcoin is the bar by which all cryptos are measured, and it’s easily the most famous cryptocurrency in the general public, as synonymous with crypto as Xerox is with fax and copy machines.
Creating a New Digital Economy
A single bitcoin is only worth as much as the market agrees it’s worth, and Bitcoin’s utility is twofold. First, it’s the easiest cryptocurrency to convert into cash, and even that can be a (costly) pain in the ass. Second, it’s the most widely accepted crypto as currency around the world.
You can pay in bitcoin for food, travel, consumer goods, rent, even college tuition. There are a lot of imitators that would bend over backwards for even half the acceptance and support Bitcoin enjoys.
And, although it’s decentralized, the Bitcoin Foundation’s board of directors is a veritable who’s who of crypto currency, including Llew Claasen, Brock Pierce, and Bobby Lee.
Bitcoin’s goal of replacing banks is coming true, but it’s not happening the way it was originally envisioned. Banks didn’t crumble as the world held Bitcoin on a pedestal. Instead, major enterprises created their own blockchains and cryptocurrencies using lessons learned from Bitcoin’s market performance to fix the bugs.
Bitcoin 1MB blocks are mined once every 10 minutes, which wasn’t an issue at the beginning, but it’s increasingly bottlenecking the network. The 21,000,000,000 limit is an issue too – every year less bitcoins are given to miners who must solve increasingly harder computations. Analysts constantly debate when it will no longer be financially viable to mine bitcoins, thus slowing block processing down even further.
Still, the last bitcoin won’t be mined until sometime around 2140, so I won’t be alive to see it happen. Who knows what technological advances will occur between now and then?
Bitcoin is the measuring stick all other cryptocurrencies are measured against, and many use its blockchain to fuel their own. Bitcoin is the cryptocurrency that introduces us to the world of digital cash, investments, goods, and services.
Bitcoin BTC Summary
Bitcoin is the poster child for cryptocurrency, pioneering its way through mainstream media and pop culture to become a legitimate currency. Thousands of imitators have since arrived, but this crypto OG has several key factors working in its favor.
- Bitcoin uses PoW mining/consensus, and its capped supply will reach its end in 2140.
- Bitcoin’s price affects the entire cryptocurrency market. It’s also the most widely accepted coin both in and out of crypto.
- Bitcoin has the most brand recognition of any other crypto, practically a household name at this point and often interchanged in pop culture with the word cryptocurrency itself.
With these pieces in place, Bitcoin is here to stay. It’s the gateway crypto for the entire market, and its name recognition will keep crypto viable as currencies for generations to come.