Cryptocurrencies are digital forms of money. They use cryptography to secure transactions and control “printing” of new money. Bitcoin is a pioneer in the field of cryptocurrencies.
Satoshi Nakamoto developed bitcoin in 2009. Satoshi Nakamoto is a pseudonym for a person or group of individuals. The real identity of the inventor is unknown.
Bitcoin is like the US Dollar or the European Union’s Euro, although this is where the similarity ends. As with all currencies, you can use bitcoin to exchange value with other people. It is the first decentralized cryptocurrency, meaning no single entity controls it. It exists in a peer network of computers. You can conduct transactions in bitcoin without having to go through any intermediary.
It is the norm around the world to have the central banks of countries control the currency. No central bank or government can regulate bitcoin transactions. The creator of bitcoin did not intend to pass its control to central bankers. Cryptocurrencies like bitcoin might be the next big disruptor of the banking industry. Not even the creator of bitcoin can manage the currency. Bitcoin is software that is available to anyone with an internet connection. What this means is that the currency’s circulation is international in scope. Early adopters are already using bitcoins to make purchases both online and offline.
According to Satoshi Nakamoto, cryptocurrencies use cryptographic proof to perform transactions. Cryptocurrencies do not rely on trust like traditional currencies. They rely on cryptographically secure ledgers called “blockchains” to record payment transactions. Users can offer the computing power of their devices to help record transactions onto the blockchain. In exchange for the computing power, they receive new bitcoins. Acquiring new bitcoins in this way is called mining.
Unlike traditional currencies like the dollar, nobody can issue new bitcoins. You have to mine bitcoins. Mining bitcoins refers to the process where peers in the bitcoin network receive new bitcoins for facilitating transaction record keeping services.
Like how people dig for a finite amount of gold in the ground, bitcoin miners extract a finite amount of bitcoins from the network. You can use the mined bitcoins as money on some online platforms as well as in some physical shops around the world. When it comes to bitcoin, there are no administrators who run the network of currency users. Instead, the currency is controlled by peers. Any two people who are willing to trade can send each other bitcoins without having to deal with financial institutions.
If you want to own bitcoins, you can mine them, accept them as a payment from someone who owns them or buy them in bitcoin exchanges. There is a limit to the total number of bitcoins that can be mined. Only 21 million bitcoins can exist. Just like gold mines, bitcoin mines will one day be depleted. Based on current technology, bitcoin mining will end around the year 2140.