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What is Bitcoin?
Bitcoin is a form of peer-to-peer electronic money that can be transferred without the intermediation of financial institutions.
In practice, this means that two individuals, even living in different countries, can send BTC to each other without needing a bank or an international remittance company.
Transactions are confirmed on the blockchain, a huge database that records all user trades. This technology was born with Bitcoin, and it works in such a way that the participants themselves are the auditors of the network.
As there is no third party involved, sending Bitcoin from one country to another is usually cheaper and faster than transferring fiat currencies.
BTC is digital, decentralized, and is not controlled by governments, companies, or individuals. Therefore, no Mint needs to print it and no Central Bank has the power to control its price. Its value depends mainly on the law of supply and demand.
When did Bitcoin appear?
Bitcoin emerged on October 31, 2008. On that day, the creator (or creators) of the cryptocurrency, who hides under the pseudonym Satoshi Nakamoto, sent an email to a list of people interested in cryptography. In the body of the message, he wrote that he had been working “on a new fully peer-to-peer electronic money system, without trusted third parties”.
He also inserted a link with the cryptocurrency’s white paper (manual), in English. In the document, with nine pages, Nakamoto briefly described the fundamentals of Bitcoin, based on four main points:
It is a peer-to-peer network to avoid double spending (possibility of sending the same coins more than once); without intermediaries, like banks; allows the anonymity of participants; and uses Proof of Work (a type of algorithm) to generate Bitcoin (process that was named mining) and prevent such double spending.
In the manual, Nakamoto also stipulated that BTC has a finite supply. In total, only 21 million units can be mined (created) until 2140, which makes it scarce. By the end of October 2021, according to the aggregator Coingecko, 18.8 million Bitcoin had already been issued.
Despite Bitcoin being launched at the end of 2008, the first block (name of the file with information about transactions) of the cryptocurrency’s blockchain was only mined on January 3, 2009.
Who created Bitcoin?
The creator of Bitcoin hides behind the pseudonym Satoshi Nakamoto. Who he is, however, still remains a mystery. Some people have come forward claiming to be the character, but no one has actually been able to prove anything.
What is known so far comes from traces of his online life. In November 2009, for example, he launched BitcoinTalk – a discussion forum about cryptocurrency. Nakamoto was very active in the space and, over almost a year, posted about 600 messages. None, however, give concrete clues about his true identity.
His last movement in the forum occurred on December 12, 2010. In the post, he gave some indications about the security of the network. After that, he no longer posted anything on BitcoinTalk. That same year, he also passed the repository with the Bitcoin code to Gavin Andresen, a software developer who was involved in the cryptocurrency project.
At the end of April 2011, in what was his last ‘online appearance’, he sent a farewell email to his close developers. In the message, Nakamoto “passed the ball” of Bitcoin to other developers:
“I’ve moved on to other things. This (Bitcoin project) is in good hands with Gavin and everyone.”
Candidates for Satoshi Nakamoto
No one knows yet who created Bitcoin. However, there are some suspects. On the list are people who collaborated with the project, were close to the creator of BTC – at least in online life or were cited by him. There are also wealthy people capable of influencing the market with just one tweet. Here are some of the candidates:
- Gavin Andresen, for having taken control of the cryptocurrency code and having exchanged messages with Nakamoto, is one of them.
- Another supposed creator of BTC is Hal Finney, who was the first person to receive a Bitcoin transfer from Nakamoto – that was on January 11, 2009. Finney, however, died in August 2014 at the age of 58, a victim of a degenerative disease. At his own request, his body was frozen to be revived in the future – that is if some technology capable of overcoming death arises.
- Computer scientists Nick Szabo and Adam Back, both cited in the Bitcoin white paper, also appear on the list. Craig Steven Wright, a computer scientist and businessman who in 2016 told journalists he was the real Nakamoto (without presenting convincing evidence), is another suspect.
- Finally, Tesla and SpaceX CEO Elon Musk is also in the running. The theory about Musk arose after a billionaire employee, known for influencing the cryptocurrency market with his tweets, said he could have created BTC. The businessman denies.
Difference between Bitcoin and digital currencies
The main difference between Bitcoin, other cryptocurrencies, and Central Bank Digital Currencies is the form of issuance and distribution.
BTC and altcoins are decentralized. That is, there is no government or country in control. The rules, therefore, are dictated by those involved in the projects, as well as by the users.
Central bank digital currencies, on the other hand, are issued and distributed by government bodies. “CBDCs are digital representations of countries’ fiat currencies being controlled by central banks,” explained Ricardo Dantas, CO-CEO of the cryptocurrency broker Foxbit.
In practice, therefore, a digital currency issued by a Central Bank is a virtual copy of the country’s current money. Its value, therefore, is determined by a monetary authority. It is different from decentralized cryptocurrencies, whose prices vary according to the law of supply and demand.
How to Buy Bitcoin
How to Buy Bitcoin There are various ways to buy Bitcoin and other cryptocurrencies. Some of the options include cryptocurrency exchanges, cryptocurrency ETFs, and investment funds.
In the case of a cryptocurrency exchange, you need to choose one and open an account. Typically, they ask for your date of birth, ID, social security number (or equivalent), and address during the online registration process. Some also request a selfie to confirm your identity. There are withdrawal and transfer fees. The minimum Bitcoin purchase investment depends on each exchange. On some, the minimum starts at around $5; others require about $10.
Cryptocurrency ETFs can be traded directly on the stock exchange like a regular stock. Therefore, you need to open an account with one of the many brokerage firms available. The registration also involves submitting personal documents.
It’s important to remember that when buying, you need to pay brokerage and custody fees to the brokers, in addition to the charges from the stock exchange. There’s also a management fee.
Finally, you can also buy Bitcoin through investment funds that allocate resources to the cryptocurrency.
These products can be purchased through brokers or directly from fund managers. There are funds for retail investors, professional investors, and qualified investors – the registration will depend on the option and classification. The minimum shares vary according to the fund and the target audience – in some, it is possible to invest from about $100. As with ETFs, there are some fees, such as the administration fee.
Is Bitcoin safe?
Yes, Bitcoin is safe. Proof of this is that the blockchain, the technology behind the cryptocurrency, has never been hacked over these years of history. And this is mainly due to the mechanism created by Nakamoto, especially two features: consensus and immutability.
“Consensus refers to the ability of nodes, computers or devices connected to the Bitcoin interface, within a distributed blockchain network, to agree with the true state of the network and the validity of transactions. Immutability, on the other hand, refers to the ability of the blockchain to prevent the alteration of transactions that have already been confirmed.
In practice, these two features allow transactions between unknown people to be carried out without the need for a third party – such as a bank or an international remittance company – to guarantee the transfer.
What is Bitcoin Mining?
Think of Bitcoin mining like a big, global competition where everyone’s using their computers to solve complex puzzles. It’s like a race where the first one to cross the finish line gets a prize. This race is happening all the time in the world of cryptocurrencies, and it’s crucial for keeping things running smoothly.
Just like a gold miner needs a pickaxe, a Bitcoin miner needs two things: a computer and electricity. These miners are people who lend their computers’ power to the Bitcoin network. The first one to solve the puzzle gets a reward in Bitcoin. This reward is called a block reward.
Here’s how it works: Miners’ computers are always gathering recent Bitcoin transactions, bundling them into blocks. They then race to solve a tricky puzzle, and the first one to crack it gets to add the new block to the blockchain, the public ledger of all Bitcoin transactions.
Everyone in the network wants to be the first to solve the puzzle because the prize is a certain amount of new bitcoins. Once a miner finds the solution, they tell everyone else in the network. If the solution checks out, the new block gets added to the blockchain.
This whole process is a big incentive for people to participate in the network and keep it running smoothly. But as more bitcoins get mined, the puzzles get harder. This means miners need more powerful computers to keep earning the same amount of Bitcoin.
The puzzle-solving is also a security measure. If someone wanted to mess with the Bitcoin network, they’d need control over more than half of the network’s computing power, which would be incredibly expensive and difficult.
How to mine Bitcoin
Shortly after the creation of Bitcoin, anyone could easily mine the cryptocurrency at home. All it took was to connect a computer (with a reasonable video card) to the BTC network and keep it on to solve complex mathematical problems.
Currently, however, it is practically impossible to “extract” Bitcoin through a common PC. This is because specific equipment is needed for the function.
But it’s not enough to have just one, two, or three hardware. To solve the calculations and take the rewards, you need to have a huge computational power. Today, there are mining farms with thousands of equipment dedicated exclusively to Bitcoin mining.
Given the complexity of the task and the high investment in the business, these mining farms usually organize themselves into pools (sets) of miners who work together to compete for the validation of transactions.
Final Thoughts
To make a sound decision for your next cryptocurrency investment, we invite you to explore our education page, where you can learn more and find a crypto coin that aligns with your investment goals.