The year of 2009 saw the introduction of Bitcoin to the public and it is believed unanimously to be the first established cryptocurrency in the world. There we go with the complicated terms again. Allow me to elaborate on what cryptocurrency is. Quite simply put, cryptocurrency is a digital asset secured with complex mathematical algorithms, i.e. cryptography, and just like any currency, it can be exchanged for goods.
An academic document detailing Bitcoin, also known as its whitepaper, states its purpose to be a “peer-to-peer electronic cash system” without any central authority, thus completely decentralized.
It is also theorized that its creation was to put power back into the hands of individuals who were at the receiving ends of corporate ambition during the global financial crisis during 2008, but of course, this has never been confirmed in any manner.
What is Bitcoin?
Now that we understand its origins, what is Bitcoin’s purpose?
The complete lack of a central authority means no middle-men for any transactions made, with every bitcoin price transaction recorded publicly on a log, where users can remain anonymous within the network through encrypted keys.
Account numbers, names or any identifying features linking a Bitcoin to its owners are non-existent, this resulting from the complete lack of a government, financial institution or any other central authority controlling the Bitcoin system.
People can buy or sell anything with no risk of the transaction being traced back to them.
Hocus, pocus, here’s a Bitcoin!
The creation of Bitcoins, that’s what you’re here for, aren’t you?
This is where the magic truly begins. Bitcoins, despite the name, are not a physical currency. They are not printed like traditional currency. Instead, they are “mined”, so to speak, using computers to solve complex mathematical puzzles.
During its creation, Satoshi Nakamoto decided that there can only ever be 21 million Bitcoins at any given time.
Before you start ramping up your computer to mine yourself some Bitcoin, keep in mind that mining Bitcoin is a lot harder than you might imagine. The creation of a single Bitcoin can often take an incredibly long amount of time, depending on the specifications of your machine, also taking a toll on your electricity.
The solving of a mathematical puzzle that creates a new Bitcoin nets the miner 12.5 Bitcoins, which is a fair bit of money. As of the present, a new Bitcoin is created every 10 minutes, not by the same computer though, of course.