What is Bitcoin?

What is Bitcoin?

At its most basic principle, Bitcoin is a relatively new and purely digital currency that offers each and every one of us a fairer financial system where everyone is an equal.

There are no physical bitcoins in existence with ownership provided by a public ledger to give complete transparency across all currency holders. Since its launch in 2009, Bitcoin has grown to be the largest crypto currency sparking a new wave of financial transactions with many other digital currencies following in the innovative footsteps.

Understanding Bitcoin

The Beginning of Bitcoin

In late 2008 an unknown person or group known only as Satoshi Nakamoto made an announcement they had been working on a “new fully peer-to-peer electronic cash system”. To date it is still not fully known who the person(s) behind bitcoin are.

In early 2009 the first Bitcoin block was mined and logged under “Block 0,” sometimes referred to as the Genesis Book. From this point Bitcoin has grown to be a word known around the world.

What makes Bitcoin Different?

The key difference between Bitcoin and similar crypto currency and traditional (fiat) currencies is that with Bitcoin, you are totally in control of your money.

Just like all other forms of currency you will have known to this point, it can be stored, exchanged and payments can be made with it. The key difference is that Bitcoin is a purely peer-to-peer transaction, requiring no third-party such as a bank. This makes delays, identity fraud and banking fees a thing of the past.

Bitcoin’s Key Features Explained

Decentralized

Bitcoin is completely decentralised, meaning nobody controls or ‘owns’ the Bitcoin network. Transactions can never be altered or censored. In traditional (fiat) banking systems, currency can be released at a rate to match growth to stabilise the pricing. In a decentralised system such as Bitcoin, release rates are set in advance according to algorithms.

Peer-to-Peer

Bitcoin is the first digital currency to use peer-to-peer technologies to facilitate instantaneous and secure payments. Each transaction goes directly from one person - or business - to another, removing the need for a trusted third party such as a bank.

secure payments go directly from one person or business to another, so there’s no need for any ‘trusted third party’ to process payments.

Fixed supply

Only 21 million coins will ever be created, making Bitcoin much more immune to the inflation traditional currencies are prone to. This is part of the reason users can choose to purchase fractions of a full Bitcoin value.

Low fees

Typically it is much cheaper to move money through Bitcoin’s peer-to-peer network, with transaction rates and fees dependent on the currency used. Bitcoin Cash (BTH) can see hundreds of transactions each second at rates generally under one penny per transaction. Bitcoin (BTC) transaction fees are typically slightly higher ranging from several cents up to tens of dollars depending on network usage at that time.

Global digital ledger

All Bitcoin transactions are recorded on a global public ledger called the blockchain, and anyone can view them. This is stored on a number of high performing computers and acts as a secure record of who owns what at any given point.

Why are there different ‘types’ of Bitcoin?

At Bitcoin.com, we often use the word ‘Bitcoin’ to refer to both Bitcoin Cash (BCH) and Bitcoin (BTC) collectively. Here’s a quick explanation of why the two different digital currencies exist:

Open to all

Bitcoin is open-source software. This means anybody can propose changes to improve the Bitcoin network and, if these changes are supported by everyone upholding the network, an upgrade takes place.

If the proposed changes are not supported by the whole community, they are not accepted.

Since the Bitcoin network is open source, it can be evolved by the community.

Bitcoin (BTC)

By original design, Bitcoin was built to be an electronic cash system. In other words, it was designed to be used for both big and small global payments—day in, day out.

However, when the original digital currency, which is now commonly called Bitcoin (BTC), became more popular in 2017, it struggled to meet the increasing demands of a global currency set by its own popularity.

Transactions were slow, expensive, and sometimes unreliable as the network became ever-busier, so part of the Bitcoin community decided a change was needed.

Bitcoin Cash (BCH)

To resolve the problem, they suggested that the network should undergo a change which would make it faster, cheaper, and more reliable.

In technical terms, this involved increasing the block size to 8MB; in simple terms, this means the number of transactions which can be processed at once increased!

However, part of the community rejected the change, leading to a hard fork taking place on August 1st, 2017. During this fork, a new type of Bitcoin called Bitcoin Cash (BCH) was created.