Statistics indicate that 36% of crypto asset holders own Bitcoin (BTC), solidifying its position as the most popular crypto. You might wonder, what is the driving force behind Bitcoin’s unprecedented popularity?
This article will delve into Bitcoin, provide a brief history of the cryptocurrency, explain what makes it popular, discuss Bitcoin’s limitations, and discuss what the future holds for cryptocurrency.
Whether Bitcoin is still a hazy topic for you or you’re familiar with crypto, you will find this guide quite helpful.
What is Bitcoin (BTC)?
Bitcoin, with BTC as its ticker, is the first decentralized cryptocurrency. Like most cryptocurrencies, Bitcoin is a virtual currency that does not require a middleman or a central bank to verify user transactions in the peer-to-peer network.
Transactions are verified through cryptography and then recorded in a public distributed ledger, a blockchain. Since transactions are recorded in a public ledger and accessible to everyone, it is difficult to make fake transfers or reverse transactions.
Bitcoin exhibits distinct characteristics compared to traditional currency, including volatility, regulatory differences, and decentralization. Yet, it still functions as a form of money because it serves as a widely accepted medium of exchange, holds value, is portable, and is fungible, among other qualities.
History of Bitcoin
Bitcoin’s creator registered the domain name bitcoin.org on August 18, 2008. In October, Satoshi Nakamoto, a pseudonymous programmer or group of programmers, first introduced the cryptocurrency to the world through the Bitcoin whitepaper.
Satoshi published a 9-page whitepaper that discussed the concept and implementation of cryptocurrency. It was titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
In 2009, Satoshi officially launched Bitcoin after completing the first block (Genesis Block).
It is important to note that the identity of Satoshi Nakamoto remains one of the biggest mysteries of the 21st century.
What is Bitcoin Mining?
Bitcoin mining is the process of verifying and adding new blocks of transactions to the network. Miners use powerful computers, called mining machines, to solve complex mathematical problems.
The Bitcoin mining process consumes a lot of energy and has high electricity costs. Miners consume an estimated 130-140 TWh (terawatt-hours) of electricity annually.
The miner who first solves the mathematical problem and adds the transaction block to the blockchain earns a reward of 3.125 BTC. The mining process is how the network mints new Bitcoins.
Bitcoin Supply and Circulation
Bitcoin has a limited supply of 21,000,000 units. According to on-chain data, its current circulating supply is 19,727,759, with about 3-4 million BTC lost or unavailable due to forgotten passwords or damaged wallets. Bitcoin’s circulating supply is not fixed. It changes due to mining rewards, transaction fees, and lost or unavailable coins.
Common Terms under Bitcoin
- Bitcoin Wallet: This software or hardware tool stores, sends, and receives Bitcoin. A Bitcoin wallet does not store crypto but stores and secures the cryptographic keys used to prove ownership of Bitcoin units. There are two types of wallets: hot and cold. A hot wallet is an online wallet, while cold wallets are offline and safer than the former.
- Bitcoin Address: A unique string of 58 characters, made up of numbers and letters, used to receive Bitcoin.
- Bitcoin Hashrate: This is also known as hash power or computing power, and it is processing power used in mining. Hashrate can be measured in Hashes per second (H/s), Gigahashes per second (GH/s), etc.
- Bitcoin Halving: The halving is a pre-programmed event in the space that happens every four years or after 210,000 blocks are verified. During every halving day, the network reduces block reward for mining by half. The first halving occurred in 2012, lowering miners’ rewards from 50 BTC to 25 BTC. The most recent halving occurred in April 202, reducing the block reward from 6.25 BTC to 3.125 BTC.
- Bitcoin Pizza Day: On May 22, 2010, for the first time, Someone used Bitcoin to pay for a physical good. Laszlo Hanyecz, an early Bitcoin adopter, bought two boxes of Pizza for 10,000 BTC (which was worth approximately $25 then).
Considering Bitcoin’s current value, Hanyecz bought two boxes of Pizza for $650 million. The Bitcoin community actively commemorates Pizza Day every May 22 to honor the legendary loss and celebrate the cryptocurrency’s remarkable years.
Common Blockchain Terms
- Exchange: This is a centralized platform to buy or sell Bitcoin. These platforms are often exposed to cyber-attacks where users’ funds are sometimes stolen.
- Node: Node refers to any computer or device that connects to the blockchain network and verifies transactions.
- Fork: This is a change in the Bitcoin protocol that creates a new version of the blockchain. There are two types of forks: hard and soft. A soft fork causes little or no change to the overall network structure, while a hard fork creates a new blockchain entirely, producing a new cryptocurrency.
- Private Key: This is a private code for accessing bitcoins.
- Public Key: This is a public code for receiving bitcoins.
- Smart Contract: This self-executing contract or program executes agreements between two or more parties in the Bitcoin network.
Reasons Why People Invest in Bitcoin
The most popular reason people choose to invest in Bitcoin is its decentralized nature. Unlike traditional currency, no governmental authority or central power can control it.
Secondly, the Bitcoin network’s cryptographic nature makes it safe and difficult to make fake transfers.
Thirdly, Bitcoin is a hedge against the inflation inherent in traditional currencies, making it a preferred choice over fiat. Bitcoin’s limited supply of 21 million units prevents inflation.
Finally, transactions made with Bitcoin are private and anonymous. There is no need to reveal the user’s information before confirming transactions.
Cons of Investing in Bitcoin
- Volatility: Bitcoin’s highly volatile nature makes it a risky asset to invest in. Like most cryptocurrencies, its value can fall or rise in minutes, leading to either a massive loss or gain.
- Regulatory uncertainties: Unlike traditional currencies, Bitcoin is largely unregulated and thus susceptible to government bans.
- Security risks: Since most Bitcoin processes are online, there is a high risk of crypto hacks, which can lead to colossal asset losses.
- Energy consumption and pollution: Bitcoin mining consumes a lot of energy generated by burning fossil fuel, which leads to greenhouse gas emissions and climate change.
Conclusion
Satoshi Nakamoto created Bitcoin in 2009. Since then, its popularity has continued to surge. Bitcoin’s decentralized nature makes it impossible for it to be controlled by a governmental authority or central bank.
Out of the percentage of people using crypto, about 36% hold Bitcoin because of its edge against other cryptos and fiat.
Whether you should join this number and invest in Bitcoin is a personal decision that requires extensive study and research. The assets can be very volatile and prone to cyber-attacks.
Meanwhile, Bitcoin is poised for greater growth and adoption as experts predict that Bitcoin’s value will surge before the year runs out and it will rise above traditional assets.
