Invented in 2008 and launched in early 2009, Bitcoin introduced the world to the concept of cryptocurrency. Bitcoin was invented by someone using the pseudonym “Satoshi Nakamoto”, but it is still unclear whether this name represents one person or a group of people.
Bitcoin is a peer-to-peer system that allows users to transfer value between each other without requiring a trusted third party to act as an intermediary. The design of the Bitcoin protocol prevents double spending and the arbitrary creation of new coins.
Key Bitcoin features:
- The first decentralized digital currency
- Extremely high security due to proof-of-work and blockchain design
- Fully transparent history of transactions and predictable supply timeline
Bitcoin transactions are recorded in a fully transparent public ledger called the blockchain. Approximately every 10 minutes, Bitcoin transactions are batched into a “block” and added to the ledger. The blocks reference each other – this is where the “chain” part of blockchain comes from.
In order to ensure the security of the network, Bitcoin uses a proof-of-work algorithm. The process of facilitating transactions and creating new coins is referred to as “mining”. Miners deploy their computers to solve resource-intensive mathematical problems – the miner that reaches the correct solution first has the privilege of adding the next block to the Bitcoin blockchain and receives a reward in the form of BTC for their trouble.
However, the reward received by miners is cut in half approximately every 4 years in what are known as Bitcoin halvings. The maximum supply of Bitcoin is capped at 21 million coins. The last Bitcoin will be mined around the year 2140, according to estimates.