Bitcoin is an innovative payment network and a new kind of money.
Bitcoin is a type of digital currency that is created and held electronically, and can be transferred between people without a middleman, like a bank. It was created by an entity using the pseudonym Satoshi Nakamoto in 2009. Since then, its popularity has grown, and you can use Bitcoin to pay for pretty much anything today!
Entirely open-source, Bitcoin is owned and controlled by nobody, all of its systems are public, and everybody is welcome to participate in it.
How does Bitcoin work?
Bitcoin is transferred directly from person to person over the Internet. Each person is assigned a digital wallet where they can store their Bitcoin.
How is Bitcoin created?
Bitcoin is generated by people all around the world running software programs that follow a mathematical formula to produce bitcoins. These people are called miners. Miners are tasked with verifying transactions, for which they are rewarded with newly generated bitcoins.
How is Bitcoin different from traditional currency?
While traditional currency is bound to a bank or a country, Bitcoin is completely decentralized. And while traditional currency is based on gold and silver, Bitcoin is based on mathematics, making it a form of cryptocurrency.
Just like gold and silver, bitcoins are difficult to mine, and they are limited in supply. Only 21 million bitcoins are allowed to ever be produced by miners, after which point more bitcoins will cease to be created.
Why use Bitcoin?
For regular folks like us, Bitcoin is cheaper to use than many other methods of payment, particularly when it comes to making international transactions. It eliminates any extra fees associated with credit card transactions, wire transfers, money orders, and check processing. Another major plus with Bitcoin is that you can use it to pay for goods and services without providing your name or address, so you can maintain your privacy.
How do I get bitcoins?
First, you’ll need to create a bitcoin wallet. Once you have your bitcoin wallet, you will be given a bitcoin address, which you’ll use to receive payments. There are several ways to get Bitcoin.
From other individuals – You can receive bitcoins from other people in exchange for goods and services. Or your friend might send you bitcoins in exchange for nothing if it was your birthday, for example.
By exchanging currency – You can buy bitcoins using your bitcoin wallet with your local currency. You can also buy bitcoins outside of your bitcoin wallet, using this site to find alternative currency exchange sites.
By becoming a miner – If you are feeling ambitious, you can mine bitcoins by yourself, using this guide as a start.
At a Bitcoin ATM – You can also buy bitcoins from Bitcoin ATMs. The first Bitcoin ATM opened on October 2013 in the Waves coffee shop in Vancouver, Canada. More Bitcoin ATMs have since popped up all over the world!
How popular is Bitcoin?
Bitcoin is certainly growing in popularity. While its decentralization initially made it the payment method of choice for the purchase of illicit goods and services (think drugs and hitmen…), more established businesses now allow their users and customers to pay with Bitcoin.
Many people have also been hoarding Bitcoin as an investment. Like most other investments, however, whether its value will rise or fall remains to be seen…
What makes a cryptocurrency Bitcoin?
In addition to Bitcoin Cash (which, with over US$20 billion market capitalization, is arguably the biggest Bitcoin contender), Bitcoin Gold, Diamond, Private and Dark all somehow attempt to piggyback on Bitcoin’s stained but bright brand.
Defining what makes Bitcoin, or even what defines money, is tricky. While Bitcoin may be described as peer-to-peer electronic cash (with the emphasis either on peer-to-peer or on cash), this definition also applies to a wide range of cryptocurrencies, some of which relatively unrelated to Bitcoin.
When looking closer, it is easy to define desirable characteristics of Bitcoin, such as low fees, fast settlement times or the proof-of-work mechanism used to validate and generate Bitcoin. But, at the same time, these are not defining characteristics—not every cryptocurrency with low fees, 10-minute block time and an SHA-256 based mining algorithm is automatically Bitcoin.
How can we tell which is the real Bitcoin?
One thing we all seem to agree on is that Satoshi Nakamoto created Bitcoin. Nakamoto minted the Genesis Block, meaning that whatever definition we want to come up with probably needs to include a reference to this block.
Origins in the Genesis does not make a definition much easier, though, as multiple chains might root back to this single block. The characteristic of “longest” or “most work” chain (a chain’s work is equal to the number of hashes it would take to replicate a chain of the same number of blocks and the same difficulty steps) might also not be very useful, as it would allow miners to unilaterally define what is Bitcoin unilaterally.
A more correct definition would include “valid most work chain,” but what rules are valid, and which are not? Surely the rules may change in the future, but under which conditions would an ‘upgraded’ Bitcoin be the ‘real’ Bitcoin? It is not possible to find a definition that works not only retroactively, but also proactively.
In reality, the only definition that we can come up with that adequately defines Bitcoin is a very unsatisfying one, but it closely fits into how people see and use money in general:
Bitcoin is what everyone around you thinks it is.
Anything, or at least any cryptocurrency, can theoretically be considered Bitcoin. In the same way, plenty of things might make for useful money—what we accept as money mainly depends on what everyone else considers money.
A good example of this is Testnet, an identical clone of Bitcoin’s code, and deployed as a separate cryptocurrency. The staggering detail about Testnet, though, is that it is entirely worthless. The worthless cryptocurrency is used by developers to test their products without the risk of losing money and mined by volunteers who give it away for free.
Similarly, whether what you own is the keys to Bitcoin or one of its imposters depends mainly on what the people around you consider to be Bitcoin. Already when using terms like ‘the real Bitcoin’ or ‘the original version of Bitcoin,’ you are subtly but importantly signaling that you might be referring to something else.
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