The most well-known cryptocurrency is Bitcoin (BTC). Bitcoin was the original cryptocurrency introduced in 2008 as a form of “peer-to-peer electronic cash.” This was just over 15 years ago, but Bitcoin has radically changed the way that we think about money and digital assets. It was envisioned as a new way to transfer and store value on the internet.

The Bitcoin white paper was posted on the internet on October 31, 2008 under the pseudonym Satoshi Nakamoto. The white paper is only 8 pages long and everyone who is trying to understand cryptocurrency should read it. Although you won’t understand most of it, the white paper is a source text for the whole cryptocurrency ecosystem.

When the Bitcoin white paper was posted, the financial world was in a free-fall. This was the height of the global financial crisis, when trust in the banking sector and even central banks was failing. Without trust, a currency cannot function. Bitcoin was introduced as a “trustless” currency because it does not rely on banks as trusted third parties or central banks for monetary policy. It captured the ideal of a form of peer-to-peer electronic cash that does not rely on any financial accounts. The transaction is simply the buyer and seller. This is why some have argued that Bitcoin is a more free-market, capitalist form of money than sovereign currency. Bitcoin operates without a single custodial third party to hold funds and you only need a computer on a home broadband connection to participate.

Bitcoin is the world’s first decentralized digital currency. It allows for the storage and transfer of cryptographic tokens. There were “e-cash protocols” in the 1980s and 1990s, but they still relied on a centralized intermediary. Wei Dai’s “b-money” proposal in 1998 was the first sketch of a decentralized currency. It describes a system in which “senders and receivers are identified only by digital pseudonyms (i.e. public keys) and every message is signed by its sender and encrypted to its receiver.” This is very similar to how Bitcoin operates. You can think of the price of Bitcoin as the exchange rate BTCUSD just like the price of Euros in Dollars is exchange rate EURUSD.

Bitcoin is also a digital asset. Bitcoin is difficult to categorize because it is both money and an asset. Like many other forms of commodity money (e.g., gold and seashells), Bitcoin has no intrinsic value. This is part of what makes it so controversial as an investment. BTC now trades like a commodity. It’s price history shows extreme volatility. Because Bitcoin was the first mainstream cryptocurrency, it is still the largest digital asset by market capitalization.

The technology behind Bitcoin is called blockchain. For Bitcoin, the blockchain is a record of digital wallets that store value. Owners of the digital wallets can transfer value with other digital wallet owners using the Bitcoin network. The Bitcoin blockchain is publicly available through websites like blockchain.com. Ironically, this is what makes Bitcoin incredibly transparent. The “unknown” is the owner of the wallet. If the owner can maintain the anonymity of the wallet, the transactions cannot be traced to the owner. However, if the identity of the owner is revealed, then every transaction (amount, direction, and counterparty) is fully revealed. This is why the IRS is looking into blockchain as a technology for taxation. Cryptocurrency transactions are already being requested on tax forms.

Mining is the process of validating transactions on the Bitcoin blockchain.

Many people are working on making Bitcoin more scalable as a payments network. For example, the Lightning Network is built on the Bitcoin blockchain to increase processing speed.

Resources

Learn me a bitcoin – https://learnmeabitcoin.com