Bitcoin is probably the most talked-about cryptocurrency, and there’s a real buzz around cryptocurrencies at the moment. As Bitcoin is the first and most successful of them, there’s a natural curiosity about what it is and where it came from.
Bitcoin’s origins are somewhat mysterious. In January 2008 the domain name bitcoin.org was registered, the first appearance of the name. By the end of the year the enigmatic Satoshi Nakamoto issued an influential paper, Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin first came into use in 2009. Bitcoin’s purpose was always as a mode of exchange, but initially was seen by many as a great investment opportunity. Businesses didn’t start using it as currency for a few years, but it is now widely used for everything from online shopping to travel.
The concept of electronic money had been around for quite a while before Bitcoin came along. The idea of Ecash, an electronic cash system, was around as early as 1983. It was used by a US bank for a few years in the late 90s. Some of the notable precursors to Bitcoin include hashcash, which is now intrinsic to bitcoin mining, b-money and bit gold.
Always a mysterious figure, we know little about Satoshi Nakamoto, the inventor of Bitcoin and creator of the first blockchain database. From the start, most people assumed that Nakamoto was a pseudonym. It was unclear whether he (Nakamoto claimed to be a man, living in Japan) was one person or a group of people working together. Most of the proposed candidates turn out to be western males based in Europe, the US or Australia. Nakamoto continued to make all modifications to the source code himself up until 2010, when he stepped back from hands-on involvement in the software. In April 2011 he posted a farewell message and effectively disappeared.
Whoever Satoshi Nakamoto is, his estimated Bitcoin holdings would probably make him the 15th-wealthiest person on the planet.
When Bitcoin emerged in 2008 it was initially valued at less than a cent. There have been a lot of ups and downs in its market value, but it has been as high as $68,000. To the lay person this kind of growth seems astonishing, but one of the founding principles of Bitcoin is scarcity. If you could pick up Bitcoins in the street they’d have a very low value. However, you can only create Bitcoin by solving increasingly complex mathematical problems that require very powerful computers. This process is known as Bitcoin mining, and is a significant industry in some countries. There are a finite number of Bitcoins to be found, so there will never be more than 21 million in circulation.
Can I Spend Bitcoin?
Bitcoin’s creator always intended it as a currency. However, its outstanding increase in worth combined with the fact that there was originally nowhere to spend it meant that it was initially more of an investment opportunity. Now you can buy almost anything with cryptocurrency. There are intermediary websites that allow you to use Bitcoin to buy from Amazon, for example. Since October 2020 the world’s biggest payment platform, PayPal, has accepted cryptocurrencies. Many online betting and casinos sites use only crypto. Several travel agencies specialize in helping you book travel with Bitcoin, and in 2014 airBaltic became the first airline in the world to accept Bitcoin payments.
There are now even countries where Bitcoin is legal tender. El Salvador was the first to make this move in September 2020, closely followed by the Central African Republic. The Honduran city of Prospera welcomes Bitcoin transactions, and the Portuguese island of Madeira is likely to follow suit. There is strong interest in Bitcoin from leading politicians in Mexico, Panama, Argentina, Paraguay and Brazil. It will be interesting to see which of these adopts Bitcoin as legal tender first.
Is Bitcoin here to stay?
As the first and most popular cryptocurrency, it looks as though Bitcoin is here to stay. Now that businesses all over the world accept it, it is rapidly becoming a normal way to carry out transactions. With major payment platforms and some nations recognizing Bitcoin, expect it to become part of everyday life.
Is Bitcoin safe?
Bitcoin uses Blockchain to record all transactions across thousands of computers. Each transaction is verified by solving a complex cryptographic puzzle. This so-called ‘proof of work’ makes Bitcoin secure and safe from fraudsters. Additional security comes from the fact that Bitcoin transactions don’t use the traditional banking system. This also gives your Bitcoin transactions a greater degree of privacy than you get from regular banking.