What is Bitcoin (BTC)
Bitcoin (BTC) is a digital currency that works as a type of money. It’s not controlled by any single person or group, so there’s no need for third parties in transactions. People called miners get rewarded with Bitcoin for checking and confirming transactions. You can buy Bitcoin on different online platforms.
In 2009, someone named Satoshi Nakamoto introduced Bitcoin to the public. It’s now the most famous cryptocurrency globally, and many other cryptocurrencies have been created because of its popularity. Some of these try to be new payment systems, while others are used for different purposes in blockchains and new financial technologies.
Find out about the first cryptocurrency ever created. Discover its history, understand how it functions, learn how to obtain it, and explore its various uses.
Important Point About Bitcoin
- Bitcoin, which started in 2009, is the biggest digital currency globally based on its overall market value.
- Unlike regular money, Bitcoin is managed through a decentralized system called blockchain, handling its creation, distribution, trading, and storage.
- The security of Bitcoin and its transactions is ensured by a consensus method called proof-of-work (PoW).
- You can buy Bitcoin through different online platforms for cryptocurrencies.
- Bitcoin has had a rocky ride as a store of value, experiencing ups and downs in its relatively short existence.
Understanding How Bitcoin Works
In August 2008, someone registered the website name Bitcoin.org. Now, the registration details are kept private, so we don’t know who the person is that registered it.
In October 2008, someone named Satoshi Nakamoto shared on a website that they had created a new digital money system. This system, described in a document called “Bitcoin: A Peer-to-Peer Electronic Cash System” on Bitcoin.org, became a key guide for how Bitcoin works today.
The first Bitcoin block, called Block 0 or the “genesis block,” was mined on January 3, 2009. It includes the message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” suggesting it was mined around that date.
Bitcoin rewards are reduced by half every 210,000 blocks. In 2009, the reward for each block was 50 new bitcoins. On May 11, 2020, the third halving took place, decreasing the reward to 6.25 bitcoins per block. The next halving is expected in 2024, which will reduce the reward to 3.125 bitcoins.
Bitcoin can be broken down into really tiny parts called satoshis. Each bitcoin can be divided into eight decimal places, which means it can be split into 100 millionths. If needed, and if miners agree, Bitcoin might be made divisible into even smaller parts in the future.
How Bitcoin Blockchain Technology Work
Bitcoin’s blockchain technology is not too difficult to grasp. Simply put, if you have some Bitcoin, you can use your digital wallet to send smaller amounts of it as payment for things you buy. However, things get complicated when you try to figure out exactly how it all works.
Cryptocurrencies are like digital money that use a special kind of technology called blockchain. The blockchain is like a shared digital notebook that keeps track of transactions. This notebook is secure because it uses encryption.
When people make transactions with cryptocurrencies, the information about the transaction is added to a new page in the notebook. This new page is encrypted and checked by validators, who are like digital auditors. These validators, also known as miners, get a reward in the form of a new Bitcoin when they successfully verify a page.
All these transactions wait in line to be checked by miners. Miners use special computer programs and machines to solve complex math problems related to the transaction. Once they solve it, a new page is added to the notebook, and more transactions can be added and verified.
In simple terms, cryptocurrencies are like digital money, and the blockchain is the secure technology that keeps track of who has what. Miners play a role in making sure transactions are valid and get rewarded with new digital money for their efforts.
Bitcoin uses a method called SHA-256 to protect the information in its blocks on the blockchain. To explain it simply, the details of transactions in a block are turned into a long, complex number. This number includes all the transaction information and details from the blocks that came before it.
How to Easily Mine Bitcoin
You can mine Bitcoin using different tools, like hardware and software. When Bitcoin started, people could mine it on a regular computer, but now it’s more competitive because more miners are trying to solve math problems. Even if your computer is new, it’s hard to win on your own.
This is because many miners together try to solve a huge number of math problems every second—444 quintillion! Special machines called ASICs are made just for mining and can solve 335 trillion problems per second. Regular computers with the latest tech can only solve around 100 million problems per second.
If you want to be a Bitcoin miner, you can use your computer with mining software and join a mining group. These groups work together to compete with big mining farms that use special machines.
If you have enough money, you can buy an ASIC miner, which is a device for mining cryptocurrency. A new one usually costs around $10,000, but you can also get used ones from miners who are upgrading their equipment. Keep in mind that there are additional costs like electricity and cooling if you decide to buy one or more ASICs.
There are different mining programs available, and you can join mining pools. CGMiner and BFGMiner are two popular programs. When choosing a pool, it’s important to check how they distribute rewards, what fees they charge, and read reviews about the mining pool.
How Can You Buy Bitcoin?
If you don’t want to mine Bitcoin, you can buy it using a cryptocurrency exchange. Many people can’t afford a whole bitcoin due to its high price, but you can purchase smaller amounts on these exchanges using regular money, like U.S. dollars. For instance, you can buy Bitcoin on Coinbase by making and funding an account. You can fund your account using your bank account, credit card, or debit card. Watch the video below to learn more about buying Bitcoin.
How Do People Use Bitcoin?
Bitcoin was first made for person-to-person payments. But now, more people are using it because its value is going up, and there are other blockchains and cryptocurrencies to compete with.
To spend your Bitcoin, you’ll need a digital wallet. Think of it as your connection to the digital money system. The wallet keeps the secret codes to access your Bitcoin, which you have to enter when you want to buy something.
Many shops and online businesses now take Bitcoin as payment. If it’s a physical store, they might have a sign that says “Bitcoin Accepted Here.” They can process the payment using special devices or by scanning codes on a screen. Online businesses just need to add Bitcoin to their list of payment choices, like credit cards or PayPal.
Investment and Donations
People started getting interested in Bitcoin as it became more popular. From 2009 to 2017, new platforms appeared where people could buy and sell Bitcoin. The prices went up, and more people wanted to buy it. In 2017, the price went over $1,000, and many thought it would keep going up, so they started buying and holding Bitcoin. Traders also started making quick trades on these platforms, and the market became very active.
In 2022, the price of Bitcoin went down a lot. In March, it was as high as $47,454, but by November, it had dropped to $15,731. It went up again in 2023, reaching $31,474 before going back down below $30,000. The drop in Bitcoin’s price was part of a larger issue affecting many assets, including problems with inflation, rising interest rates, supply chain issues due to COVID-19, and the war in Ukraine. Some other important tokens in the crypto world also crashed, along with one of the major exchanges, which made people worried about the stability of digital currencies.
Risks of Investing in Bitcoin
Investing in Bitcoin comes with risks. Some people invest in Bitcoin because its price went up a lot in the past. For example, on December 31, 2019, it was $7,167.52, and a year later, it was $28,984.98, which is more than three times the original amount. In the first half of 2021, it reached a high price of $68,990 in November. But after that, it went down and stayed around $40,000. The price of Bitcoin keeps changing a lot.
Many people buy Bitcoin as an investment because they hope its value will increase, not necessarily to use it for buying things. But because its value is not guaranteed and it exists only in digital form, using and buying Bitcoin comes with risks. Organizations like the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and Consumer Financial Protection Bureau (CFPB) have warned investors about the dangers of investing in Bitcoin.
- Regulatory Risk: Cryptocurrency regulations vary, and this inconsistency makes it uncertain how long, stable, and widely accepted these digital currencies will be.
- Security Risk: When it comes to security, most people who own Bitcoin buy and sell it on online platforms called cryptocurrency exchanges. These exchanges are digital and can be vulnerable to hackers, malware, and technical issues.
- Insurance Risk: Unlike traditional investments, Bitcoin and other cryptocurrencies are not insured by organizations like the Securities Investor Protection Corporation or the Federal Deposit Insurance Corporation. Some exchanges offer insurance through third parties, but it’s not universal.
- Fraud Risk: Despite blockchain’s security features, there are still opportunities for fraudulent activities with cryptocurrencies.
- Market Risk: Just like any investment, the value of Bitcoin can go up and down. Its price is sensitive to news and events, and it has experienced significant drops in the past, like a 61% fall in one day in 2013 and an 80% drop in 2014.
Regulating Bitcoin is challenging, like handling any new technology. The current government wants to set rules for Bitcoin to prevent illegal activities but also doesn’t want to hinder the growth of the industry.
Biden aims to stop the illegal use of Bitcoin while encouraging its positive development. The U.S. is especially focused on regulating cryptocurrency and preventing criminal use abroad by sanctioning exchanges and wallets and recovering payments to criminals.
As the Bitcoin world evolves, there will be more regulations and laws over time.
The thoughts and ideas shared on Ruby Currency are just for giving information. The person who wrote this article doesn’t own any cryptocurrency as of the article’s date.
Ruby Currency writers must use reliable sources like white papers, government data, and interviews with experts to support their work. We also refer to research from other trusted publishers as needed. Our editorial policy outlines the standards we follow to ensure accurate and unbiased content.
- Bitcoin Project.
How long does it take to mine one Bitcoin?
It usually takes about 10 minutes for the mining process to approve a block and get a reward. The reward for mining one block is 6.25 BTC, and this means it takes around 96 seconds to mine 1 BTC.
Is Bitcoin a good investment?
Bitcoin’s value has been unpredictable in its short history. Whether it’s a good investment depends on your financial situation, investment mix, risk tolerance, and goals. It’s advisable to consult a financial expert before investing in cryptocurrency to make sure it’s suitable for you.
How does Bitcoin make money?
Bitcoin miners earn money by validating blocks in the network and getting rewards. Bitcoins can be exchanged for regular currency on cryptocurrency exchanges and used for purchases at places that accept them. Traders can also profit from buying and selling bitcoins.
How many Bitcoins are left?
Currently, there are 19.51 million Bitcoins and about 1.4 million more can still be mined as of October 15, 2023.