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 letter and numbers, meaning users are not anonymous but pseudonymous.
Bitcoin is mined according to a complex algorithm which aims to create blocks every ten minutes. The rate at which bitcoin is rewarded to miners for creating blocks halves every few years in an event called the ‘halvening’. Only 21 million bitcoin will ever be mined, and once they are all mined the miners (network participants) will be rewarded with the transaction fees of the network. Bitcoin is not controlled by any government or central bank – it is controlled by the network participants and the community.
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 see a list of nearly all cryptocurrencies that are traded on cryptocurrency exchanges like Coinbase and Binance, visit CoinMarketCap. Bitcoin can be spent in many places, including Amazon, Microsoft and Nike.
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