Bitcoin is a digital currency that has gained widespread attention in recent years. Bitcoin is often referred to as a “cryptocurrency”, though there are other digital assets also referred to as cryptocurrencies.
Bitcoin was officially launched in 2009 by an obscure entity who called himself Satoshi Nakamoto. It operates on a wholly decentralized network, which means it is not and cannot be controlled by any central authority, including a government. Instead, it is maintained by a community of volunteers who work together to verify and process transactions.
At its core, Bitcoin is a digital file that contains information about transactions between buyers and sellers. These transactions are verified and recorded on a public ledger called the blockchain. The blockchain is essentially a decentralized database that allows anyone to view transactions in real-time, providing transparency and security to the system.
One of the unique features of Bitcoin is its limited supply. Unlike traditional currencies that can be printed at nauseum, Bitcoin is capped by design and there will only ever be 21 million Bitcoins in existence. This makes Bitcoin is a scarce asset and some argue, that the scarcity is what drives up and will continue to drive up the value of Bitcoin. In this respect, the HODLers like to use the phrase “To The Moon”.
To acquire Bitcoin, users can either buy it on a cryptocurrency exchange, or “mine” it through a process referred to as “proof-of-work”. Mining involves using computer processing power to solve mathematical equations that verify transactions on the blockchain. In return for this work, miners are rewarded with newly-minted (created) Bitcoin.
In recent years, Bitcoin has gained popularity as an investment option, but early adopters of the cryptocurrency have used it as means of payment. Some merchants and retailers adapted to the growing popularity and began to accept Bitcoin payments in their businesses.
Transactions with Bitcoin are not only faster and cheaper than traditional payment methods like credit cards, they are also non-discriminatory so anyone can use them to pay for things anywhere.
Security of Bitcoin transactions is safeguarded and verified by the decentralized network, making it nearly impossible to hack or counterfeit. This made it possible for people oppressed by tyrannical regimes to transact with other parties.
Bitcoin has also faced criticism for its environmental impact. While it is true that the mining process requires some amount of electricity, the allegation that these have significant impact on the environment have been vastly debunked and the criticism exposed for being manufactured.
To sum Bitcoin up: Bitcoin is a decentralized digital currency. It operates on a public ledger called the blockchain outside of a single point of failure. Because there will ever only be no more than 21 Million Bitcoins ever mined, the cryptocurrency is an attractive investment option, which at the same time offers fast and secure transactions. However, because it is a relatively new and volatile asset, one should keep a well diversified portfolio and not be invested too much in novelty assets.