Bitcoin is a digital payments system and form of cryptocurrency invented in 2008 and launched in 2009. It’s the world’s first widely used cryptocurrency, and its creation follows several failed attempts at digital forms of peer-to-peer money.
With Bitcoin, you can transfer a digital source of money to anyone from anywhere in the world without an intermediary.
It is a new monetary asset class where transactions are recorded on a ledger. This ledger is the Bitcoin blockchain and uses a system—proof of work (PoW)—where miners validate all transactions are legitimate and maintain the ledger.
All transactions ever recorded on this blockchain are visible to anyone. As a result of the vast amount of computing power it takes to ‘mine‘ blocks of Bitcoin, some describe it as ‘digital gold’.
Who Is Satoshi Nakamoto?
The creator of Bitcoin goes by the pseudonym Satoshi Nakamoto, whose identity remains unknown. Satoshi published the Bitcoin whitepaper in Oct. 2008, which described a way to create a monetary network without the need for a central authority.
What Makes Bitcoin Valuable?
Indeed, the current system of money and payments works pretty well in stable, developed countries. Even though central banks and governments control these currencies, anything radical and extreme rarely occurs. Even though banks and payment processors can freeze your funds, reject your transactions and cancel your accounts, the reality is that most people will never have to deal with such concerns.
But if you’re one of the billions living in countries that are relatively less stable and developed, this can be a very real occurrence.
Transactions can happen without the oversight or control of banks or governments. This means the 1.7 billion adults worldwide who are either unbanked or from corrupt countries can manage their finances independently.
Bitcoin presents as a digital currency solution, transgressing borders and establishing an equal, common monetary system.
A problem Bitcoin aimed to solve is the fact that despite so much of our lives having transitioned online, money still remains in physical form and is relatively archaic. Bitcoin solves this issue by making it easier to almost instantly transfer value across its platform, in contrast to banks which take much more time to move foreign currencies.
Bitcoin is underpinned by its native cryptocurrency, bitcoin (BTC). There is a fixed maximum supply of 21 million BTC. Today, there is between 19.5 million and 20 million BTC in circulation. More BTC is slowly released each day to so-called ‘miners’, who earn BTC in return for helping to operate the Bitcoin blockchain.
Every 4 years the BTC reward is halved until there’s no more BTC to be rewarded sometime in the year 2140. The current reward is 6.25 BTC, which will halve to 3.125 in early 2024.
BTC has multiple use cases and benefits:
- Store of value: Increasingly BTC is seen as a ‘digital gold’, for storing and maintaining wealth. This is becoming increasingly important as governments and central banks tackle high inflation and quantitative easing (QE).
- Peer-to-peer monetary system and currency: BTC can be used to buy and sell goods and services or send value between 2 parties. BTC is fundamentally an open-source, peer-to-peer monetary system.
- Money free from censorship or tampering: Banks and governments are unable to control an individual’s Bitcoin (as long as it’s self-custodied).
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