What is Bitcoin?
Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. It was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software.
Bitcoin as a Cryptocurrency
Bitcoin is the first, and most well-known, of a class of assets known as cryptocurrencies. Cryptocurrencies are digital or virtual currencies that use cryptography for security. They are primarily used for digital transactions and are overseen by blockchain technology, a decentralized ledger enforced by a disparate network of computers.
Bitcoin transactions are more secure than traditional financial transactions because they do not rely on trust in a specific counterparty. Transactions are made with no middlemen, meaning, no banks! Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock, and buy Xbox games. But much of the hype is about getting rich by trading it.
How Bitcoin Works
Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer. People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people. Every single transaction is recorded in a public list called the blockchain. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undoing transactions.
Bitcoins are generated through a process known as Bitcoin mining. Mining involves solving complex mathematical problems, and miners are rewarded with a certain number of Bitcoins. This provides an incentive for more people to mine. As miners validate transactions and create new blocks, they receive Bitcoin rewards as well as transaction fees.
Impact of Bitcoin
Bitcoin has had a significant impact on the financial world and the way we think about money. It has challenged the traditional notion of ‘money’ and has provided a digital means of exchange that is decentralized and free from government control. Bitcoin’s rise has also led to the proliferation of hundreds of other cryptocurrencies, collectively known as altcoins.
Bitcoin and the Economy
Bitcoin’s impact on the economy has been profound. It has introduced a new way of making payments, saving and investing. Moreover, it has introduced a new asset class which, despite its volatility, has attracted considerable investment from both retail and institutional investors.
Bitcoin and Society
On a societal level, Bitcoin offers a platform for financial inclusion and innovation. It has the potential to provide access to financial services for people who are currently unbanked or underbanked, and it offers a platform for new and innovative financial products and services.