What Is Bitcoin (BTC)?
Bitcoin is a decentralized cryptocurrency described initially in a 2008 whitepaper by a person, or group of people, using the alias Satoshi Nakamoto. It was launched soon after, in January 2009.
BTC is a peer-to-peer online currency, meaning that all transactions happen directly between equal, independent network participants, without the need for any intermediary to permit or facilitate them. According to Nakamoto’s own words, BTC was created to allow “online payments to be sent directly from one party to another without going through a financial institution.”
Some concepts for a similar type of decentralized electronic currency precede BTC, but Bitcoin holds the distinction of being the first-ever cryptocurrency to come into actual use.
Who Are the Founders of Bitcoin?
Bitcoin’s original inventor is known under a pseudonym, Satoshi Nakamoto. As of 2021, the true identity of the person — or organization — behind the alias remains unknown.
On October 31, 2008, Nakamoto published BTC’s whitepaper, describing how a peer-to-peer, online currency could be implemented. They proposed to use a decentralized ledger of transactions packaged in batches (called “blocks”) and secured by cryptographic algorithms — the whole system would later be dubbed “blockchain.”
Just two months later, on January 3, 2009, Nakamoto mined the first block on the Bitcoin network, known as the genesis block, thus launching the world’s first cryptocurrency. BTC price was $0 when first introduced, and most Bitcoins were obtained via mining, which only required moderately powerful devices (e.g. PCs) and mining software. The first known BTC commercial transaction occurred on May 22, 2010, when programmer Laszlo Hanyecz traded 10,000 Bitcoins for two pizzas. At BTC price today in mid-September 2021, those pizzas would be worth an astonishing $478 million. This event is now known as “Bitcoin Pizza Day.” In July 2010, Bitcoin first started trading, with the Bitcoin price ranging from $0.0008 to $0.08.
However, while Nakamoto was the original inventor of BTC and the author of its very first implementation, he handed the network alert key and control of the code repository to Gavin Andresen. The latter later became the lead developer at the Bitcoin Foundation. Over the years, many people have contributed to improving the cryptocurrency’s software by patching vulnerabilities and adding new features.
BTC’s source code repository on GitHub lists more than 750 contributors. Some of the key ones are Wladimir J. van der Laan, Marco Falke, Pieter Wuille, Gavin Andresen, Jonas Schnelli and others.
What Makes Bitcoin Unique?
Bitcoin’s most unique advantage comes from the fact that it was the first cryptocurrency to appear on the market.
It has created a global community and gave birth to an entirely new industry of millions of enthusiasts who create, invest in, trade, and use BTC and other cryptocurrencies in their everyday lives. The emergence of the first cryptocurrency has created a conceptual and technological basis that subsequently inspired the development of thousands of competing projects.
The entire cryptocurrency market — now worth more than $2 trillion — is based on the idea realized by Bitcoin: money that can be sent and received by anyone, anywhere in the world, without reliance on trusted intermediaries, such as banks and financial services companies.
Thanks to its pioneering nature, BTC remains at the top of this energetic market after over a decade. Even after BTC has lost its undisputed dominance, it remains the most prominent cryptocurrency, with a market capitalization that surpassed the $1 trillion mark in 2021, after Bitcoin price hit an all-time high of $64,863.10 on April 14, 2021. This is mainly owing to growing institutional interest in BTC and the ubiquitousness of platforms that provide use-cases for BTC: wallets, exchanges, payment services, online games and more.
How Much Bitcoin Is in Circulation?
Bitcoin’s total supply is limited by its software and will never exceed 21,000,000 coins. New coins are created during the process known as “mining”. As transactions are relayed across the network, they get picked up by miners and packaged into blocks, which are in turn protected by complex cryptographic calculations.
As compensation for spending their computational resources, the miners receive rewards for every block they successfully add to the blockchain. At the moment of BTC’s launch, the reward was 50 BTC per block: this number gets halved with every 210,000 new blocks mined — which takes the network roughly four years. As of 2020, the block reward has been halved three times and comprises 6.25 bitcoins.
Bitcoin has not been pre-mined, meaning that no coins have been mined and distributed between the founders before it became available. However, during the first few years of BTC’s existence, the competition between miners was relatively low, allowing the earliest network participants to accumulate significant amounts of coins via regular mining: Satoshi Nakamoto alone is believed to own over a million BTC.
Mining BTC can be very profitable for miners, depending on the current hash rate and the price of Bitcoin. While mining Bitcoins is complex, we discuss how long it takes to mine one Bitcoin on CoinMarketCap Alexandria — as we wrote above, mining Bitcoin is best understood as to how long it takes to mine one block, as opposed to one BTC. As of mid-September 2021, the Bitcoin mining reward is capped to 6.25 BTC after the 2020 halving, which is roughly $299,200 in Bitcoin price today.
How Is the Bitcoin Network Secured?
Bitcoin is secured with the SHA-256 algorithm, which belongs to the SHA-2 family of hashing algorithms, which is also used by its fork, Bitcoin Cash (BCH), and several other cryptocurrencies.
Bitcoin Energy Consumption
Over the past few decades, consumers have become more curious about their energy consumption and personal effects on climate change. When news stories started swirling regarding the possible adverse effects of Bitcoin’s energy consumption, many became concerned about BTC and criticized this energy usage. A report found that each BTC transaction takes 1,173 KW hours of electricity, which can “power the typical American home for six weeks.” Another report calculates that the energy required by BTC annually is more than the annual hourly energy usage of Finland, a country with a population of 5.5 million.
The news has produced commentary from tech entrepreneurs, environmental activists, and political leaders alike. In May 2021, Tesla CEO Elon Musk even stated that Tesla would no longer accept the cryptocurrency as payment due to his concern regarding its environmental footprint. Though many of these individuals have condemned this issue and moved on, some have prompted solutions: how do we make BTC more energy efficient? Others have taken the defensive position, stating that the BTC energy problem may be exaggerated.
At present, miners are heavily reliant on renewable energy sources, with estimates suggesting that BTC’s use of renewable energy may span anywhere from 40-75%. However, to this point, critics claim that increasing BTC’s renewable energy usage will take away from solar sources powering other sectors and industries like hospitals, factories and homes. The Bitcoin mining community also attests that mining expansion can help lead to the construction of new solar and wind farms in the future.
Furthermore, some defending Bitcoin argues that the gold and banking sectors individually consume twice the energy as BTC, criticizing BTC’s energy consumption as a nonstarter. Moreover, the energy consumption of Bitcoin can easily be tracked and traced, and the same cannot be said of the other two sectors. Those who defend Bitcoin also note that the complex validation process creates a more secure transaction system, which justifies the energy usage.
Another point that BTC proponents make is that the energy usage required by Bitcoin is all-inclusive such that it encompasses the process of creating, securing, using and transporting BTC. Whereas with other financial sectors, this is not the case. For example, when calculating the carbon footprint of a payment processing system like Visa, they fail to calculate the energy required to print money or power ATMs, smartphones, bank branches, security vehicles, among other components in the payment processing and banking supply chain.
What exactly are governments and nonprofits doing to reduce BTC energy consumption? Earlier this year in the U.S., a congressional hearing was held where politicians and tech figures discussed the future of crypto mining in the U.S, specifically highlighting their concerns regarding fossil fuel consumption. Leaders also discussed the current debate surrounding the coal-to-crypto trend, particularly regarding the number of coal plants in New York and Pennsylvania that are being repurposed into mining farms.
Aside from congressional hearings, private sector crypto initiatives are dedicated to solving environmental issues, such as the Crypto Climate Accord and Bitcoin Mining Council. The Crypto Climate Accord proposes a plan to eliminate all greenhouse gas emissions by 2040, And due to the innovative potential of BTC, it is reasonable to believe that such grand plans may be achieved.
What Is Bitcoin’s Role as a Store of Value?
Bitcoin is the first decentralized, peer-to-peer digital currency. One of its most important functions is that it is used as a decentralized store of value. In other words, it provides for ownership rights as a physical asset or as a unit of account. However, the latter store-of-value function has been debated. Many crypto enthusiasts and economists believe that high-scale adoption of the top currency will lead us to a new modern financial world where transaction amounts will be denominated in smaller units.
The minor units of Bitcoin, 0.00000001 BTC, are called Satoshis (or Sats in short), in a nod to the pseudonymous creator. At Bitcoin price now, 1 Satoshi is equivalent to roughly $0.00048.
For many, the top crypto is considered a store of value, like gold, rather than a currency. This idea of the first cryptocurrency as a store of value, instead of a payment method, means that many people buy the crypto and hold onto it long-term (or HODL) rather than spending it on items as you would typically spend a dollar — treating it as digital gold.
The most popular wallets for cryptocurrency include both hot and cold wallets. Cryptocurrency wallets vary from hot wallets and cold wallets. Hot wallets can be connected to the web, while cold wallets are used for keeping large amounts of coins outside of the internet.
Some of the top crypto cold wallets are Trezor, Ledger and CoolBitX. Some of the top crypto hot wallets include Exodus, Electrum and Mycelium.
How Is Bitcoin’s Technology Upgraded?
A hard fork is a radical change to the protocol that makes previously invalid blocks/transactions valid and requires all users to upgrade. For example, if users A and B disagree on whether an incoming transaction is valid, a hard fork could make the transaction valid to users A and B but not user C.
A hard fork is a protocol upgrade that is not backwards compatible. This means every node (computer connected to the Bitcoin network using a client that performs the task of validating and relaying transactions) needs to upgrade before the new blockchain with the hard fork activates and rejects any blocks or transactions from the old blockchain. The old blockchain will continue to exist and accept transactions, although it may be incompatible with other newer BTC clients.
A soft fork is a change to the BTC protocol wherein only previously valid blocks/transactions are made invalid. Since old nodes will recognize the new blocks as valid, a soft fork is backwards-compatible. This kind of fork requires only a majority of the miners to upgrade to enforce the new rules.
Some examples of prominent cryptocurrencies that have undergone hard forks are Bitcoin’s hard fork that resulted in Bitcoin Cash, Ethereum’s a hard fork that resulted in Ethereum Classic.
Bitcoin Cash has been hard forked since its original forking, with the creation of BTC SV. Read more about Bitcoin, Bitcoin Cash and Bitcoin SV here.
What Is Taproot?
Taproot is a soft fork that bundles together BIP 340, 341 and 342 and aims to improve the blockchain’s scalability, efficiency, and privacy by introducing several new features.
The two significant changes are the introduction of the Merkelized Abstract Syntax Tree (MAST) and the Schnorr Signature. MAST introduces a condition allowing the sender and recipient of a transaction to sign off on its settlement together. Schnorr Signature allows users to aggregate several signatures for a single transaction. This results in multi-signature transactions looking the same as regular or more complex ones. Users can also save on transaction fees by introducing this new address type, as even complex transactions look like simple, single-signature ones.
Although HODLers will probably not notice a significant impact, Taproot could become a pivotal milestone in equipping the network with smart contract functionality. In particular, Schnorr Signatures would lay the foundation for more complex applications to be built on top of the existing blockchain as users start switching to Taproot addresses. If adopted by users, Taproot could, in the long run, result in the network developing its DeFi ecosystem that rivals those on alternative blockchains like Ethereum.
What Is the Lightning Network?
The Lightning Network is an off-chain, layered payment protocol that operates bidirectional payment channels which allow instantaneous transfer with instant reconciliation. It enables private, high volume and trustless transactions between any two parties. The Lightning Network scales transaction capacity without incurring the costs associated with transactions and interventions on the underlying blockchain.
How Much Is Bitcoin?
The current valuation of BTC is constantly moving, all day, every day. It is a truly global asset. From a start of under one cent per coin, BTC has risen in price by thousands of per cent to the numbers you see above. The prices of all cryptocurrencies are quite volatile, meaning that anyone’s understanding of how much BTC is will change by the minute. However, there are times when different countries and exchanges show different prices and understanding how much Bitcoin is will be a function of a person’s location.
Is Bitcoin Political?
Bitcoin is becoming more political, particularly after El Salvador began accepting it as legal tender. The country’s president, Nayib Bukele, announced and implemented the decision almost unilaterally, dismissing criticism from his citizens, the Bank of England, the IMF, Vitalik Buterin and many others. Since the Bitcoin law was passed in September 2021, Bukele has also announced plans to build Bitcoin City, a city entirely based on mining Bitcoin with geothermal energy from volcanoes.
Countries like Mexico, Russia and others have been rumoured to be candidates to accept Bitcoin as legal tender, but thus far, El Salvador stands alone.
Where Can You Buy Bitcoin (BTC)?
Bitcoin is, in many regards, almost synonymous with cryptocurrency, which means that you can buy BTC on virtually every crypto exchange — both for fiat money and other cryptocurrencies. Some of the main markets where BTC trading is available are:
- Coinbase Pro
- Huobi Global