Updated: Dec 15, 2019
It is almost impossible to talk about cryptocurrencies without the name Bitcoin popping up, and for good reason too. It is the world’s first decentralized cryptocurrency, which changed the way people thought about money. Bitcoin can be best explained as a form of electronic cash, which is not under the control of any single administrator, country or central bank. The cryptocurrency can be exchanged without any intermediaries on the peer-to-peer Bitcoin blockchain network.
This quick guide will talk about the reason behind Bitcoin’s creation, the little that is known about its makers, the way it works, and its uses and applications.
What is Bitcoin Designed For?
Bitcoin was created in January 2009 as a cryptocurrency, not to be backed by any country’s government or banking system. It offered the promise of lower transactional fees as compared to traditional online payments. The cryptocurrency is completely operated by a decentralized authority, unlike other traditional forms of government-issued currencies.
It is a small wonder that Bitcoin made its first appearance in 2008, right after ‘Occupy Wall Street’ accused the country’s big bank, of misusing investors’ and borrowers’ money, rigging the system, duping clients, and charging exorbitant fees. Bitcoin was designed to put the sellers back in charge, canceling interest fee, eliminating the middleman and making transactions transparent, in a bid to hack corruption.
Who Is the Team Behind Bitcoin?
Bitcoin’s domain was first registered in August 2008, and ideas set out in a white paper in January 2009, by the mysterious Satoshi Nakamoto. The name is a pseudonym for the person behind Bitcoin. Nakamoto was the first person to ever solve the digital currency problem of double-spending by using a peer-to-peer network.
Cypherpunk Hal Finney, the developer for PGP Corporation (world’s most widely used email encryption software), was the first to receive 10 bitcoins (BTC) from Nakamoto in January 2009.
However, it was only in 2010 when the world’s first public commercial transaction using a bitcoin was carried out. This happened when Laszlo Hanyecz purchased two Papa John’s pizza for 10,000 BTC. The amount equated to $40 in 2010, since Bitcoin was just over a year old. Currently, 1 BTC equates to USD 10,240.30.
How Does Bitcoin Work?
New users can get started on Bitcoin easily without having to understand all the technical details. You need to install the Bitcoin wallet on your device, after which your first Bitcoin address shall be generated. This address works similar to emails, except they can be used only once. New Bitcoin addresses can be generated whenever required. You can disclose your single-use Bitcoin address to the person you want to transact with.
Each Bitcoin wallet contains a private key, which is a secret piece of data used to sign transactions. This key provides mathematical proof that the transaction came from the wallet’s owner. This ‘signature’ also prevents the transaction from being tampered with, or otherwise altered by someone else.
The entire Bitcoin network relies on a shared public ledger technology called the blockchain. This includes all confirmed transactions, which allows individual Bitcoin wallets to calculate the remaining spendable balance. This is important for the verification and viability of new transactions.
All transactions are confirmed through a process called mining, which refers to a distributed consensus system. Mining includes pending transactions into the blockchain, allowing different devices to agree on the state of the transaction. The entire process does not take more than 10 to 20 minutes.
What are Bitcoin’s Current and Future Applications?
Although several cryptocurrencies have been developed following the success of Bitcoin, it is still the most widely accepted decentralized digital currency on the market. Many service providers from online sellers to brick-and-mortar stores, have started accepting bitcoins along with other fiat currency (regular currency, such as USD, AUD, and EUR).
Currently, BTC can be used to purchase several products, such as:
● Software and Electronics
Newegg, Dell, and Microsoft, among other companies accept BTC as a mode of payment.
● Casinos and Entertainment
In 2016, the online casino called bitcoin.com was launched, where anyone can play and gamble anonymously using BTC.
● Flights and Travel
One of the biggest travel agencies in the world, Expedia, allows users to pay using bitcoins.
There are several smaller service providers and merchants, other than these big-names that accept bitcoins worldwide.
Bitcoin has already reached the pinnacle of cryptocurrencies, but there are still several important changes coming it's way. This year is seen by experts as ‘the building years’ to support the next big wave of BTC, due to the increasing number of players. Lightning Network, Bitcoin’s most promising scaling solution, is expected to dominate the Bitcoin conversation by promising greater utility and better means of exchange.