A quick-reference guide for the most popular cryptocurrency in the world.
What is Bitcoin?
If you find the concept of Bitcoin confusing, you are not alone. Bitcoin is a form of digital money. This means it doesn’t have a physical form. A Bitcoin is a digital token — with no physical backing — that can be sent electronically from one user to another, anywhere in the world. A Bitcoin can be divided out into eight decimal places, so you can send someone 0.00000001 Bitcoins and it is the first and most widely used decentralized ledger currency, with the highest market capitalization.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks, managing transactions and the issuing of bitcoins is carried out collectively by the network.
To truly understand what Bitcoin is and the value it can bring to our world, it is very important to know why it was created in the first place. Cryptocurrency is a digital asset that is secured with cryptography – complex mathematical algorithms – and can be a means of exchange for goods.
Who created Bitcoin?
The first mention of a product called bitcoin was in August 2008 when an anonymous programmer, or a group of programmers, using the names Satoshi Nakamoto and Martti Malmi registered a new domain, bitcoin.org. In October of the same year, Nakamoto released a document, called a white paper, entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” In the preceding months, Nakamoto and a group of volunteer researchers had proposed different versions of the concept in forums and email threads. It was in 2008 that it all came together. In Bitcoin’s whitepaper – an academic document with details about Bitcoin – Satoshi Nakamoto states that the goal of Bitcoin is to create a new “peer-to-peer electronic cash system” that is completely decentralized with no central authority.
Where Can I Spend Bitcoin?
In the beginning, there was *pizza. Nowadays, you can spend your bitcoin on much more than pizza, in a wide variety of places, both online and offline. Some of the most popular companies accepting Bitcoin payments worldwide today are Wikipedia, Microsoft, AT&T, and Overstock. Bitcoin is very actively traded on cryptocurrency exchanges, which allow users to swap ‘ordinary’ money like pounds for bitcoins.
*On May 22, 2010, when bitcoin was a little over a year old, a programmer called Laszlo Hanyecz bought two pizzas for 10,000 BTC. The day is now known as “Bitcoin Pizza Day.”
As a new user, you can get started with Bitcoin without understanding the technical details. To use Bitcoin, the first step is to create a wallet. Once you've installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses, should be used only once.
Why would someone use Bitcoin instead of normal money?
For normal currency it’s easy to answer, you use whatever the other side accepts. If you buy things from a foreign store and it accepts EUR, then you pay EUR. As more and more money is created, it erodes the value of the existing money in circulation. People don't necessarily notice this erosion because the nominal amount of their money remains the same; however, they do notice that their weekly shop, eating out, and watching movies costs more and more money. Bitcoin is different. The supply of bitcoins is carefully controlled and limited, and no one can create or issue more bitcoins at will. There will never be more than 21 million bitcoins and each bitcoin is itself divisible into 100 million units known as Satoshis. This prevents the kind of erosion of value that plagues ‘normal’ currency
Can we trust cryptocurrencies?
Contemporary cryptocurrencies lack legal, monetary, and institutional backing that traditional financial services employ. Instead, cryptocurrencies provide trust through technology. Despite the plethora of research in both trust and cryptocurrencies, the underlying attributes of the technologies that drive trust in cryptocurrencies are not well understood. Like any fast-developing space mushrooming with new technologies, there are higher quality cryptocurrencies and lower quality ones. In the face of often-slick marketing operations, many ordinary people understandably struggle to tell which cryptocurrencies have real potential and have genuine points of technical novelty, and which are simple clones of other currencies, or, worse, outright scams. Sometimes, schemes like One Coin have claimed to be cryptocurrencies, but have then turned out to be nothing more than well-organized pyramid frauds backed by a centralized database.
