Bitcoin — What it is and what to do with it
In recent years, everyone has become familiar with Bitcoin or at least heard about it. From its humble beginnings in 2018 to its peak in 2021, Bitcoin has taken investors on a journey. Bitcoin is not only the first cryptocurrency but also the most well-known of the more than 7800 cryptocurrencies that exist today. Never in history has it been possible to transfer value between distant people without relying on a trusted intermediary, such as a bank. In this article, we will clarify what exactly Bitcoin is and how it is connected to the blockchain.
Bitcoin is a type of digital money, and like any other money, you can store it, exchange it, and also make payments with it. The difference between it and national currencies like the euro or the US dollar is its decentralized structure and opt-in model. Centralized money, or “fiat money,” is issued by central banks, and transactions are processed through intermediaries such as banks.
Why was Bitcoin created?
Bitcoin was invented during the Great Recession in 2008. Satoshi Nakamoto, whose identity is still unknown, published a 9-page solution titled “Bitcoin: A Peer-to-Peer Electronic Cash System” to a long-standing problem in computing to create a system that allows users to trust transactions without relying on third-party intermediaries traditionally required for digital money transfers.
Bitcoin is decentralized, which means you can buy, sell, and exchange directly, without an intermediary like a bank. This also means that Bitcoin is not backed by any government or institution, and there is nothing to guarantee its value other than proof of the system. Every transaction ever made is in a public ledger for anyone to see, making it impossible to forge or reverse transactions. Each transaction is publicly sent to the network and passed from note to note. These transactions are collected by miners in a group called a block and added to the Bitcoin supply every 10 minutes or so. The number of bitcoins mined is reduced by 50% after 210,000 blocks or about every four years.
Fast Fact: As of March, 18,99 million Bitcoin have been issued, with about 2,01 million bitcoins still to be released, which is anticipated to occur in 2140.
Although a maximum of 21 million Bitcoins can be minted, the number of Bitcoins in circulation is likely much lower, as holders can lose access to their Bitcoins if they lose the key to their wallet or die without sharing their wallet details. There is no exact number of how many Bitcoins have already been lost, although a recent study estimates that about 2–3 million Bitcoins are lost forever. This brings us to a realistic problem without a central authority — anyone who makes a mistake with transactions in their wallet has no recourse. If someone accidentally sends Bitcoins to the wrong address, there is one to help you.
Features of Bitcoin
- It has a limited supply: 21 million bitcoins
- Easily divisible: You can divide one bitcoin into 100 million pieces
- Immutable: Every transaction on the Bitcoin network is stored on a block, that is linked to a previous block of transaction.
- Network effects: Bitcoin became a mainstream asset — over 100 million active BTC users across the world
How to use Bitcoin?
Generally, Bitcoin is used as an alternative investment to diversify a portfolio alongside stocks and bonds. Bitcoin is already accepted for purchases, but the number of merchants accepting cryptocurrencies is still limited. You can also use a service that connects your crypto account to your debit card, allowing you to use Bitcoin in the same way as your credit card. Financial service providers for such services include Crypto.com and Coin Zoom. Moreover, BTC can be converted into cash just like any other asset. There are various cryptocurrency exchanges on the Internet where you can exchange your bitcoin for cash.