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What is Bitcoin?

Tali Kon

What are cryptocurrencies?

Cryptocurrencies essentially have the same concept as real money; they can be classified as digital currencies and can be used as storage value as well as for exchange purposes. The most obvious difference, however, is that cryptocurrencies are not tangible and are not controlled by any governed entity. That being said, in most cases cryptocurrency exchanges are usually done through some sort of regulated platform.

Cryptocurrencies are not backed by any regulated body, however, their value as secure forms of payments comes from the fact that they are digital files containing special computer codes that can’t be altered. This computer code is known as ‘cryptography’.

Now that we have a rough idea of what cryptocurrencies are, let’s gain a basic understanding of the first ever cryptocurrency invented – ‘Bitcoin’.

Understanding Bitcoin

There are many different coins in the crypto world, yet the most popular one is Bitcoin. Bitcoin is often referred to as ‘cash for the internet’. After its creation in 2009 by Satoshi Nakomato, Bitcoin had no real significance. However, as this coin began to be accepted and adopted as a form of payment by many, it started to withhold some value.  As of September 2020, Bitcoin was being used as a form of payment by more than 7 million people. 

As mentioned before, Bitcoin is a digital currency, which takes the form of a digital file made up of some sort of mathematical code. Bitcoin is used to fuel a transaction that is then stored on a public decentralized ledger known as ‘blockchain’. In comparison to fiat currency, this digital currency is created, stored and distributed on the blockchain. The idea that Bitcoin lives and functions on the blockchain essentially means that the blockchain is the source that powers Bitcoin. In other words, Bitcoin and blockchain exist together.

Just like fiat currency, Bitcoin is a store of value and a form of payment. Although the two serve to function in the same way,  they differ in their source of value. Bitcoin’s value comes from the concept of adoption; what this means is that the bitcoin network runs simply because people agree to the rules of the Bitcoin protocol. Fiat currency on the other hand has value because the government maintains its value. 

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Bitcoin’s value has been extremely volatile over the years, nonetheless, as a whole Bitcoin’s value has risen immensely. As of 2021, Bitcoin’s worth has peaked to over $60,000. In addition, due to Bitcoin’s scarcity, with its limitation to 21 million coins, the expectation is that the value of Bitcoin will keep rising. 

Bitcoin is usually bought nowadays through exchange platforms, such as Coinbase. These platforms allow people to purchase, sell and keep hold of Bitcoin. To store Bitcoin, you need a crypto wallet which you can set up through apps such as MetaMask and Ledger Nano X.

Bitcoin, being the first cryptocurrency to achieve widespread adoption, has led to the creation of other cryptocurrencies. The widespread adoption of Bitcoin has also been exemplified in it’s adoption in big companies, such as Overstock, Twitch and Paypal. 

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