In our digital age, most of the money that circulates globally exists in electronic form, handled by central authorities like banks and governments. But the biggest transformation from our time, where physical currency evolved into digital currency, has implications for security and trust in the already ‘broken’ financial system.
Bitcoin is a revolutionary digital currency that is independent from any government or institution and as the oldest cryptocurrency it operates on the most used, most secure and most liquid blockchain, also called the OG or God market. To learn more about the king of crypto, we’ll take a look at Bitcoin in this coin report.
To understand Bitcoin, we must first understand digital money, which operates primarily through centralized systems where banks maintain the digital ledgers that record the transactions. These ledgers track the balances and transactions of all accounts, essentially keeping a detailed record of who owns what. You may ask yourself, “Is the bank to be trusted with this power?” Well, we place our trust in them to do so, and this form is called ‘fiat,’ as we trust in government-issued currency.
Fiat money is issued and controlled by central authorities such as governments and central banks. This centralization means that a single entity controls the money supply and, by extension, the economy.
Unlike resources like gold, fiat money can be printed without limit. This can lead to inflation if too much money is created, devaluing the currency as purchasing power decreases.
The cards were dealt perfectly for the tale of Bitcoin to start with, and it all began on October 31, 2008, with Satoshi Nakamoto’s, Bitcoin’s creator, whitepaper that outlined its function and purpose.
August 18, 2008 – The domain name “bitcoin.org” was registered, likely by Satoshi Nakamoto. Since then it has become a central hub for Bitcoin information.
After the domain came into existence and the whitepaper was launched, it took another few months before the mining of the first Bitcoin block, known as the Genesis Block, as it was on January 3, 2009, that marked the official start of the Bitcoin blockchain.
In this genesis block, there was a hidden message that read: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” This message has often been interpreted as a critique of the financial crisis at the time.
Bitcoin’s journey into the financial world began with its first exchange, New Liberty Standard, which started operations on October 5, 2009. The first transaction on this platform occurred when Martti Malmi, often considered Satoshi Nakamoto’s sidekick, traded 5,050 BTC for $5 (with the first recorded price of $0.003 per Bitcoin) on October 12, 2009.
Contrary to popular belief, Bitcoinmarket, which is well-known among cryptocurrency enthusiasts, was not the pioneer but actually the fifth exchange to be established. Following New Liberty Standard, the sequence of early Bitcoin exchanges included BTC 2 PSC and Bitcoin Exchange, both starting in December 2009, and BitcoinFX, which began in February 2010. Each of these platforms played a crucial role in the nascent stages of Bitcoin’s commercial history.
On November 1, 2010 – The current Bitcoin logo as we know it was designed by an unknown artist under the pseudonym “Bitboy.” The logo’s design helped brand Bitcoin as a credible digital currency until this day.
On May 22, 2010, a programmer named Laszlo Hanyecz made the first known retail purchase using Bitcoin by buying two pizzas for 10,000 BTC. This event is celebrated annually in the Bitcoin community and is also known as “Bitcoin Pizza Day.”
One year later, one Bitcoin reached parity with the US dollar (February 9, 2011). This meant that one BTC equaled one USD, something very important and the first ‘real’ milestone in Bitcoin’s broader credibility and acceptance.
As a sidenote, the creator of Bitcoin, as described above, still remains anonymous. Satoshi began crafting Bitcoin’s initial software in 2007 and was actively involved up until mid-2010, communicating only via email. He/She/They never shared any personal details and left his/her/their identity a profound mystery.
Nakamoto’s seminal work, the Bitcoin whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” was published in 2008. It detailed the use of a peer-to-peer network to prevent double-spending, a significant issue that previous digital currencies could not effectively address.
The speculation continues on which individuals could be Nakamoto. These include Dorian Nakamoto, Hal Finney, Nick Szabo and even theories on the CIA being behind Bitcoin. Another prominent figure, Craig Wright, claimed to be Nakamoto, although this claim has faced significant scrutiny and even legal challenges in dismantling the alleged ‘Faketoshi’.
Blockchain analysis suggests that Nakamoto could own around 1 million BTC, making the anonymous founder a billionaire many times over given today’s market prices. This would place him among the top 15 wealthiest people on the planet, if he were to cash out (which would likely crash the market).
Nakamoto’s decision to remain anonymous might have been intended to prevent any individual from wielding too much influence over Bitcoin’s development, ensuring the network remains decentralized. We can only speculate.
This review of Bitcoin (BTC) was created for informational purposes. This article is not intended for promotion.
Bitcoin’s approach to tracking transactions involves a distributed ledger system known as the blockchain. By now, you may know that every transaction on the Bitcoin network is verified and validated by nodes, which are essentially individual computers connected to the network.
Nodes maintain the network by storing Bitcoin’s full transaction history and validating new transactions. Anyone with a basic computer can run a Bitcoin node. While there are no direct financial rewards for running a node, participants contribute to the network’s decentralization.
Back to the transactions – these are then grouped into blocks every few minutes. And with each block on the blockchain linked to the previous one via a process called hashing, this creates an immutable chain. Altering any information in a block would require changing all subsequent blocks, which the network would detect as fraudulent activity.
The Bitcoin network consists of nodes (mentioned briefly above) and miners.
Bitcoin mining involves submitting numerous guesses, possibly in the trillions, to solve a cryptographic puzzle. Every miner on the network does this simultaneously, and the first miner who successfully solves this challenge adds the next block to the chain and receives the block reward in newly issued bitcoins.
Miners are special types of nodes that perform the network’s proof of work—securing and verifying Bitcoin transactions. Miners are financially incentivized through block rewards, which are new bitcoins released with each block added to the blockchain.
This process requires substantial computing power and, consequently, a significant amount of electricity.
The environmental impact of Bitcoin mining has been a topic of debate, primarily because of the high energy consumption associated with it. However, the impact can be mitigated if the energy comes from renewable sources. But it remains an interesting fact nonetheless.
Increasingly, many Bitcoin mining operations are turning to renewable energy sources to power their activities, which could potentially reduce their environmental footprint.
Due to the environmental concerns caused by Bitcoin mining, miners have been trying various ways to curb carbon emissions. On 9th June 2021, El Salvador passed Bitcoin as a legal tender which brought immense joy among crypto enthusiasts worldwide. However, the small Central American country did not stop there but soon announced that it would use geothermal energy from volcanoes to generate electricity for mining Bitcoin.
Bitcoin’s design as a disinflationary currency with a maximum cap of 21 million BTC is something that defines one of its most unique aspects, as it underscores its scarcity. Supported by the Bitcoin Halving events, which occur approximately every four years, the amount of new BTC that can be created drops.
Bitcoin halving is the reducing of the number of Bitcoin in circulation. Thereby halving the Bitcoin rewards after each set of 210,000 blocks are mined. Assuming a block time of 10 minutes on average, Bitcoin halving will occur every four years.
Some believe that the reduced supply and inflation rate will positively affect the price of Bitcoin. However, critics argue that halving does not create demand, even if it does make the Bitcoin supply scarcer over a period. You can learn more about Bitcoin halving here.
Bitcoin gained notoriety for its use on the Silk Road, one of the first and biggest Darknet marketplaces of its time. It was used to anonymously buy drugs and other illegal substances, providing an introduction to crypto for many, though it remains controversial to this day.
Although Silk Road was shut down by law enforcement in 2013, and the founder Ross Ulbricht was sentenced to double life imprisonment plus 40 years without the possibility of parole, many darknet markets emerged quickly after.
Another milestone and recurring narrative, even to this day, were the days of Mt. Gox. This exchange was once the largest Bitcoin exchange but suffered from a series of hacks between 2011 and 2014, culminating in the loss of 844,408 bitcoins.
This incident significantly impacted the news for years after. The repayments of these massive amounts of Bitcoin still needed to be done and the recuperation took more than enough time.
If we look back at recent history, we can also mention the fact that Bitcoin was declared a legal currency in El Salvador from June 2021, making it the first country to do so. not that long later, the Central African Republic followed in April 2022. A big milestone for a country to acknowledge Bitcoin as valid currency, no?
After years of anticipation and regulatory pushback, the U.S. Securities and Exchange Commission (SEC) has marked a historic turning point for cryptocurrency by approving the first spot Bitcoin exchange-traded funds (ETFs). This groundbreaking move is expected to significantly impact the integration of crypto assets into mainstream financial portfolios.
The SEC has given the green light to an array of spot Bitcoin ETFs, some of which are managed by the most prominent names in the investment world. These include:
There is no doubt that Bitcoin lacks scalability, but many projects have been undertaken to resolve these issues and better the Bitcoin ecosystem.
With the way Bitcoin works, utilizing blockchain technology since its inception, it faced many difficulties that most blockchains know as the blockchain trilemma.
It didn’t take long before Bitcoin Layer-Two solutions were introduced and created as secondary protocols built on top of the primary Bitcoin blockchain. Their main purpose is to enhance Bitcoin’s scalability by handling transactions off the main blockchain, speeding up processing times and reducing transaction costs.
But some Layer-Two solutions go one step further and introduce the capability for executing smart contracts, a way to leverage the biggest and most secure blockchain of them all.
While both Bitcoin and Ethereum utilize Layer-Two technologies, their approaches and underlying architectures differ in a few ways:
Bitcoin Layer 2s function by creating a separate execution layer that handles transactions off-chain. This layer is intricately linked to the main blockchain’s consensus layer, which finalizes transactions. Here’s how different types of Bitcoin Layer 2 solutions operate:
State Channels: State channels are private two-way conversations between parties that can perform numerous transactions off-chain. Only the final state of these transactions is recorded on the blockchain, significantly reducing transaction costs and speeds.
Sidechains: Sidechains are independent blockchains that are linked to the Bitcoin blockchain using a two-way peg. They allow for faster transactions and the introduction of features not currently supported on the main Bitcoin blockchain.
Rollups: Rollups process and store transaction data off-chain but post transaction data to the main blockchain. They enhance throughput while leveraging the security of the main blockchain.
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Bitcoin is known for its extreme price changes and exponential growth. From a low of $2.05 in 2011 to a peak of $70,035 in 2024, Bitcoin has shown about a 10,000x increase in value, making it the decade’s top-performing asset. Besides whatever analysts say, it is truly a global phenomenon that is connecting many across the planet in joy, fear and hope.
After the acceptance of global leaders and making it to a topic on a global scale, even in presidential debates, no one can argue that it is not something special.
The critics who point out the environmental concerns related to Bitcoin mining often forget that the amount of energy consumed by the banking industry to process payments and mint new currencies is a lot more than Bitcoin may ever use.
Since Bitcoin started as a means of payment and transitioned to a store of value, its value proposition for it is starting to change to a more foundational network for decentralized apps can be launched upon. So the narrative and technology keeps changing, we wonder how its all going to evolve in the long run.
Understanding the basics of money and the shift towards trust in government-backed fiat currencies sets the stage for appreciating the value proposition of Bitcoin. Bitcoin offers a decentralized alternative to fiat money, limited in supply and not controlled by any central authority, presenting a modern solution to some of the age-old problems of trust and value in economics.
Just as the Internet decentralized information, freeing it from the control of major conglomerates, Bitcoin decentralizes money. It liberates financial transactions from the grips of governmental and financial institutions, offering a peer-to-peer money system without intermediaries.
Nakamoto’s disappearance is central to the allure of “brand Bitcoin.” If we knew the truth behind why he disappeared — whether he is even still alive, or died of illness, suicide, or murder — we could close off all narratives that could be projected onto him.
Disclaimer: Trading and investing in cryptocurrencies (also called digital or virtual currencies, altcoins) involves a substantial risk of loss and is not suitable for every investor. You are solely responsible for the risk and financial resources you use to trade crypto. The content on this website is primarily for informational purposes and does not constitute financial advice.
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