A Beginner’s Guide: What is Bitcoin?
According to Google; “Bitcoin is the world’s first cryptocurrency, a form of electronic cash. It is the first decentralized digital currency: the system was designed to work without a central bank or single administrator.” But what does that mean exactly — in simpler terms?
Bitcoin (BTC) is simply just a currency — just like the Great British Pound (GBP) or the US Dollar (USD), however it is digital. This means it is not a physical currency like we are used to in our everyday lives and can only be used on the internet. Bitcoin is also decentralized and open-source, meaning no one owns or controls it — not even a government or bank. It’s design is public and anyone around the world can use it.
Who created Bitcoin and why?
Bitcoin was created in 2007 by someone under the pseudo name Satoshi Nakamoto, in response to the financial crisis. To this day, the search for Nakamoto has been going on for years, but no one has ever found him, despite speculations over his possible identities, including the likes of Elon Musk. Since its creation, the total value of the Bitcoin network has grown from zero to over 5 billion USD (or £3.76B GBP).
Bitcoin is currently the largest and most popular cryptocurrency out there in the market, and the very first to be decentralised and is based on Blockchain technology which records transactions, verifying and ensuring everything is accounted for.
Despite its intense publicity, Bitcoin is not widely adopted (yet). The idea is that cryptocurrency will eliminate all the banks (middle men) and money transfer will be faster without any fees or delays.
How is it different to every day currencies, such as the US Dollar or Great British Pound?
There are few factors differentiating cryptocurrencies to fiat money, such as:
- Cryptocurrencies have a fixed supply — there is a market cap on how many coins can circulate in the market (21 million.)
- It relies on Blockchain technology
- It is not regulated.
- It is a digital currency, not physical.
- Cryptocurrencies is not legal tender — meaning it is not backed by a central government or bank.
How do I get Bitcoin?
You can join the Bitcoin network by opening an online wallet and it will generate a 25 character long public and private key. This is your Bitcoin address and you can think of it kind of like your bank sort code or account number. You can give your public key to anyone as it is what people will use to send bitcoins to you, however your private key is for your eyes only and must not be shared with anyone as anyone who has your private key could potentially access all your funds.
So why is the use of cryptocurrencies like Bitcoin rising?
Bitcoin is increasingly becoming the most preferred for payments on the internet due to its anonymity capabilities. However, Bitcoin is not completely anonymous, but it is much more anonymous when compared to your credit card. It is also a very erratic currency (meaning it does not store value in a predictable fashion) — it is highly volatile and unpredictable, therefore investing is kept to a minimum.
If you got this far, thank you for reading this article!
If you have any questions, please let me know in the comments below or on Twitter (my handle is @salmapkhan ).