What is Bitcoin?

Token Takeaways ✍

✨ Bitcoin is the world’s leading cryptocurrency token.

✨ The Bitcoin network is secured by a mechanism known as Proof-of-Work. Miners receive BTC payments for validating transactions.

✨ Bitcoin’s unique origin story and value proposition as a “digital gold” have helped it maintain its place at the forefront of the token economy.

Bitcoin is the world’s biggest and best-known cryptocurrency. Now 14 years into its lifetime, Bitcoin was the first crypto token, giving rise to a powerful financial revolution that could impact millions of people around the world. The Bitcoin story is as mysterious as it is inspiring, and after more than a decade, it still holds a place at the heart of the expansive universe it created. This guide tells you everything you need to know about the token world’s “King.”

Bitcoin’s inception 📰

Bitcoin launched in January 2009. It was famously created by a pseudonymous developer known as Satoshi Nakamoto, who was inspired to offer the world an alternative to the traditional finance system in response to the Great Financial Crisis. 

Frustrated by the failings of central banks worldwide, Satoshi published the Bitcoin whitepaper to a cryptography mailing list in October 2008, sharing the vision for what they called “a peer-to-peer electronic cash system.” 

The Bitcoin network went live three months later, by which point it had garnered the attention of a small community of cypherpunks and cryptography enthusiasts who dreamed of bringing freedom to the Internet. Satoshi famously hid a secret message in the blockchain’s Genesis block that read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” borrowing the headline that appeared on The Times newspaper on the same day. 

“Chancellor on brink of second bailout for banks” (Source: The Times)

Bitcoin stayed under the radar for several years, but it saw growth thanks to its passionate community of users evangelising about its advantages over the centralised finance system. They spread the word about its potential to enable economic freedom by giving people control over their assets. When someone makes a deposit into a bank account, they have to trust the bank to look after their funds. Bitcoin was transformative as it gave people sovereignty over their assets, using cryptographic keys to secure wallets.

Bitcoin is a global network valued at roughly $600 billion at the time of writing. It’s still crypto’s strongest brand and has millions of users around the world. These users come from different backgrounds, but they all share a common belief in Bitcoin’s potential to enable greater financial freedom. 

How Bitcoin works ⛏

To understand how Bitcoin works, why it is seen as a revolutionary innovation, and how the Bitcoin price or BTC price is influenced, it’s important to make the distinction between the Bitcoin network and its underlying “currency” or token.

The Bitcoin network comprises thousands of nodes based around the world. As Bitcoin is not owned by any single party or entity, nodes are responsible for validating transactions and store the network’s history on a public ledger in terms of Bitcoin price USD. They form the backbone of the Bitcoin network.

Miners also play a crucial role in the Bitcoin ecosystem, especially in relation to the BTC price. Bitcoin operates a consensus mechanism called Proof-of-Work, which is used to achieve consensus and verify that a transaction can be added to the chain. With Proof-of-Work, miners compete to solve complex puzzles to verify that new transactions are valid. The first miner to solve the puzzle adds a new block of transactions to the chain, and receives some coins as a reward for the work they put into solving the puzzle. New blocks get added to the chain approximately every 10 minutes. As miners are responsible for verifying new transactions on the blockchain, they play a fundamental role in upholding the network and influencing the Bitcoin price.

The total supply of Bitcoin will never exceed 21 million. Miner rewards are halved every four years, which means the final block reward should be processed in roughly 2140. After that point, miners will rely on transaction fees for processing new transactions alone. This scarcity is a key factor in the Bitcoin price.

Another of Bitcoin’s key characteristics, essential for those looking to invest in Bitcoin, is the way coins are stored. All coins live on the Bitcoin blockchain, and they can be accessed through cryptographic digital wallets. Bitcoin wallets consist of a public key, which can be used to receive coins, and a private key, which can be used to access a wallet and move any coins inside it. Bitcoin wallets also have an associated 12 or 24-word seed phrase, which can be used to access the private key.

Bitcoin’s 21 million supply cap is central to its design as it differentiates it from other traditional currencies and influences the Bitcoin price. While central banks can influence the supply of money in an economy, Satoshi designed Bitcoin so that the number of coins would never inflate. That’s why many ardent Bitcoin followers describe it as “hard money.”

Bitcoin’s history and how its narrative has changed 📈

While Bitcoin initially took off in the cypherpunk community, it garnered mainstream attention after WikiLeaks started accepting Bitcoin donations in 2011. As Bitcoin addresses are not attached to a name like traditional bank accounts, it was also used as a medium of exchange on the darknet marketplace Silk Road, which made headlines worldwide after the FBI shut down the site in 2013. The US agency also seized 174,000 Bitcoin, fueling a narrative that Bitcoin was primarily a tool for criminals. 

On both WikiLeaks and Silk Road, Bitcoin was adopted as a currency rather than an investment. However, the narrative surrounding Bitcoin’s value proposition has changed over the years as the cryptocurrency movement has grown. Bitcoin’s biggest evangelists argued that it was a tool that empowered people to achieve financial freedom, helping usher in a new wave of adopters who believed in its world-changing potential. 

WikiLeaks began accepting Bitcoin donations in 2011 (Source: Twitter)

In recent years, Bitcoin has gained adoption in countries facing economic uncertainty such as Venezuela, Turkey and Nigeria. For the people living in these countries, Bitcoin’s globally-distributed, decentralised network serves as a lifeline against failed governments and banking systems where regular people can be excluded from the banking system or face having their funds frozen. 

While Bitcoin is still popularly used as a medium of exchange, most of its 200 million users have opted to participate in the network to invest in Bitcoin as an asset. Thanks to its hard supply cap and widespread hype surrounding the potential for the cryptocurrency movement, Bitcoin has seen several cycles of parabolic price growth since it launched. While 1 Bitcoin was worth less than a penny in 2009, at the time of writing it’s priced at around $31,000. Bitcoin became the fastest asset in history to hit a $1 trillion market capitalization in 2021, and its adoption growth rate is faster than global Internet adoption in the 90s. However, like most cryptocurrencies, it’s also extremely volatile; after a period of market-driven mania pushed Bitcoin’s price to $69,000 in November 2021, today it’s more than 50% down from its peak following a years-long slump. 

Bitcoin’s price history (Source: CoinGecko)

Bitcoin has become known as a store-of-value or “digital gold” owing to its unique properties. Like gold, it is scarce and fungible. Miners must put in work to receive new coins, which is what has led some advocates to argue that Bitcoin transfers energy into value. In recent years, Bitcoin has occasionally been described as an “inflationary hedge” that acts as a pushback against central bank money printing, but it remains extremely volatile even as inflation rates soar worldwide. 

Bitcoin’s staying power 💪

While thousands of cryptocurrency tokens have emerged since Bitcoin launched, Satoshi’s creation remains at the core of the cryptocurrency ecosystem. Bitcoin’s value represents roughly 47% of the global cryptocurrency market capitalization, and it is still the strongest and most recognised brand in the space. It’s often referred to as “the King” that holds court at the top of the ecosystem. 

In recent years, some of the most successful new blockchains and associated crypto projects to launch have been smart contract networks such as Ethereum. While Ethereum and other Layer 1 blockchains like Solana have gained traction by catering to use cases in the decentralised finance and NFT spaces, Bitcoin’s focus on simplicity as crypto’s battle-tested “digital gold” equivalent has helped it achieve true staying power.  

More recently, Bitcoin has seen adoption on a nation-state level, most notably in El Salvador. The Latin American country adopted Bitcoin as an official currency in 2021 and began investing for its treasury, highlighting the potential for Bitcoin to become a globally-adopted asset in the future. Understanding how to invest in Bitcoin is becoming increasingly relevant as its adoption grows.

Many members of the Bitcoin community are working on additional solutions to help bring the network closer to mass adoption. These include plans to develop a DeFi ecosystem on top of Bitcoin and the Lightning Network, a Layer 2 sidechain that allows for fast, low-cost Bitcoin transactions. 

Final thoughts 🤔

As the world’s biggest and most popular cryptocurrency token, Bitcoin is arguably the most important asset in the token universe. It’s also the innovator that gave rise to the birth of the token economy. Thanks to Bitcoin’s disruptive potential, innovative technology, and inception story involving its mythical creator Satoshi Nakamoto, millions of people have been inspired to join the token movement in pursuit of an alternative financial paradigm. For many new token entrants and early adopters alike, Bitcoin is still the first choice when it comes to investing in the space. To discover Bitcoin for yourself, head to the app and check out our Card to track its recent performance. 

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Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.