What is Bitcoin?

Bitcoin (BTC) is a decentralized cryptocurrency that was first described in a 2008 whitepaper by an individual or group of individuals using the alias Satoshi Nakamoto. Officially launched in January 2009, Bitcoin is a peer-to-peer online currency that allows transactions to happen directly between equal and independent network participants without the need for any intermediary. Bitcoin is digital money that cannot be inflated or manipulated by any individual, company, government, or central bank. Bitcoin is recognized as one of the initial cryptocurrencies to come into use and has inspired the development of thousands of competing projects. There will only ever be 21 million BTC. Bitcoin is highly divisible, with its smallest unit, i.e. 0.000 000 01 BTC, called a "satoshi" or "sat." As bitcoin's value has risen, its easy divisibility has become a key attribute.

How does Bitcoin work?

Bitcoin's key innovation was the blockchain — a piece of software that acts like a ledger, logging every transaction ever made using Bitcoin. Unlike a bank's ledger, the Bitcoin blockchain is distributed and verified across a network of computers, meaning that no company, country, or third party is in control of it, and anyone can become part of that network. The process by which new bitcoins are entered into circulation involves solving computationally difficult puzzles to discover a new block, which is added to the blockchain. The individuals who present their solution to the puzzle first are compensated with a certain number of bitcoins. Finally, anyone, anywhere, with Internet access, can receive, send, and hold Bitcoin using the public version of their key (i.e., the version of their private key that can be freely shared in order to securely receive funds).

What are the potential use cases for Bitcoin?

One of Bitcoin's advantages comes from the fact that it was one of the initial cryptocurrencies to appear on the market. It has managed to create a global community and give birth to a new industry of millions of enthusiasts who create and use Bitcoin and other cryptocurrencies in their everyday lives. Bitcoin is often referred to as digital gold due to its potential for long-term utility. It is also used as a decentralized medium of exchange, providing for ownership rights as a physical asset or as a unit of account.

What is the history of Bitcoin?

Bitcoin was launched in January 2009 by an individual or group of individuals using the alias Satoshi Nakamoto. The paper introducing Bitcoin wasn't the first idea for digital money drawing on the fields of cryptography and computer science—in fact, the paper referred to earlier concepts—but it was a uniquely elegant solution to the problem of establishing trust between different online entities, where people may be hidden (like bitcoin's own creator) by pseudonyms, or physically located on the other side of the planet. The first block on the Bitcoin network, known as the genesis block, was mined by Nakamoto, but the first known Bitcoin transaction occurred on May 22, 2010, when programmer Laszlo Hanyecz traded 10,000 Bitcoins for two pizzas. This event is now known as "Bitcoin Pizza Day." Over the years, many people have contributed to improving the cryptocurrency's software by patching vulnerabilities and adding new features. Bitcoin's source code repository lists more than 750 contributors. The fact that Bitcoin is not controlled by a single person or organization is core to its value proposition, and Satoshi's identity has never been revealed (and likely never will be).

How can I buy Bitcoin?

You can create an account on Coinbase or an increasing number of other reputable financial technology companies to buy, send, and receive Bitcoin. Bitcoin is also increasingly accessible via traditional financial portfolios; for example, in October 2021, the first Bitcoin futures-based ETF was approved. (ETFs are a popular way for investors to gain exposure to an asset like gold or tech stocks, and now Bitcoin.)

What is Bitcoin mining?

Bitcoin is often considered to be a "store of value," the same as gold is. New bitcoins are created by "mining" (up to a maximum of 21 million coins). Bitcoin mining is the process by which thousands of computers worldwide compete to record and verify transactions on the network. These specialized computers, known as 'mining rigs,' perform the equations required to verify and record a new transaction. In the early days, a typical desktop PC was powerful enough to participate, allowing pretty much anyone curious to try their hand at mining. These days, however, the computers required are massive, specialized, and often owned by businesses or large numbers of individuals pooling their resources. As of October 2021, Cambridge University researchers estimate that U.S.-based miners maintain the highest percentage of global mining by country.