Bitcoin Series #1: A Gentle Introduction to Bitcoin and Cryptocurrency
One of the most significant developments in the world of currency, finance and the way we exchange goods and services is Cryptocurrency. Cryptocurrencies (yes, there are more than one!) are going to change the way we think about money and the value of things.
What is Bitcoin?
Bitcoin is a form of digital currency, one of the many cryptocurrencies, that you can’t hold in your hands, smell or physically feel. Instead, it is created and held electronically. It was created in early 2009 by a software developer known as Satoshi Nakamoto. The name is merely an alias and it is possible that this was a group of developers or a single person.
Bitcoin was created as an electronic payment system that was based on mathematical proof. It is decentralised, meaning it is not controlled by a single entity, unlike real money (like US dollars or Indian Rupees which are controlled by the respective central banks).
It was created as a solution to the centralised system where the central banks control currency and can make it go up or down in value. So, any governing authority cannot influence Bitcoin in the same way the central banks can. Its value is determined solely by the free market of those who are buying and selling across an exchange.
Bitcoin is created digitally through a network of miners. These miners use their computing powers to verify the transactions of the blockchain, and in exchange, are paid out in Bitcoin, thereby increasing the total amount in circulation.
Blockchain? What is that?
Blockchain is a system of recording information. This is done in a way that makes it difficult or impossible to change, hack, or cheat the system.
A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger.
So, if one block in one chain was changed, it would be immediately apparent that it had been tampered with. If someone wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain.
Here’s a short 3 minute video you can watch to know more about Bitcoin.
But why is Bitcoin in the news?
In recent times Bitcoin, and cryptocurrencies in general, have been under a lot of public glare and scrutiny. On one hand we have some countries banning the use of cryptocurrencies while on the other people have invested their life savings in them.
Bitcoin and cryptocurrencies are changing the world thinks about money and its value. In recent times there has been growing adoption of the new system of finance in the mainstream. Nowadays even major companies such as Tesla, Microsoft, BMW etc have started adopting Bitcoin and other cryptocurrencies.
Due to it inherent design and no central governing authority, and the fact that Bitcoin is also the de-facto currency of the Dark Web, has resulted in some governments banning their use while some others are planing to roll out their own form of cryptocurrency.
What about the future?
It will be interesting to see the developments in the future as Bitcoin gains ground over traditional currencies. There very well could be a time in the not so distant future where all online transactions could be recorded on a blockchain.
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