Bitcoin is one of the most famous of the cryptocurrencies and it has been around for over a decade. Launched in 2009, it had become so well-established by 2015 that over 100,000 vendors world-wide accepted payment in Bitcoin.
Bitcoin rely on a peer-to-peer (P2P) network to function and utilizes a database which is distributed over the network nodes.
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Short facts about Bitcoin
- Launched: 2009
- Symbol: Ƀ
- Abbreviation: BTC or XBT (none of them are ISO-standard)
- Basic unit: 1 bitcoin
Subunits
- 1 millibitcoin (1 mBTC) is 1/1,000 bitcoin (10−3).
- 1 microbitcoin (1 μBTC) is 1/1,000,000 bitcoin (10−6).
- 1 satoshi is 1/100 million bitcoin (10−8).
Background
The basic software for Bitcoin was released in 2008 by someone (or, possibly, someones) using the pseudonym Satoshi Nakamoto. “Satoshi Nakamoto” also published a paper online detailing how this cryptocurrency would work. As of 2019, the identiy of Satoshi Nakamoto has still not bee revealed, despite 10+ years of heavy speculation.
A small group of dedicated cryptocurrency afecionados worked with what Satoshi Nakamoto had provided, and the cryptocurrency Bitcoin was released in January 2009.
In 2011, the BTC/USD exchange rate reached 1 BTC – 30 USD for the first time ever, but the market price for BTC dropped down to just 2 USD soon thereafter.
2013 – an eventful year for cryptocurrencies
The Euro crisis of 2013 sparked mainstream interest in alternative payment methods, including cryptocurrencies such as Bitcoin. Notably, the Nicosa University on Cyprus started accepting tution payments in bitcoin. On the other side of the Atlantic, the United States Financial Crime Enforcement Network (FinCEN) published a regulatory framework for decentralized virtual currency, and on May 15, the new rules are utilized to confiscate accounts tied to the online cryptocurrency market Mt. Gox. The following month, the U.S. Drug Enforcement Administration (DEA) make their very first Bitcoin confiscation.
In Canada, the world’s first Bitcoin ATM is inaugurated in Vancouver on October 29.
By November 28, the market price for 1 bitcoin reaches 1,000 USD.
The 2017-2018 Bitcoin boom and bust
2017 was a year of many new records for the BTC/USD exchange rate, as the price of bitcoin soared to then-unpresidented levels. It climed to 2,000 USD in May, reached 4,000 USD in August, 5,000 USD in September, and peaked at a whopping 19,783.21 USD on December 17. On December 22, it had fallen to below 14,000 USD.
The 2018 Bitcoin crash occured soon after the end of 2017. Between January 6 and February 6, the bitcoin price fell by roughly 65%.
The 2018 Bitcoin crash was a part of the 2018 Great Crypto Crash, as several other cryptocurrencies followed the trajectory of bitcoin (albeit at lower levels), seeing record-breaking growth in late 2017 and then falling dramatically in early 2018. In the first quarter of 2018, the cryptocurrencies’s market capitalization lost over 340 billion USD, which is the largest loss in cryptocurrencies to date.
How new bitcoins are created
New bitcoins are created through a process known as bitcoin mining.
The Bitcoin network needs computer power to work, and it rewards the donors of computer power with newly created bitcoins. Because of this, new bitcoins are constantly being created. So far, this hasn’t caused any inflation, because the interest in aqauiring bitcoins have rose faster than the creation of new bitcoins.
To put it simple: A bitcoin miner donates computer resources to the Bitcoin network by letting the network use their computer to verify and log bitcoin transactions. In exchange, the bitcoin miner gets newly created bitcoins.
What’s a Bitcoin wallet?
In order to prove that you are the owner of a certain bitcoin, you need to provide the Bitcoin network with certain data. This data can be stored digitally or physically. The storage medium is commonly referred to as a Bitcoin wallet.
The most well-known form of Bitcoin wallet is the electronical one, where you store the information in digital form on your own computer harddrive. A downside with this is that you risk losing the information in case of computer trouble.
Another option is to store the information physically, e.g. in the form of print outs on paper. Of course, that option comes with downsides too.
If you don’t want to store information in your own computer nor physically, there are providers available online that will let your keep your Bitcoin wallet on their server.
Transferring bitcoins
Bitcoins are transferred through the Bitcoin network, without using any banks.
- María wants to transfer 2 of her bitcoins to Erik.
- Erik gives his Bitcoin address to María. (The address has been generated by his digital Bitcoin wallet and is only valid for one transfer.)
- María orders her wallet to transfer 2 bitcoins to Erik’s Bitcoin address. A private key stored on Marias computer is used to generate a digital signature.
- The digital signature is confirmed by the Bitcoin network, using the public key.
- Two bitcoins are transferred from María to Erik.