Bitcoin is a peer-to-peer electronic cash system, created by the anonymous Satoshi Nakamoto in 2008. It is considered to be the first digital currency to solve the “double spend” problem (basically copy and pasting the digital currency to create more currency). It achieved this through the use of blockchain technology, which is common amongst most cryptocurrencies.
Blockchain technology usually involves a ledger which is distributed across the entire network. As transactions are made with bitcoin, each ledger updates the wallet balances and verifies with other network participants to ensure the right transactions have been recorded. It also links back to previous transactions whilst doing this, ensuring that none of the previous transactions can be edited. The network participants are rewarded for this process, called mining, by having a chance to “win” the next block of transactions, granting them a number of bitcoins as a reward.
Bitcoin is pseudonymous because users require wallets in order to send and receive bitcoin. Each wallet has a public key (similar to an email address) which is an almost random string of letters and numbers, meaning users are not anonymous but pseudonymous.
Bitcoin mining targets an average of roughly ten minutes between blocks. The reward paid to miners for creating blocks halves every 210,000 blocks, or roughly every four years, in an event called the “halving”. Only 21 million bitcoin will ever be mined, and once the block reward reaches zero, miners will rely on transaction fees rather than newly issued bitcoin. Bitcoin has no central authority: its consensus rules are enforced by network nodes, while miners add valid transactions to blocks.
Since the creation of bitcoin, many other cryptocurrencies have been created that have different advantages and disadvantages, as well as vastly different use cases. To browse prices and market data for a wide range of cryptocurrencies, visit CoinMarketCap. Bitcoin can also be spent with some merchants, either directly or by buying gift cards for other retailers.
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