In this article, we are going to examine all you need to know about what Bitcoin is, who created Bitcoin, what determines Bitcoin’s value, the difference between BTC and BCH, the legality of Bitcoin, and where you can spend Bitcoin. Enjoy!
What is Bitcoin?
Bitcoin is the first ever example of truly digital currency combined with blockchain technology- creating a cryptocurrency. The ‘crypto’ in cryptocurrency stands for cryptography, a form of encryption. Bitcoin combines a cryptographically secure digital currency with blockchain technology in order to produce and record a ‘chain’ of public transactions (blockchain).
It is also the first ever example of a trustless digital currency. What this means is that neither party of the transaction has to trust each other, yet they can still send and receive Bitcoin in complete confidence. This trust is achieved through something called ‘Proof of Work’ and creates what is referred to as ‘consensus’.
In essence, Proof of Work (or PoW) requires computers connected to the Bitcoin network to check the validity of transactions by solving part of a complicated puzzle. When enough computers have solved this puzzle, the ‘proof’ (answer) is submitted to the network and gives the transaction the go-ahead. This process also writes the record transaction into the chain of blocks and is known as making it ‘immutable’ (unchangeable). No middleman, or bank, is needed.
Who created Bitcoin?
A person, or people, under the name of Satoshi Nakamoto. The whereabouts of Satoshi, and who he or they are, is still unknown. Many theories have arisen as to the identity, and gender, of the famous creator. What we do know is that he or they were active on internet forums before the inception of Bitcoin, talking to fellow enthusiasts about economics, computing, censorship and more.
Whilst the whitepaper (explanatory document) about Bitcoin was released on October 31st, 2008, it wasn’t until January 3rd, 2009 that the first Bitcoin block (genesis block) was created.
What determines the value of Bitcoin?
In short – the network effect. As a decentralized, ungoverned, unbanked, peer-to-peer digital monetary system, the value of Bitcoin is determined entirely by the effect and reach of its network. The currency is deflationary by nature, meaning that more Bitcoin cannot be created. There can only ever be a maximum of 21-million Bitcoins ever in circulation. This is unlike national currencies, whose value is controlled by a central bank.
As the network is used more and more as a store of value, or ‘digital gold’, a larger portion of the world’s money will be wrapped up in the value of each Bitcoin, giving it greater value. As with any asset in existence, a Bitcoin (or fraction of a Bitcoin – known as a Satoshi) is only ever worth what someone is willing to pay for it.
What is the difference in BTC and BCH?
Bitcoin experienced what is known as a hard fork on August 1st, 2017. A hard fork is when changes are made to the blockchain’s rules, with the sharing of transactions stopping after the hard fork. Bitcoin was ‘forked’ as a result of a disagreement between developers at block 478558, 1 August 2017. For every Bitcoin (BTC) holders received 1 Bitcoin Cash (BCH).
Notable differences from Bitcoin (BTC) include; a block size of 8MB, no segwit, replay and wipeout protection, as well as something called ‘quickly adjustable proof-of-work difficulty’.
Is Bitcoin legal currency?
Sort of. Tax bills have been settled in Bitcoin by both individuals and companies, suggesting there is some recognition of legality by various jurisdictions. Despite words of encouragement from international legislators, there has been little done in the way of officially accepting Bitcoin as a standalone, legal currency. Bitcoin has multiple personalities. Some jurisdictions consider Bitcoin to be a currency while others define digital currencies as assets or collectibles.
Multi-billion dollar investment by global conglomerates suggests that the writing is on the wall for those countries who do not recognize Bitcoin as legal tender.
Where can I pay with Bitcoin?
In many places! Whilst the list of vendors that accept Bitcoin is expanding all the time, below are just some examples of the different types of online shops that accept Bitcoin as a form of payment.
And there’s our all you want to know about Bitcoin guide. Make sure to check out our other beginner’s articles over the next few months, as well as our other articles and news stories on everything crypto and blockchain.