- It's Software
- a Platform
- an Idea
- Natural Evolution
- Sound Money
- Savings Technology
- A Payment, Settlement & Monetary Network
- a Database
- a Consensus Network
Bitcoin is perceived to be so many different things because it does many things for different people. But it may be beneficial to your understanding to distinguish what bitcoin is (in a fundemental barebones sense) verusus what bitcoin might be to it's diverse set of users.
Difficult to Define
Bitcoin is difficult to understand because it's something completely new. Nothing like Bitcoin had existed in the past, so to describe it, we sometimes compare it to things that we are familiar with like gold. This can be helpful but it can also cause confusion as it lacks the whole picture. Bitcoin is Bitcoin.
To have a deep and rich understanding of bitcoin, it helps to have multidisciplinary knowledge in; cryptography, money, protocols, programming, IT security, history, technology, philosophy, economics, game theory, etc.
Bitcoin is akin to a living organism; forever evolving and growing. There are layers to Bitcoin and that's what makes it so captivating to so many.
What Bitcoin is NOT
To begin, it might help to define what Bitcoin is not. Bitcoin is not a company or controlled by any central entity and there are no leaders. It's not just gold 2.0 or a PayPal 2.0 - describing it as such doesn't do justice to what Bitcoin is.
What Bitcoin Might Be to Users
Some usescases for users of Bitcoin may include but are not limited to:
- to escape oppression
- to store and protect your wealth from things like inflation
- to route around censorship
- financial freedom
- generational wealth
- a monetary network
- a reserve asset
- digital gold
- digital property
- digitally-native bearer asset
- a settlement tool
- drastically improved digital payments rail
- financial privacy
- the underpinning of the new money
- programmable money
- a unit of account
- a tool to make the world more fair and honest
- a truth / corruption barometer
- an IQ test
This list goes on and on. We'll discuss all the different things that help define Bitcoin throughout this website.
Bitcoin is a software program (often referred to as a full node) that is installed on a device such as a PC. Devices running the software are found all over the globe (by people like you and me) and are constantly communicating with each other to keep "themselves" up-to-date, typically over the internet. There are different implementations of the software but Bitcoin Core is the most common because it has the most competent developers behind it.
Anyone can easily download and run a full node - which is important for the integrity of the network. If the requirements are too demanding, then less people can run the software creating a centralized network.
These full nodes must be used if you want to interact with the Bitcoin network. In fact, there is no bitcoin without the software since it contains all the rules of the network among other things. The nodes themselves are also what form the backbone of the network itself.
These full nodes are Bitcoin and the ability for anyone to easily run one largely determines if the network is decentralized or not. For example, if a full node's resource requirement grows too large; the network will naturally become more centralized over time. Fortunately, Bitcoin has avoided this issue thus far and tens of thousands of full nodes form the backbone of the global Bitcoin network. Collectively, they define, enforce and protect the consensus rules of the network - for example, the issuance of new bitcoin must follow a pre-determined schedule that mathematically ensures the fixed supply limit of the network remains less than 21,000,000 bitcoin.
It's a wallet too
The full node software has a native but basic wallet to send and receive bitcoin. Most users download and run a lightweight wallet that either connects to their own full node or someone else's for a better user experience.
Benefits of using a node
There are many very important benefits for using your own full node and you can read about them here.
Bitcoin is a platform for which apps, tools, protocols and networks are built upon or around. It serves as the secure and reliable rock solid foundation to support all sorts of innovation and interconnect existing networks. Technically speaking, Bitcoin is a protocol just as TCP is of the internet.
Similarly to the internet, Bitcoin has spurred a torrent of innovation from all walks of life around the globe in the last decade and will continue to for the next. Like a blank canvas, artists around the world painted and continue to paint their visions for a better future.
Bitcoin is an idea whose time has come - that using technology we can improve things like money by removing the need for trusted third parties. Thereby ridding politics and central control from the core inner workings of the network. This idea was pursued by the Cypherpunks where some have tried to create systems like Bitcoin but would eventually fail.
Bitcoin itself was released from the ashes of the 2008 financial crisis with the creator embedding the message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." into the Bitcoin blockchain. Perhaps a hint to why Bitcoin is necessary.
In essence, Bitcoin ushers in something that had never existed before but is fundemental for a fair and honest society; complete ownership and control over your own money without a trusted third party. People are no longer forced to trust the words of a central entity that they have what they claim to, that they'll never freeze your funds or that they aren't printing more money. We are no longer bound by the strict and decaying rules of legacy systems. The bitcoin that you hold is 100% verifiably yours using software anyone can run.
Ethos of Bitcoin
Bitcoin and the core infrastructure built for it, typically has a heavy emphasis on openness, transparency, trust minimizing, security, incentives, self-verifying and self-sovereignty which embodies the ethos of bitcoin.
Bitcoin is just the natural evolution of money. It's progression of the human race. A step forward towards a better system. It's an all around better money because it was engineered to be the best - it wasn't by accident. As such, Bitcoin is a voluntary network to participate in and it's not forced on anyone through acts of violence. It must gain adoption and compete simply by being much better than the competition.
Now that the genie is out of the bottle and forunately (or unfortunately for some), this is a new system that people are slowly embracing to be a part of our every day lives whether you, me or anyone else likes it or not. How exactly you will interact with the new global system is still not crystal clear - it may be seamless and something that just functions quietly in the background. It could take decades to fully play out; no one really knows. But in hindsight, we'll look back in history and say to ourselves, "Well that was obvious".
Do you remember what the last big innovation in money was? Plastic cards? Plastic bills?
Disruption has finally come to money like with many other industries and the internet. The advent of Bitcoin didn't just bring a technological advancement but a cultural one. It has us asking what really is money? How does our current money work? Why does my money lose purchasing power? Why does a small group of people get to create unlimited amounts of money out of thin air? Why do currencies collapse? Why is a large portion of the world population not given access to basic financial services? It's re-educating us on one of the most fundamental, yet taken for granted thing in life - money.
Sound money is a core value of Bitcoin because it has:
- a predictable supply issuance schedule that cannot be maliciously altered
- a fixed monetary supply that cannot not be changed by a central entity
- a monetary supply that can be independently audited by anyone running a full node
- a system and value that has less correlation with traditional financial markets
- value that cannot be debased from endless printing
- value that is shielded from inflation, negative interest rates and other future human interventions
- value that is easily verifiable and auditable
- value that is resistant to confiscation
- value that is extremely portable, divisible, durable and non-counterfeitable
- payments that are censorship-resistant and irreversible
- a network that can function independent of trusted third parties
Bitcoin is growing into the most widely accepted sound money on the planet and if you think about it, it may be the only truely sound money there is. In fact, bitcoin may be the first real money humankind has ever seen. Previous monies may have been mere placeholders until we were able to find a true money.
Bitcoin is the ultimate savings technology. Instead of stealing your time like fiat does (by printing fiat endlessly which devalues your money), Bitcoin protects and values your time because no entity can just print more bitcoin. It's like owning your own bank in cyberspace with no boundaries or limitations. There is no one above you and no one central entity to change the rules of the network - it's financial freedom.
Why? Because the global decentralized full node network ensures that the monetary policy isn't switched on you by an unelected small group, for example, by a country printing 4 trillion dollars in a single year. A full node also ensures anyone that interacts with the network is abiding by the same consensus rules as you and everyone else around the globe. Your full node is an instance of the consensus rules and it contains a copy of the entire transactional history of Bitcoin (or a partial copy) so that it doesn't need to trust a central entity to tell them something is true or not. It has all the tools necessary to independently validate any bitcoin transaction or audit the monetary supply on its own accord. That means no cheating or printing unlimited amounts of bitcoin.
Payment & Settlement Network
Bitcoin is a payment network because value can be easily transferred from Alice to Bob without Bob needing to trust Alice or a third party. It's just not a very good one (on it's own).
The Bitcoin protocol is better suited for the settlement of transactions, particularly higher valued transactions and this will likely become more evident in the coming decade. This is because a blockchain is not designed for global instant coffee payments. It's designed for a limited but very special usecase: digital immutability. Infinite Coffee payments don't need to be permanently recorded forever, that would be a waste of limited resources.
Bitcoin will have global, instant coffee payments but it will be facilitated by technologies built on top of Bitcoin such as the Lightning Network. In fact, technologies built on-top of Bitcoin take payments to the next level by enabling near limitless coffee payments that cost fractions of a cent that are still trustless - not just for people but for automated machines too.
Bitcoin is a monetary network because it's a network that has some similar concepts to existing monies like gold and fiat but improved upon and removed from any central controls. Everything on the Bitcoin network has an emphasis on being independently verifiable, trust minimized and decentralized.
The monetary attributes of Bitcoin include:
- A fixed monetary supply of 21 million bitcoin
- It's own supply issuance schedule
- Built-in mechanisms to facilitate transactions
- Built-in mechanism to store and protect value
- Built-in mechanisms to verify transactions
- Built-in mechanisms to secure the network from attacks
- Built-in mechanism to audit the bitcoin monetary supply.
On a more technical basis, the Bitcoin network is recording and transfering ownership and money / payments were just the first obvious applications.
Bitcoin relies on a database-like structure called a blockchain to record every transaction completed over the Bitcoin network. This is a 24/7 proccess, so it's happening as we speak! Each transaction record is associated with a bitcoin address and it's transactional history.
For example, you can go to a block explorer website and search for your bitcoin address. Say it received a 0.001 bitcoin payment 5 years ago. You can see that record and also click on the bitcoin address that it was received from and see it's entire transaction history too (and so on).
Why *BITCOIN's* blockchain is special
Bitcoin's database is special because everyone can see, audit, download and use it but no one can alter the data that has been "settled". Settled is in quotations because on the blockchain, transactions continue to get more "settled" on average every 10 minutes everytime it receives a transaction confirmation.
What makes Bitcoin's blockchain different?
Bitcoin achieves the only real usecase for a blockchain that makes sense: immutability. Bitcoin is the only thing that exists today that accomplishes this. All other projects have shown time and time again that central entities control their network and blockchain (A.k.a their history).
Projects run into this issue because immutability is not native to a blockchain. It's acheived through a combination of things such as a decentralized full node network and using an algorithm called proof of work. Bitcoin has the only immutable blockchain that exists today and it doesn't really make sense to have another immutable blockchain given how proof-of-work operates. In this regard, there is no number 2.
Where is this database
Every user running a full node has a copy or partial copy of the blockchain. This means tens of thousands of copies are found all over the globe.
How is the global database updated?
Simplified, full nodes all over the globe constantly talk to each other to keep everyone's database synched.
For central entities like a company, decisions are ultimiately approved by a leader. But how would a decision be made for a global network that has no leaders?
Bitcoin uses consensus to form an agreement on the current status of the network. Incentives and game theory are also involved. Ultimately, consensus is achieved on the network through the economic majority.
Let's say that a group of miners, exchanges and developers wanted to change the consensus code of Bitcoin to have a limit of 100 million bitcoin instead of 21 million.
Developers would need to make the change and release the new bitcoin software. Fortunately, this is the easy part. The hard part is convincing all the users of Bitcoin to come to a consensus on adopting the new change and that's a whole other beast, because:
Achieving consensus in Bitcoin is an organic and genius process but may also appear chaotic at times. The process can be full of debate, arguing, gridlock and constant educating that can go on for months or even years. Consensus must be found between a very diverse set of users on the network where the path that is best for everyone should take precedence. Game theory and incentives are a very important part of the process too. But this is a feature, not a flaw. This is by design so that no bad actor(s) can waltz in and change Bitcoin's consensus code willy-nilly. It also greatly increases the probability that the most optimal path is adopted.
If consensus cannot be achieved, no change is adopted and the network continues as normal. Whether for well-intentioned or ill-intentioned reasons, anyone has the freedom to "fork off" and create their new version of Bitcoin. Forking is a non-event now because it had occurred countless times now, mostly by those with the intent of scamming. Generally speaking, if the network comes to consensus, a high percentage of users download and install the updated Bitcoin software.
The following are two different general mechanisms that could be used to update Bitcoin (but are in no way limited to these):
Softfork: this software update is backwards compatible with all previous versions of the bitcoin software that interact with the Bitcoin network. If users don't update to the new software, they can still use Bitcoin but they won't directly benefit from the improvement(s) of whatever the new software offers. However, to note, that dosen't mean you shouldn't upgrade or fall too far behind the latest version because security updates are being implemented in updated clients too. A softfork involves miner participation to push it through and it's used because it makes for a cleaner and less complex protocol upgrade method. Using this method for upgrading Bitcoin does in no way infer that miners control the upgrade process. It's a preferred method as long as participants are behaving. A softfork does not alter the existing consensus code.
Hardfork: this software update isn't backwards compatible with previous versions of the bitcoin software. If a user doesn't update by a specific trigger time, they are using a different network than those who installed the altered Bitcoin software. A hardfork results in both the original and new network existing and users will have coins on both. A hardfork does alter the existing consensus code which is why the new hardfork software would be incompatible with the existing Bitcoin.
- Trust Minimized
- Open Source
- Auditable Supply
- Fixed Supply
- Dumb Network
- Properties of money
Having a decentralized network is critical for Bitcoin because it ensures that there is no central point of control to change the rules by any central actor.
The decentralization of Bitcoin is measured by the number of users running the Bitcoin software (also called a full node) and to a much lesser extent - by those that are mining. But the cause of the decentralization is largley due to the ease of running a full node or in other words; the resource requirements to run a full node. Collectively, how distributed all the Bitcoin nodes and miners are spread around the globe plays a role in the decentralization too.
Bitcoin is decentralized because tens of thousands of users around the globe run a full node. It's important to emphasize that anyone is able to "easily" run a full node. This is possible with Bitcoin because the resource requirements such as hard drive space, IO, internet bandwidth, your time, money, expertise are small despite being the oldest and most adopted. Some may even argue that Bitcoin needs to implement protocol level "tweaks" that would slow down Bitcoin's future resource requirements in fear of centralization. Bitcoin nodes require many multiples less resources than even the most popular altcoin because of optimal scaling implementations. You can read about full nodes here.
Ultimately, this means Bitcoin is controlled by all of us - the individuals. Thus, the network can't be controlled or shutdown. There is no central location or go-to person for a malicious entity to capture / control the network.
Only a doomsday scenario could permanently disrupt Bitcoin such as the entire planet not having access to electricity - as in no solar, wind, water, etc. But at that point is money really anyone's priority? Not to mention, every other system would also be non-functioning.
Bitcoin is a trust minimized network meaning trusted third parties are not required for certain usecases like money to function.
The problems with trusted third parties are that:
We trust them to hold all our confidential data (such as e-mail, phone number, full name, home address, credit card info, bank info, etc.), so they naturally become a huge attraction for hackers. Examples in history taught us that it is near impossible for central entities to protect this data.
We put so much trust in entities like central banks that some gained incredible power over the people and have been proven to abuse their power because humans are subject to corruption, emotions, bad decisions, self-interests, etc.
With Bitcoin, the value that you or anyone else holds is 100% publicly verifiable with a full node. You own your bitcoin in the purest sense that can exist when using a full node. In this space we go by the motto, "Don't trust. Verify".
Bitcoin is open source meaning anyone can freely view, audit, modify or redistribute the code. This means that the project is open to everyone for collaboration which is great for bug checking and innovation.
This also means that anyone can copy+paste Bitcoin's code to create their own altcoin. A developer can also work to improve Bitcoin and potentially have the changes implemented.
Bitcoin is a protocol and it doesn't know what a border is. This means any person or machine can connect to the network at any location. Whether you are in mid-flight, the Sahara Desert or Mars. Okay, maybe not Mars (yet) but you can connect to Bitcoin via satellite!
Once connected to the Bitcoin network, the global network is in your grasp and you can transact with anyone at anytime. Users can send and receive bitcoin across the planet and the transactions can't be stopped. A user can also take their bitcoin with them physically in ways that no one would ever know such as memorizing your seed phrase or private key.
Being borderless means the pace at which innovation is built dramatically increases because it's not dependent or dictated by just one group, company or even country. It's a global community and a global project.
Bitcoin is permissionless meaning no person or machine has to ask permission to connect to the network. You can open your global self-custody bank right now - all you have to do is download a Bitcoin wallet. You don't have to wait until a certain age, fill out paper work, sign-up, or visit your local bank. Even machines can have their own bank now, as we all know, machines cannot have a bank account using our current banking system.
No permission is required from a government, bank, authority, regulatory body or company. It doesn't matter how old you are, where you live, who your leaders are, if you have legal documents, what gender, what religion or what color you are - Bitcoin is a protocol and it does not care.
Permissionless also means that anyone can build on Bitcoin which greatly increases the pace of innovation. You can wake up one morning and think to yourself "Hmm, I want to build something on Bitcoin.." and just start building something, by yourself, in your bedroom.
Bitcoin cannot be changed in two ways:
- The consensus rules that everyone must abide to can never be changed by a central entity. An exmaple of such a consensus rule is a monetary policy that ensures bitcoin cannot have more than 21,000,000 bitcoin in circulation.
- The transaction records recorded in the global public blockchain cannot be altered to trick the network.
It's important to emphasize that immutability is not a native feature of a blockchain. In fact, Bitcoin has the only truely immutable blockchain and consensus rules.
Blockchain Data Immutability
Bitcoin's blockchain is digital data containing all of Bitcoin's transactions, yet it's immutable meaning once the digital data is recorded to it, it can never be changed. The primary technology that helps to facilitate this is called proof-of-work. This is an extremely important characteristic of Bitcoin and has some very special usecases for things like money.
Consensus Rule Immutability
Bitcoin's consensus rules cannot be changed by any central entity because the rules are enforced and regulated by the decentralized full node network around the globe.
Simple Technical Level
Bitcoin's immutability is achieved through a combination of things such as a decentralized full node network and using an algorithm called proof-of-work.
In addition to Bitcoin's code base being auditable by anyone, the supply of bitcoin is auditable by anyone too. This is important because it ensures that nothing nefarious is occuring to the Bitcoin monetary supply.
Many altcoins, including ones with higher market caps can't verify their supply or their future supply. For many altcoins, the average user can't even verify the supply if they wanted to because running the required software needs an obscene amount of expensive computer resources and time to complete.
It's important that anyone has the ability to easily and independently audit the bitcoin supply at any point in time - and that's what Bitcoin enables by running a Bitcoin full node.
Bitcoin utilizes a peer to peer broadcast network to propogate data (such as data for a new transaction made by a wallet) between Bitcoin nodes on the network. Miners will eventually pick-up the valid transaction and pack it into a transaction block to be recorded into the blockchain indefinitely.
Bitcoin is clone-proof in two different aspects:
- A bitcoin (token) is impossible to clone out of thin air to expand the fixed monetary supply because of how bitcoin works. There is no actual physical or digital representation of a bitcoin to clone. Rather, there's just a public ledger of transactions that people all over the world have a copy of and maintain independently.
- The network effects of Bitcoin cannot be cloned. Since Bitcoin's code is open source it's a given that anyone can clone it a million times to create altcoins but you can't magically copy and paste Bitcoin's security, adoption, value, organic growth, fair distribution, fair beginning, collective mining power, mind share, etc.
Central Bank Digital Currency (CBDC)
If a country or company wants to create their own digital currency it does not compete with Bitcoin by default because by design it would be the exact opposite of Bitcoin - the very reasons why Bitcoin exists today. It definetely wouldn't be designed for you to independently control, store and protect your wealth. It would be the exact same thing as the current fiat system we use today but more controlled, manipulatable, censored, tracked and have a greater concentration of power.
Although a bitcoin (token) can't be duplicated, it can be double spent. But this is also the exact thing that Bitcoin is designed to resolve because Bitcoin has a built-in check mechanism using something called confirmations. Transaction confirmations protect the receiver from accepting bitcoin that a wallet no longer has access to. This is why Bitcoin's layer 1 protocol, by itself, is better seen as a settlement layer than a payment layer.
The Protocol Is Not Owned By Anyone
Bitcoin is neutral because the network is not owned by anyone and it does not play favoritism towards any person, group, company or country. Everyone is on an equal playing field because it's just a protocol that exists and functions.
Bitcoin is an opt-in system to participate in and is not forced on anyone through hostile measures. To gain adoption, it must be much better than the competition.
Doesn't Cater To The Rich or Powerful
Bitcoin doesn't care how powerful you are. Someone with 50,000 bitcoin has no more influence or control over the Bitcoin network than someone with 0.1 bitcoin.
Bitcoin uses a public ledger called a blockchain to record every transaction made on the Bitcoin network in the form of transaction blocks every 10 minutes (hence the block in "blockchain"). It's a running log of Bitcoin's entire transactional history ordered in chronological order. Every transaction log is specific to the bitcoin address that sent bitcoin and includes time-stamps, amounts sent and received, addresses received from and sent to and current quantity of bitcoin available. These transaction logs are recorded in the blockchain forever.
It's so transparent that users can track any bitcoin address real-time or verify the current bitcoin supply at any moment. Participants can even do a proof-of-ownership where an individual, group or company can sign a message with a private key to prove that they have access to the bitcoin on the associated bitcoin address in question. However, this method does not definitively prove that the signer owns the Bitcoin, for a few reasons. P.S: No - this is not a viable method of trying to KYC everyone's personal wallets. No method is.
This transparency is not only important but imperative to protect the integrity of Bitcoin's fixed monetary supply. However, not all blockchains are equal. Many altcoins including those in the top 5 cannot properly audit or verify their current token supply. To further worsen the matter, many altcoins have an unknown token limit and in the case of an inflation bug some of the altcoins are unable to verify if the token supply has been maliciously increased.
In this regard, the Bitcoin blockchain offers an un-matched level of transparency that didn't exist before.
The software that defines Bitcoin is just code meaning it can change and adopt new features from things like altcoins if they have been tested thoroughly over an extended period of time and justified as being important to integrate. To my knowledge, this had never occurred because all the innovation is already being built and tested for Bitcoin by the brightest developers. Unfortunately, the majority of altcoins have just been scams and broken experiments.
Think it through:
Are the tens of millions of people (and future users) going to throw away all their money and investments every time someone shouts they have something better? Is the entire network going to throw away all the organic growth, infrastructure and restart to square one? Of course not. That would be an endless cycle of disruption and destruction occurring on a monthly basis.
Bitcoin is censorship resistant because no central entity can successfully prevent someone or something on the network from the basic function of sending or receiving bitcoin. Bitcoin transactions are just data. That means Bitcoin can be used (with varying degrees) on:
Bitcoin is anti-fragile because instead of weakening in times of chaos and disorder, it gains strength. For example, when there is economic trouble caused by corruption, Bitcoin adoption accelerates. Or when an entity "attempts" to co-opt Bitcoin, the communities grow stronger, new innovations are created to protect the network and game theory kicks in.
The system is battle tested because everything but the kitchen sink has been thrown at it and it doesn't die. In fact, the attacks made the technology, network and communities stronger each time. Mainstream media declared Bitcoin dead over 383 times already and guess what? It's still here and thriving.
Everyone from presidents, governments, bank CEOs, central banks, politicians, mainstream media to your Uncle Bob have bashed Bitcoin. Detractors desperately search for negative talking-points that will stick but fail because you can't argue against facts or mathematics. Interestingly, many who started off as detractors of Bitcoin eventually progressed to embracing it and it takes some people years to go through the process. In fact, the majority of people in Bitcoin now started off as a skeptic.
Bitcoin has been through:
- Bans, restrictions and threats in some countries such as China
- Attacks from governments, banks and politicians on individuals and companies.
- Constant bashing from "established" economists, bankers, mainstream media, etc.
- Attacks from a conglomerate of large bitcoin companies, miners and has-beens
- Protocol, game theory and hacker attacks
- Scaling hurdles
- An endless wave of "the next Bitcoin" altcoins and their bag holders
- Thousands of altcoins and altcoin clones
- Three +83% multi-year bear market corrections
- the collapse of Mt.Gox which was the largest and only relevant exchange for Bitcoin at the time
- Multiple high-profile exchange hacks including an 850,000 bitcoin hack (Mt.Gox)
- Early code bug hiccups
It's to be expected that there will be more failed attacks on the global stage but it's nothing new. During Bitcoin's entire existence it had to fend off attacks from outside the space, from within the Bitcoin space and from the Crypto / Blockchain space in general. But guess what? Bitcoin is still here, thriving and as important as ever.
As Ghandi's famous quote goes, "First they ignore you, then they laugh at you, then they fight you, then you win".
Bitcoin has a fixed supply of less than 21,000,000 bitcoin that will ever exist. Bitcoin follows a predictable issuance schedule that is estimated to reach it's fixed supply limit near the year 2140. This is hard-coded into the DNA of Bitcoin and cannot be changed by any central entity.
The system is designed so that everyone knows:
- how often new Bitcoin are added to circulation: every ~10 minutes
- how many Bitcoin are created every ~10 minutes: 6.25 btc for years 2020 to 2021
- when the issuance rate will be halved, a.k.a the quantatative hardening / halving event: every 210,000 blocks or every ~4 years
- when new Bitcoin stop getting issued: year ~2140
Bitcoin is a dumb network meaning the core function itself is simple and the devices, tools and protocols that connect to the network are smarter, more complex or more advanced. This means the Bitcoin network doesn't care about how you are transacting, using which device, to whom or to where - it just does it. This means innovation doesn't require risky, disruptive changes at the core protocol level. Innovation is pushed to outside the core protocol such as on end-user devices and other protocols. This is a good thing. Think of how a small bug in updating the core protocol would affect everyone on the entire network. This translates to a stable, secure and reliable core protocol - which is of the utmost importance for a protocol handling massive amounts of value.
A dumb network is more robust than a complex protocol and accelerates the pace of innovation by putting it in the hands of any user and not just one company or group.
The internet (TCP/IP) is an example of a dumb network. It transfers data from A to B and it does not know or care what that data is or what the end device is. Additional protocols and networks work together to make the internet experience smooth and scalable.
Historically, the greatest innovation came from the bottom-up meaning outside the already established banks, Fortune 500 companies, etc. The greatest innovation comes from the bottom simply because that's where it has the greatest need. It's also where individuals have the most creativity, motivation and passion, uncontrolled by bosses, agendas or regulations.
Simply put, a system that is highly regulated, permissioned, closed source, has a singular vision dictated by the company and a walled garden environment simply cannot compete with an open, global and permissionless system designed to help, not profit from people. This is why bottom-up innovation beats out top-down.
In addition, the power structure in Bitcoin is reminiscent of bottom-up because the people are given the power and ultimately, the people are the ones who control Bitcoin.
Bitcoin not only meets the properties of money but exceeds (most of) them:
- Durable: A bitcoin can never be deleted, destroyed or degraded but access to bitcoin can be permanently lost. However, a user can create an unlimited number of bitcoin backups. The Bitcoin network exists as long as a full node exists.
- Portable: Bitcoin has no physical form and it's digital, so it can be sent instantly across the planet with the click of a button. In the physical world, access to bitcoin can be recorded on paper, saved on a USB, memorized in your brain, etc. Bitcoin does not actually exist in a wallet but in the global blockchain/ledger.
- Divisible: Bitcoin is divisible to the eighth decimal place which means 0.00000001 is the smallest unit of a bitcoin (commonly called a satoshi). Each Bitcoin is made up of 100 million individual satoshis which if you do the math, means 2.1 quadrillion satoshis will exist when the last bitcoin is mined.
- Verifiable: Bitcoin is easily verified for authenticty using software anyone can easily download and setup (a full node).
- Fungible: Bitcoins are indistinguishable from one another because they have no physical appearance. However, all bitcoin have a history but their history can also be obfuscated in the event of blacklisting / whitelisting attempts
- Unit of Account: Bitcoin may not be a unit of account in the physical world (yet) but it is a unit of account in the cryptocurrency realm. Every altcoin and stablecoin is paired with Bitcoin. Bitcoin is not a unit of account in the real world, simply because that takes a long time. It's a process and Bitcoin becoming a unit of account for real world things like food is still up in the air.
- Medium of Exchange: Bitcoin and protocols built on-top of Bitcoin can be used to purchase goods and services. However, it's not mainstream and again it's a process that takes a long time to play out.
Since digital existed, it had the issue of; if it was digital, it could be duplicated. Music, movies, video game gold, software, document files, digital currencies - you name it and it could be duplicated if it was digital. Bitcoin solved this problem when it was released in 2009.
The creation or invention of Bitcoin (however you want to view it as) is actually the culmination of decades worth of research and development of existing proven technologies and combining them. The idea of a Bitcoin-like system actually existed long before Bitcoin was created. In fact, there were quite a few attempts at creating a similar system from a group called the Cypherpunks. Some attempts that would fail include DigiCash, eGold, B-Money, HashCash and BitGold. Now, we have Bitcoin which can now be confidently viewed as the one that made it.
The Bitcoin whitepaper was published on Halloween day, October 31, 2008 by Satoshi Nakamoto on the cryptography mailing list at metzdowd.com. Intentional or not, the Bitcoin whitepaper was released to the world from the ashes of the 2008 financial crisis with the creator embedding the message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." into the Bitcoin blockchain.
The first block a.k.a. "the genesis block", was mined on January 03, 2009.
On January 12, 2009 - the creator(s) of Bitcoin sent 10 bitcoin to Hal Finney which is the first bitcoin transaction in history. Hal Finney had since passed away in 2014 and had his body cryonically froze. On may 22, 2010 - the first publicized bitcoin purchase for something physical made its mark in history when Laszlo Hanyecz paid Jercos 10,000 bitcoin to purchase and deliver 2 Papa John's pizzas to his house. At Bitcoin's 2017 peak, these pizzas cost just under $200,000,000 USD.
From 2009-2012, Bitcoin was completely unknown to most - only to be accepted for payment by a handful of visionaries. Starting from 2013, Bitcoin slowly gained traction and legitimacy as more visionaries and entrepreneurs discovered Bitcoin's advantages and it's huge potential. Now, the world cannot go 1 day without talking about Bitcoin.
- The Bitcoin Whitepaper ( listen to the Whitepaper here)
- A Cypherpunk's Manifesto (Article) ( listen to the article here)
- The untold history of Bitcoin: Enter the Cypherpunks (Article) ( listen to the article here)
- The History of Bitcoin by The Motley Fool (Article)
- History of bitcoin (Wikipedia)
- A Short History Of Bitcoin Everyone Should Read (Article)
Bitcoin was created by an unknown person or group that went by the pseudonym of Satoshi Nakamoto on bitcointalk.org and on other forms of communication.
2011 was the last time Satoshi publicly communicated with anyone but before disappearing Satoshi encouraged the former "lead" Bitcoin Core developer Gavin Andresen to continue working on Bitcoin. But now there is no leader due to the radical decentralization that the network went through since then.
Satoshi Nakamoto is assumed to have disappeared due to the dangers of creating such a system that would ultimately succeed. It isn't known but some people have speculated that the creator passed away because Satoshi's (allegedly known but not conclusively proven) bitcoin addresses have never sent any bitcoin anywhere - meaning the bitcoin never moved, even once. Others believe that Satoshi may be alive but cannot spend his known bitcoin holdings without the risk of exposing his/her/their identity. It's also plausible that access to the bitcoin have been lost permanently. There are many other theories floating around.
P.S: No one knows who Satoshi is. Quite frankly, the identity has no significance and he/she/they no longer have influence on the Bitcoin protocol. Bitcoin has evolved far beyond Satoshi and that's a good thing. Bitcoin has no leaders.
Bitcoin uses a process referred to as "mining" to process transactions. This is an over-simplified term because the process is much more complex than what we normally think of as mining.
Without getting technical, the important thing to understand about miners is that they don't validate transactions - transactions are actually deemed valid by users running Bitcoin full nodes. Instead, miners are adding transactions into a transaction block to be submitted into the blockchain. Every time a new block is added to the blockchain every transaction previous to it exponentially increases its security because of how proof-of-work is designed.
Every time a transaction receives a confirmation, it means a new block has been added to the blockchain. For example, if your transaction from a month ago has 6000 confirmations, that means 6000 new blocks have been added to the blockchain after the one that includes your transaction.
Miners submit a block to the blockchain by competing to be the first in solving a work-intensive mathematical puzzle using special hardware. If a miner wins the race, they get to add their block to the blockchain and receive a block reward as payment. Miners can also collectively work together to solve the puzzle by forming a mining pool. In this case, the block reward is divided between miners based on their hash rate contributed. The block reward (or more specifically the block subsidy) is how new bitcoin are issued into circulation.
Mining is a technically complex process and also involves an algorithm called Proof-of-Work. We'll leave it at this.
At the beginning, anyone could mine with a device that had a CPU, such as a laptop or desktop. Mining eventually progressed to video cards, then FPGAs. Now, mining is only profitable when using specialized hardware called an ASIC.