Quick Facts

Approximate Market Cap$846,323,201,677
Year Established2009
FounderSatoshi Nakamoto
Symbol/AbbreviationBTC
UtilityStore of Value Token

Bitcoin began as “money with an ideology”. It emerged as a result of mistrust of traditional financial institutions. 

Bitcoin’s design reflects its philosophy. It offered the opportunity to execute government-free transactions.  It was the new concept of a peer-to-peer money network.  

There are many differences between  Bitcoin and traditional currencies. Yet, these differences make Bitcoin such a powerful possibility.

What is Bitcoin – Definition

Bitcoin represents a digital currency that is not centralized. It is a totally virtual kind of money. It is powered by an open-source software called Blockchain. The system runs on a decentralized peer-to-peer network.  

Bitcoin is also referred to as a “digital asset”. Users can buy Bitcoins, own them, and send them to someone else. Bitcoin transfers from one account to another are internationally recognized in seconds. 

Bitcoin doesn’t exist in physical form. Unlike physical money, neither coins nor paper money is officially manufactured. It is being produced digitally by people solving hard arithmetic problems on their computers. 

Bitcoin allows anonymous payments without excessive transaction fees or exchange rate expenses. It also avoids the risks associated with credit card payments. 

Pros and Cons

Pros

  • Decentralized
  • Secure
  • Transparent

Cons

  • Volatile
  • Lack of regulation
  • Irreversible transactions

The History

When Bitcoin was initially suggested in 2008, there was a lot of uncertainty around it. It grew in favor due to its inventor, Satoshi Nakamoto, a pseudonymous man whose identity is still unknown. 

The blueprint explained how to perform decentralized financial transactions. It removed the need for third-party intermediaries such as banks and credit agencies.  

The Bitcoin software was publicly released in 2009 on the P2P Foundation website. To make the network work, Nakamoto put his computer to work and created the first Bitcoins.  

How Bitcoin Works

The concept for Bitcoin is to let one person instantly transfer payments to another. 

Every Bitcoin is essentially a computer file. The owners can keep it on a smartphone or PC in a ‘digital wallet’ app. A network of computers keeps track of all Bitcoin payments. The Blockchain records the history of Bitcoin transactions to prevent anyone from spending coins they do not own.

A Bitcoin transaction is permanent. The user can not reverse it or change it in any manner. The system adds transactions to an ever-growing list called Bitcoin Blockchain. The distribution of data works on a peer-to-peer basis. 

There are four ways for people to obtain Bitcoins:

  • They may purchase Bitcoins with real money;
  • They may sell items and accept Bitcoin payments;
  • They may exchange other crypto coins for Bitcoins;
  • They may generate Bitcoins by solving a complex math problem on their computer.

Advantages & Disadvantages

Advantages

Decentralization system

No one person, corporation, or government controls the Bitcoin network.  No political body chooses how much to release into the world or when to release it.   

Scarcity 

The Bitcoin network is set to create no more than 21 million Bitcoins. The network is set to self-regulate in response to inflation. 

Security and control

Bitcoin users have complete control over their transactions.

Transparency

The Bitcoin protocol is not under the authority of any individual or group. The protocol is cryptographically secure. 

Payment freedom

Bitcoin was specially designed for fast transactions at low costs. Users use Bitcoin to make cross-border transfers without paying expensive fees for remittances. 

Lower risks for merchants

The Bitcoin transactions are secure and irreversible. The low cost of transactions also allows merchants to accept micropayments. This opens the way for Bitcoin to be widely accepted without a minimum transaction level. 

Disadvantages

Unpredictability

The price of Bitcoins will fluctuate as different events affect the price. This may make it difficult to determine how good Bitcoins are as a store of value. 

Facilitation of criminal activity

A major concern of Bitcoin is its use to launder money and finance terrorist activity. 

Ongoing development

The Bitcoin protocol mainly worked as a payment network. Being open-source technology it has the potential for further innovations. 

Availability

Bitcoin isn’t yet widely accepted by the general public.

Bitcoin in the Global Crypto Market

The cryptocurrency exchange reportedly has over 7.3 million users and has generated over $21.8 billion in trade volume in 2021. Like any market, the exchange rate for Bitcoin responds to changes in supply and demand.  

At the moment Bitcoin’s value is rising as it spreads globally as the number of users grows. According to CoinMarketCap, Bitcoin is now trading in the green, with a market value of more than $848 billion.

FAQ

What are the biggest threats to Bitcoin?

The biggest threats to Bitcoin can be regulation, as a restriction for businesses for using crypto payments; volatility, as there are extreme changes in Bitcoin’s price and environmental issues regarding Bitcoin mining.

Is it worth investing in Bitcoin?

The potential for large profits is one of the primary reasons in favor of Bitcoin. It is also not exposed to the same political and economic constraints that central banks apply to currency markets. These reasons make BTC attractive for investors. Bitcoin also has highly speculative characteristics. So investors need to be aware of the large potential losses.

Is Bitcoin legal?

In most countries, Bitcoin is legal to mine, buy, sell, or trade.