What Is Bitcoin?
Bitcoin is the oldest and best-known cryptocurrency. It was born on 3 January 2009. More than 16.7 million bitcoins were in circulation as of December 2017 with a total value of about USD 250 billion. That’s still almost nothing compared to...
Bitcoin is the oldest and best-known cryptocurrency in the world working non-stop for more than ten years. But despite its popularity, many people still struggle to realize what it is, what does it mean, and how does it all work.
What is Bitcoin?
Bitcoin is a peer-to-peer cash protocol designed to operate without central authorities like governments and banks. Its open-source nature ensures that all its transactions, as well as the issuance of bitcoins, are collectively secured by genius math, cryptography, and network participants called miners. Such a design makes it the most sophisticated, accessible, and transparent money. Anyone with the right skills can participate in its development or build applications on top of it.
Even so, it is not easy to grasp Bitcoin and its implications. Here are some other definitions and analogies of bitcoin according to people who have studied Bitcoin for years.
Native Internet money that's controlled by no one & accessible to anyone. Rather than trusting an authority to do the accounting, many users run accounting software to ensure nobody cheats. Transactions are secured from reversal by large amounts of energy. https://t.co/vV2QRSgZM4
— Jameson Lopp (@lopp) June 1, 2019
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Bitcoin is the perfect combination of a peer to peer network and a distributed cryptographic system that weakens the current monopoly of power held by the central banks, central governments, and big corporations that would otherwise have us be slaves of their totalitarian society
— wiz (@wiz) May 13, 2019
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Bitcoin got another property, it bring a violentless revolution!
— Jon ₿ ⚡️ (@Jonbros01) May 13, 2019
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Exactly, it empowers the sovereign individual to peacefully opt-out of the bank/government fiat currency system and opt-in to a fair monetary system governed by incorruptible consensus rules enforced by math and cryptography and only changeable with the consent of all the users
— wiz (@wiz) May 13, 2019
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Bitcoin is like early electricity. Raw, dangerous, seems very volatile and hard to use. With time though it'll start to feel safer, easier and normal. Like electricity it will inspire and power new unimaginable industries. And one day we’ll wonder where did Bitcoin come from?
— O₿iWan (@ObiWanKenoBit) May 12, 2019
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#bitcoin is a censorship-resistant, immutable, global digital currency which is borderless and completely decentralized. It is also a "Store of Value" to hedge against the inflationary fiat currency.
— ⚡CRYPTOLOGIST⚡ (@kadhirvelavan) May 12, 2019
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Unstoppable money
— Alex Fortin (@realAlexFortin) May 12, 2019
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Bitcoin is is the marriage of economics and computer science; a digital deflationary currency and ledger run on a decentralised network, which was launched to replace the current inflationary fiat system, following the 2008 economic crash.
— ₿TCkitty (@CryptoSenseYT) May 12, 2019
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Bitcoin is BitTorrent for money. You can't shut it down, because it's everywhere and nowhere. Nobody controls it, because you control it. It is the scarcest substance ever created and can be transported by sharing information. Ignore it at your peril.
— Gigi (@dergigi) June 2, 2019
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BTC prevents double spends w/o a single point of failure. BTC is more needed every day as the world goes cashless because it's the best bearer asset, like physical cash or gold, but online. A BTC transaction is hard to stop, seize, change or revert. Many A+ devs improving BTC.
— Craig Wrong®️ (@YangVentures) June 1, 2019
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Unconfiscatable, Censorship Resistant Payment w/ a Store of Value due to Deflationary Gold Like Hard Money Properties. Cause of Satoshi's invention of Proof Of Work that burns electricity for security, coded as Open Source w/ decentralized Consensus by Validating Nodes.-#Bitcoin
— Tone Vays [#UnderstandBit] (@ToneVays) June 1, 2019
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From my book: "Bitcoin can be best understood as distributed software that allows for transfer of value using a currency protected from unexpected inflation without relying on trusted third parties"
— Saifedean Ammous (@saifedean) June 2, 2019
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Shared ledger where everyones balances are written. You can only spend using your password, which only you know. Inflates 4% annually so some people keep the sheet honest.
— Richard Heart Pumpamentals.com (@RichardHeartWin) June 1, 2019
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Bitcoin is:
- a system for storing and transferring value through a communications medium which allows the recipient to verify the integrity of the transfer themself; &
- the first version of that system as initiated by Satoshi Nakamoto and fairly distributed from 2009 to present— nic carter (@nic__carter) June 1, 2019
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Currency kept alive by distributed network of horcruxes
— Mike Elias (@harmonylion1) June 1, 2019
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- your hedge against bad government devaluing savings through inflation
- tx can’t be stopped by a bank
- wallet can’t be closed by anyone
- receiving money abroad is faster & cheaper than via bank
- not suitable for money laundering
- not suitable for 3rd party custody— Alena Vranova (@AlenaSatoshi) June 2, 2019
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We need hard money to store value across time, but parasites want to inflate. We need dark money to exchange value across people, but parasites want to track/tax. Central entities providing hard/dark money got shut down by powerful parasites. So we invented an unshutdownable way.
— Giacomo Zucco [I identify as 'SJW-ism is a Fraud'] (@giacomozucco) June 1, 2019
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Bitcoin is a form of money used to save and transfer value, created by and exchanged among people in an entirely voluntary manner, not subject to the whims of politicians, bankers, or economists.
This has never existed before.— Johnathan Corgan (@jmcorgan) June 2, 2019
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Free speech money.
— Gab.com (@getongab) June 2, 2019
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Bitcoin is a currency which
- Can't be seized
- Supply grows asymptotically, governed by an algorithm
- Transactions are sent over the internet and can't be blocked
- Is public infrastructure controlled collectively by users— Justin Moon (@_JustinMoon_) June 1, 2019
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Bitcoin is a digital asset & form of money. The supply is limited & written into the open source code. Peers, not a central authority, verify what is true on the ledger. This is done by nodes & mining blocks every 10 minutes. This is also the issuance & governance method.
— Bruce Fenton (@brucefenton) June 1, 2019
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An electronic payment system based on cryptographic proof instead of trust, where the cost savings from lack of mediation decrease transaction costs, reducing the minimum transaction size and enabling small casual transactions.
— Matthew Green (@matthew_d_green) June 2, 2019
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Means of transferring value to anyone, anywhere, at any time, without a third party, with a public record of the transaction on the blockchain for minimal fees with high security. A decentralized currency with a fixed supply with inflation reduction every 4 years. Store of value.
— Jon Cooke {ŁTC} (@JonCooke17) June 1, 2019
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Things you should know about Bitcoin
The Bitcoin history starts from 3 January 2009 when Satoshi Nakamoto and other cypherpunks decided to make this idea a reality. As of today, the current price of one bitcoin revolves around $9,000. Its price is decided by simple market forces of supply and demand. The more demand for bitcoin there is, the higher its price is likely to go.
If you want to learn more about why do bitcoins have value, check out this brief guide.
Close to 18 million bitcoins are in circulation as of June 2019 with a total value of about $150 billion. That’s still almost nothing compared to fiat currencies like the US dollar, of which there are 3.7 trillion in circulation. The number is even smaller if we compare bitcoin to gold, which has a market cap of more than $7 trillion.
Source: Crypto Voices.
The creator of Bitcoin – a person or group using the pseudonym Satoshi Nakamoto – capped the coins that can ever be put into circulation at just under 21 million. It’s estimated that all those bitcoins will be produced (in cryptocurrency terminology, “mined”) by the year 2140.
The Bitcoin network is decentralized, meaning no one controls it. It’s based on so-called blockchain technology, also known as distributed ledger technology (DLT).
Bitcoin is ahead of other cryptocurrencies not only in terms of its price. It also enjoys the widest network of merchants that accept it. But growing popularity has complicated using Bitcoin for everyday purchases due to a sharp increase in fees and slower transaction confirmation. Thus, Bitcoin is sometimes seen more as an asset than a currency. However, such development has prompted an emergence of second layer solutions like The Lightning Network (LN), which enable users to trade with minimal fees.
Moreover, Bitcoin is popular among speculators, who aim to profit from its price fluctuations. Some even claim the Bitcoin price is manipulated, which is a likely scenario because it is still unregulated. Wealthy industry players (so-called whales) can have more impact on bitcoin price than others. However, the price fluctuations are likely to end once Bitcoin is widely adopted and has sufficient liquidity.
Getting started with Bitcoin
Getting started with Bitcoin is getting easier by the day. All you need to do is to set up a cryptocurrency exchange account, install a Bitcoin wallet app and you’re good to go.
If you want to learn more about how to buy bitcoin, click here. You can sell your bitcoins anytime, too. Here’s how you can go about it.
Keep in mind that the price of it is highly volatile, with percentage swings up and down that can reach double digits. In 2017 the price of Bitcoin skyrocketed from less than $1,000 per coin to over $14,000, at one point reaching $19,000. Some forecast the value of the currency will reach tens or even hundreds of thousands of US dollars, while other market players believe it has no value and calls the price rise a bubble. However, it wasn’t the first time when bitcoin has radically increased in price and then dropped. Since 2011, it had experienced three similar explosions in price, which were followed by 80% retracements. All these “bubbles” have led to a net increase in value every time.
Bitcoin historical bubbles. Source: ChartsBTC / Twitter.
In any case, Bitcoin is attracting more and more users and merchants around the world since it permits bypassing banks and other financial institutions and so can make international transactions cheaper and quicker. It’d cost the same, for example, to transfer $1 worth of bitcoins or $100 million worth.
If you’re interested, here is a complete list of merchants and major retailers who accept Bitcoin (BTC) payments.
Also, Bitcoin also provides more anonymity than traditional banking (though it isn’t 100% anonymous). And it gives people more control over their money since no government controls its supply and no bank can freeze your account. Some governments, though, have banned the use of Bitcoin (like Russia) or restricted it (like China). However, such a ban works only in theory, since there is nothing that can stop people from trading bitcoins. Here is the complete list of countries where bitcoin and cryptocurrencies are legal or banned.
So, what is Bitcoin?
There are too many things to learn about bitcoin in one simple guide. Some people are studying it for years and still don’t get it completely. Nevertheless, you don’t need to understand it entirely if you simply want to use it.
The bottom line is Bitcoin, like other cryptocurrencies, is still in development, and no one knows what opportunities or challenges it may bring in the future. That said, no one knows what may happen with our traditional money, either. It could lose its value or get frozen in a bank account, or the whole payment system could be hacked.
Everything you need to know about Bitcoin is covered in this and the rest of our Bitcoin guides.
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