What Is Bitcoin

Title: bitcoin
Abbreviation: BTC
Origin: 2008
Founder: Satoshi Nakamoto (pseudonym)
Total BTC amount: 21,000,000
The last bitcoin will be mined sometime around the year 2145
Units: 1 BTC = 1000 mBTC = 1 000 000 bits (uBTC) = 1 000 000 000 satoshi

Brief: Bitcoin (with an uppercase B) is a protocol, open source software, a decentralized network and a digital currency (known as a cryptocurrency), while bitcoin (with a lowercase b) is the unit of its economic value on this network. We also call this the Internet of Money (IoM), because it offers any person online the opportunity to be their own bank, allowing these individuals to have complete control of their own digital funds without the need of a centralized bank.

Bitcoin’s main advantage is a decentralized structure that cannot be censored by central authorities = Bitcoin, unlike state money, it is not dependent on the state, central banks or institutions. Anybody can send bitcoins to another person without worrying about a third party, or financial institution preventing the transaction, reversing the transaction, or stopping the transaction completely. Even more so, this same third-party cannot devalue bitcoin through any form of inflationary monetary policy.

Bitcoin “Monetary Policy” is known in advance, unchangeable, and transparent – put into place by protocol and independent of centralized authorities. The total amount of bitcoins in circulation and the way they are mined are firmly encoded into the algorithm, are known in advance, and are final. There will be a total of 21 million bitcoins mined. (although the change of that number is theoretically possible if a vast majority of users, miners, knots, and programmers choose to agree with the change, the chance that this will happen is very small). Bitcoins can be divided into hundreds of millions of smaller units called, satoshi. So 1 Bitcoin (BTC) = 100 million satoshi. Bitcoins are released into circulation gradually, through mining, a complex process executed by computers. As this article is being written (2018) there are currently 17 million Bitcoins in circulation, but the release of new Bitcoins is halved every four years, a process also known as halving.

Supply curve – Most bitcoins will be mined by the year 2030, the remaining few will be mined by approximately 2145. Every four years, new blocks of coins are released and that number is reduced by half upon each release.

All 21 million Bitcoins will be mined by 2145. Miners who mine Bitcoins and provide a secure network will continue to receive rewards in the form of fees for Bitcoin transactions – sending payment via the Bitcoin network is cheap, but not free. Charges in bitcoin may also change over time, as the network grows or as the new technology develops.

The original creator of Bitcoin is an unknown person or a group of people with the pseudonym Satoshi Nakamoto. Near the time surrounding the global financial crisis in 2008, Satoshi Nakamoto published a technical article on a newly proposed digital currency called Bitcoin (whitepaper) in the cryptographic community and then launched the open source Bitcoin code. Other developers started building on the code attracting enthusiasts from the libertarians to promote Bitcoin.

Satoshi’s response to rescuing bankrupt banks with taxpayers’ money during the global financial crisis.

Satoshi himself, initially appearing in discussion forums and active programming communities gradually withdrew himself from the public’s eye and growing cryptocurrency community. This decision proved to be beneficial to the cryptocurrency community in the long term. This has also contributed to one of the reasons why Bitcoin is decentralized – it has no leader in the form of a founder, as is the case with most other projects. Bitcoin is community-built engaging with independent programmers, scientists, enthusiasts and companies around the world. The whole system works without a central authority pulling the strings.

Bitcoin today is the largest and most well-known cryptocurrency in the world. Before Bitcoin, there have been dozens of other attempts to create a purely digital currency (BitGold, for example). But, all of them failed mainly due to the fact that they were always dependent on some centralized authority. Finally, Bitcoin has succeeded and paved its own path thanks to the brilliant combination of cryptographic security (private keys and public addresses), shared ledger (the blockchain) and its decentralized mining (Proof of Work).

Bitcoin – a technological, economic and social phenomenon

Trying to put it in the “software” box or “digital currency” box or the “internet payment system” box is inaccurate and limiting. Bitcoin technology has other uses that stretch beyond just payments. For example, the timestamp of documents in the network provides proof that the document existed at the given time. For example, the opentimestamps project offers a service that aims to replace document authentication, currently routinely performed by a central authority in the form of a notary, with the help of Bitcoin.

Therefore, Bitcoin is not only a technological and financial asset but also a social one – it forces us to think about what money is, how we can limit the risks that arise from trust in centralized authority, and offer an alternative to a monetary system that is dictated by states and larger banks. Bitcoin has had a very turbulent history, and it is still unclear whether it will eventually become widely used, but today we can say that it is a revolutionary achievement and is a very interesting experiment.

With its unique features, Bitcoin offers:

    • collective verification of transactions by nodes and processors in the public general ledger
    • a system based on voluntariness and openness
    • transparent monetary policy, unchanged and pre-known
    • payment system available 24/7/365
    • a world community that does not know the borders of states
    • a system that does not discriminate and does not require its user to disclose his or her personal data
    • stability and robustness of the safest blockchain protocol in the world
    • Freedom, control and responsibility of the capital of the user (be your own bank)
    • resistance to censorship, adverse regulations
    • speedness and low fees (mainly in international trade)
    • the ability to write unencrypted data into the network
    • Liquid and easily portable storage of values
    • a deflationary alternative to inflationary currencies

Do you want to know more?
Learn how Bitcoin works under the hood.

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