What is Bitcoin and How Does it Work?

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Bitcoin is a digital currency that was introduced to the world in 2009. It leverages new-age technologies such as blockchain and peer-to-peer transactions. The bitcoins are created and managed by the open-source Bitcoin peer-to-peer network. 

It eliminates the role of banks and governments from financial transactions as it is a decentralized form of digital cash. A decentralized currency doesn’t require any intermediaries for processing transactions. 

Just like how Wikipedia is driven by volunteer editors, Bitcoin is powered by a network of individuals and cryptography, the technology which allows only the sender and the receiver to read the passed on secret information. 

Bitcoin is popularly referred to as “Cash for the Internet” by the crypto community. Bitcoin is the de facto leader of all cryptocurrencies. There’s not even one cryptocurrency that matches or rivals the market cap of Bitcoin. The second in the list of cryptocurrencies with the largest market cap is Ethereum and even it isn’t anywhere near the dominant market cap of Bitcoin. 

The Origins

The global financial world was in doldrums in 2008. Lehman Brothers Holdings was one of the biggest casualties of the 2008 financial crisis. They were the world’s fourth-largest investment bank during that time. The domain bitcoin.org was registered at the time when the global financial infrastructure was crumbling under the unprecedented challenges it faced. 

In 2008, an individual or a group of people published a white paper to a cryptography mailing list under a pseudonym Satoshi Nakamoto. The white paper was on Bitcoin and it explained how it would work. The first-ever bitcoin was mined in early 2009 and it was known as the “genesis block.” 

The First Bitcoin to be Mined

The first bitcoin had a text embedded in its programming and the text read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It referred to the headline of The Times, a British newspaper published on 3rd January 2009. Many of the crypto believers consider this embedded text to be pointing towards the crumbling modern financial infrastructure of the world. Nakamoto transferred this first Bitcoin to Hal Finey, who is an expert in cryptography. 

Who is Satoshi Nakamoto?

What is Bitcoin and How Does it Work?

It is almost impossible to be a crypto enthusiast and not know the name “Satoshi Nakamoto.”  The original identity of Satoshi Nakamoto remains a mystery to this day. Many individuals and groups have claimed to be Satoshi Nakamoto until now. However, none of them provided enough evidence to prove that they are indeed the mysterious programmer behind Bitcoin. 

The only publicly available information that is publicly available is that Nakamoto was born on April 5, 1975, and lives in Japan. 

The First Purchase To Be Made Through Bitcoin 

What is Bitcoin and How Does it Work?

Laszlo Hanyecz, a Florida-based programmer offered to pay 10,000 bitcoins in exchange for a pizza in May 2010. A bitcoin enthusiast from the United Kingdom took up Hanyecz’s offer and ordered two pizzas to be delivered to Hanyecz’s residence. 

Hanyecz kept his end of the deal and reimbursed the Briton by transferring him 10,000 Bitcoins. This was the first known instance of using bitcoin to purchase something. To celebrate this, the bitcoin community celebrates May 22 as the Bitcoin Pizza Day. Imagine, if Hanyecz would have kept these 10,000 bitcoins with him till now, it would have been worth over $9 million today. 

How Does Bitcoin Work?

Blockchain came to be known worldwide with the introduction of the Bitcoin network. It was a first recorded example of the commercial use of blockchain technology, as we call it today. You must be wondering why this technology is called Blockchain and not something else. There’s a reason behind it. This technology is called blockchain because it works exactly like a series of blocks that are connected through chains. 

The blocks contain information about bitcoin transactions. These blocks are organized properly as they are chained together. The properly structured blocks containing transaction details aid the Bitcoin network in maintaining a complete record of all transactions that took place within the network. 

On average, a new block is created every 10 minutes in the Bitcoin blockchain. With each new block, the Bitcoin network starts looking at all transactions that are contained within the block automatically. Thereafter, the Bitcoin network sends payments to the recipients and records the information about all the transactions in its ledger. 

The Future Ahead

What is Bitcoin and How Does it Work?

COVID-19 has ravaged the economies worldwide. All countries regardless of their development status have been affected by the COVID 19 induced economic gloom. Many experts around the world believe that the value of Bitcoin is driven by its demand in closed economies such as China, Iran, Venezuela, and many more. 

We believe that there is immense potential in Bitcoin. It will keep growing as the leading fiat currencies feel the downward pressure because of the multitudes of challenges that the governments around the world are facing. 

Keep in mind that there can be only 21 million Bitcoins ever created and is a reason to believe price outlook can only increase as demand to hold and use Bitcoin continually rise over time.

What is Bitcoin Mining and How Does it Work?

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