Bitcoin is the first cryptocurrency ever created, and the first instance of a blockchain computer network. It is an open-source, decentralized peer-to-peer network where users can send and receive the native cryptocurrency, Bitcoin (BTC) tokens. Bitcoin introduced the idea of digital cash whose transactions are a matter of permanent and public record and triggered the launch of thousands of different cryptocurrencies across the world.
On October 28th, 2008 a pseudonymous individual or group called Satoshi Nakamoto published a whitepaper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” on a cryptography mailing list. In this whitepaper, Nakamoto explained the ideas of decentralization, and trustless transactions and outlined the workings of the Bitcoin network and cryptocurrency in detail.
Bitcoin functions as an open-source, decentralized network of computer nodes that record and verify BTC transactions in blocks using a Proof-of-Work consensus mechanism. Nodes or “miners” compete to solve a complex mathematical problem based on the transactions in the block. Whichever miner solves the puzzle, “mines” the block. Once a block is mined, new BTC tokens are issued to the mining node as a reward.
Proof-of-Work is highly resource-intensive and uses a huge amount of energy and involves specialized hardware. This has led to criticisms around the environmental impact of Bitcoin. A single Bitcoin transaction is estimated to be enough to power a typical US household for over 78 days. Some users have moved to more environmentally-friendly cryptocurrencies like Tezos.
In 2009 the Bitcoin network was launched and the genesis block was mined on 3 January 2009 by Nakamoto. In the first Bitcoin transaction ever, Nakamoto sent 10 BTC to Hal Finney, one of the early users of Bitcoin.
In spite of the huge interest in their identity, Nakamoto never revealed who they were and by 2010 Nakamoto announced that they had moved on to other things. To this date, the majority of the Bitcoin in their wallet is untouched and is estimated as close to 1 million BTC or $36 billion dollars.
Bitcoin has grown hugely since its inception. In 2010, the first retail transaction was carried out where 10,000 BTC were exchanged for two pizzas. At the time this was equivalent to $41 dollars but would now be worth $340 million. Bitcoin has seen some splits in the community that has led to hard forks including the creation of Bitcoin Cash in 2017 but the core community has grown and remained passionate.
Bitcoin has gone from being seen as an outlier in the financial world to being accepted globally. In 2021, El Salvador recognized Bitcoin as an official currency and PayPal announced they would accept Bitcoin for payments in the US. While other popular cryptocurrencies like Ethereum have a wider range of services including DeFi options and dApps, Bitcoin has remained a leader in the crypto markets even since the DeFi boom of 2020.
However, recently some governments and financial regulatory bodies have sought to regulate or ban cryptocurrencies. This is partly to do with the image of cryptocurrencies being used for illicit purposes including tax evasion. This could lead to difficulties for Bitcoin and other cryptocurrencies going forward as tight restrictions could limit their operations and decentralized nature.