Date Launched: January 2009
Founders: Satoshi Nakamoto
Child Forks: Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond
Major Investors: Winklevoss Twins, Tim Draper, Peter Thiel, Marc Andreessen
Bitcoin is the world’s first decentralized ledger cryptocurrency. Created by Satoshi Nakamoto, Bitcoin is designed to be a digital cash system that does not rely on a central trusted source. Utilizing blockchain technology, Bitcoin transactions are secured and recorded on a decentralized public ledger. New Bitcoins are generated through a process called mining up to the maximum supply of 21 million Bitcoins.
Because multiple nodes (think of it as people running the Bitcoin ledger on their PC) confirm the validity of the ledger, it is decentralized and maintained by the network. This is unlike a centralized system, such as our banks, where one organization/person has the authority to dictate what is final.
Benefits of Bitcoin
Successful venture capitalist Marc Andreessen published an article in the New York Times in January 2014 titled “Why Bitcoin Matters” in which he discusses the disruptive nature of the technology. The article mentions that low transaction fees made possible by Bitcoin allow for micropayments. Micropayments can bring about a whole host of features that gives people financial flexibility. Examples include viewing news articles on a per-article basis rather than a subscription. Or getting paid your salary daily instead of at the end of the month.
Another benefit of Bitcoin is security, in which merchants can accept Bitcoin payments and then instantly convert to fiat. This way, payment by credit cards would not be necessary and customer data would not be compromised when a merchant is hacked. Merchants can also drastically reduce the fees they need to pay to Visa or MasterCard.
In the country of Venezuela, the local currency Bolívar experienced hyperinflation. This occurs when a currency loses its value at an alarming pace. During the period of hyperinflation, if a person held onto $100 worth of Bolívar, in a matter of weeks, the value of the same amount of Bolívar would go to $1.
As a result of the hyperinflation, the citizens of Venezuela no longer trusted in its national currency. While USD is considered the most trusted fiat currency in the world, it was very difficult for Venezuelans to get USD. What ended up happening was the rise of Bitcoin in the country. More and more people began using Bitcoin to transact, and salaries were being paid in Bitcoin. This shows the importance of Bitcoin which does not need a trusted central organization.
While Bitcoin’s value has risen significantly over the past few years, there remains a lot of controversy regarding the cryptocurrency. Many government agencies and major institutions are pushing back against Bitcoin and claim that it is nothing more than a bubble.
However, Bitcoin and blockchain technology has began revolutionizing the world, setting up a new network on which people can transact assets of value online through a trustless system. Satoshi’s initial whitepaper outlines a digital cash system that does not rely on a central trusted source. While his goals of Bitcoin becoming an international cash system is still far from being achieved, new developers are working everyday at improving the Bitcoin protocol and making cryptocurrencies easier to access.