Since its inception in 2009, the price of Bitcoin has shown extraordinary growth and reached a market capitalization of over 1.7 trillion USD. So, what is Bitcoin, and how did this cryptocurrency come into existence? Let’s explore together with The Tech-conomix Hub through the article below!
1. What is Bitcoin (BTC)?
Bitcoin (BTC) is a cryptocurrency created in 2009. It was designed to function as a means of payment outside the control of any organization, thereby eliminating the need for third-party involvement in financial transactions. Bitcoin has a total supply of 21 million and is expected to be fully mined by 2140.
The victory of Donald Trump in the U.S. Presidential election in November 2024, along with his pro-crypto stance during his next term, catalyzed Bitcoin’s strong growth. Between November 6, 2024, and November 14, 2024, the price of BTC rose sharply, reaching an all-time high (ATH) of $93,200.
2. Who created Bitcoin?
Bitcoin was created by a mysterious programmer under the pseudonym Satoshi Nakamoto. Satoshi first published Bitcoin’s whitepaper in 2008 and released the initial version of Bitcoin’s software the following year.
Satoshi Nakamoto once described himself as a 37-year-old Japanese man. However, his fluent use of English and the technical characteristics of Bitcoin’s software have led many to question his true origins. Around mid-2010, Satoshi decided to “step back,” passing the role of Bitcoin’s lead developer to Gavin Andresen.
In October 2024, the HBO documentary Money Electric: The Bitcoin Mystery claimed that Peter Todd was Satoshi Nakamoto. However, the documentary quickly faced strong backlash from the community, and Peter Todd himself denied being the creator of Bitcoin. The true identity of Satoshi Nakamoto remains a mystery.
Satoshi is estimated to own nearly 1 million Bitcoins, equivalent to over $90 billion as of November 2024 market prices.
3. How does Bitcoin operate?
When a new transaction appears on the blockchain, it is gathered into a memory pool called the “mempool.” Miners play a crucial role in verifying the validity of these pending transactions and then organizing them into blocks.
A block acts like a page in the blockchain ledger, where multiple transactions along with additional data are recorded. Specifically, a mining node collects unconfirmed transactions from the mempool and constructs a potential block.
Next, miners attempt to turn this potential block into a valid and confirmed block. To achieve this, miners must solve a complex mathematical puzzle requiring significant computational resources. However, for each successfully mined block, the miner is rewarded with a block reward, which includes newly created Bitcoins along with transaction fees.
4. Characteristics of Bitcoin
a. Decentralization:
Satoshi Nakamoto developed Bitcoin with the goal of creating a financial system independent of any third-party control. Anyone can participate in transaction validation and network security. Even if part of the system fails, Bitcoin can still function normally.
b. Anonymity:
Today, banks know almost everything about their customers: credit history, addresses, phone numbers, spending habits, and so on. However, Bitcoin is the complete opposite. When transacting with Bitcoin, users’ identities are protected.
c. Transparency:
Bitcoin’s anonymity is only relative. Every BTC transaction is stored on the Blockchain. In theory, if your wallet address is used publicly, anyone can study the blockchain ledger to determine your balance.
Various methods can be used for those who wish to transact anonymously. Some specific wallets prioritize privacy features you can rely on, but the simplest method is to use multiple addresses combined with spreading risk across several wallets.
d. Irreversibility:
Once you have sent Bitcoin, there is no way to retrieve it unless the recipient agrees to return it. This feature can serve as proof of payment, meaning that anyone you transact with cannot deceive you by claiming they didn’t receive the funds.
5. What are the benefits of Bitcoin?
a. Freedom:
BTC was designed with a mindset of freedom. Most importantly, it is independent of centralized third-party control in transactions. When purchasing an item, cryptocurrency has recently become as convenient as fiat currency. Particularly, if you are buying items from certain deep web markets, BTC is an ideal payment method compared to other currencies.
b. High Convenience:
One of the key attributes of money is convenience, meaning it should be easy to carry and use. Since Bitcoin is entirely digital, all funds are stored in an app or hardware wallet.
Cryptocurrency allows people to freely send and receive money simply by scanning a QR code or through a few steps of accessing an online wallet. Transactions take little time, have low fees, and money moves directly from one person to another without any cumbersome intermediaries. All you need is an Internet connection.
c. Ability to Choose Transaction Fees:
One undeniable advantage of the Bitcoin network is the freedom to choose transaction fees. These fees are paid to miners, but only after certain new blocks are created. Typically, the sender covers the entire fee, as deducting it from the recipient might be considered an incomplete transaction.
Transaction fees are entirely voluntary and serve as an incentive for miners to continue their work. This mechanism is also a primary source of income in the cryptocurrency mining industry, generating more revenue for miners than traditional sectors. Bitcoin mining will eventually cease when all Bitcoin has been mined.
Thus, in the cryptocurrency market, there is a trade-off between cost and transaction waiting time. Higher fees mean faster transactions, while some users may opt to wait to save money.
d. Not Part of PCI:
PCI stands for the Payment Card Industry. Its products include ATMs, debit cards, credit cards, POS networks, and related services. It encompasses all organizations that store and issue payment card data. Currently, it is subject to strict security regulations, and most payment card companies participate in these standards.
While unified regulations can benefit large companies, the system often fails to address the specific needs of individuals. By using Bitcoin, you do not have to comply with PCI standards.
e. Security and Control:
Bitcoin users can control their transactions, and no one can withdraw money from your account without your authorization. Additionally, personal information and identity are protected and not disclosed during the transaction process.
f. Bitcoin Cannot Be Counterfeited:
One of the most common methods of fraud in the digital world is spending the same currency twice, causing both transactions to be fraudulent. This phenomenon is called “double spending.” To address this issue, Bitcoin uses blockchain technology along with various consensus mechanisms to build a robust protocol.
6. Risks of Investing in Bitcoin
a.Legal Risks:
The lack of unified regulations for managing cryptocurrencies raises questions about their longevity, liquidity, and popularity.
b. Security Risks:
Purchasing Bitcoin through exchange platforms like Binance or OKX is the most common way to acquire this cryptocurrency. However, these platforms are vulnerable to exploitation at any time, potentially causing significant losses to users’ assets.
Additionally, many users store Bitcoin in non-custodial wallets. A private key—a combination of numbers and letters—acts as the password to access these non-custodial wallets. Losing or exposing the private key means losing all assets stored in the wallet.
c. Market Risks:
Bitcoin is an extremely volatile asset, making this one of the major risk factors that can lead to severe financial losses for investors.
8. Types of Bitcoin Wallets
Today, with the growth of the cryptocurrency market, there are various wallet applications available for users to store Bitcoin. These can be categorized into three main types:
a. Hot Wallets:
Hot wallets are Bitcoin storage solutions created online, where the user holds the private key. Common hot wallets for storing Bitcoin include Blockchain.com, Coin98 Wallet, Exodus, Coinbase Wallet, and others.
b. Cold Wallets:
Cold wallets offer extremely high security by storing the private key in physical devices. The two most popular cold wallets currently available are Ledger and Trezor.
c. Exchange Wallets:
These are wallets provided by cryptocurrency exchanges, where users do not hold the private key. Users can utilize the wallets of popular exchanges such as Binance, Huobi, OKX, Kucoin, Gate.io, MXC, and others.
9. Conclusion
Above is all the information you need to know about Bitcoin, the most influential factor in the cryptocurrency market. Thank you for exploring with The Tech-conomix Hub!