Blockchain, Bitcoin … you’ve probably heard of it and now you’re genuinely intrigued and took the brave step to explore our website and quench your thirst for knowledge and digital wisdom. You’ve come to the right step-by-step guide, as we did our homework of simplifying these notions for you while protecting the accuracy and consistency of the provided information. Let’s dive deeper into a digital world full of promises, for the truth is … everywhere here.
Blockchain, Bitcoin, and key milestones
Bitcoin is a new form of peer-to-peer electronic cash, that first was mentioned in a paper written by Satoshi Nakamoto in 2008. In fact, speculation is that Nakamoto is not a real person, but rather a group of writers who used a pseudonym. Hence, the mystery of who was behind it continued with the emergence of Bitcoin in 2009 as an open-source software. The Bitcoin software enabled a “digital currency that could be used without any governing authority”. This means that currency could pass from person to person without the need for a financial intermediary. Bitcoin is called cryptocurrency because transaction history can be seen by everyone, but the contents are only known to the people making and receiving transactions. What cannot be seen by others is called encrypted and what can be seen is unencrypted. Thus, the crypto part of the word cryptocurrency.
There are no physical coins or notes in cryptocurrencies. It lives natively on the internet.
When a cryptocurrencies transaction takes place, a participant’s computers validates the transaction, and it is recorded in a distributed ledger. It’s the blockchain: the essential supporting mechanism for the digital currency as explained by Nakamoto.
Hence, we can think of Blockchain as fundamentally a distributed ledger that supports immutable transactions, currency movements that are secure by design, frictionless, undisputed, without a central authority, and only modifiable by agreement from all participants. By extension, a whole range of financial transactions can take place over a blockchain.
How can Bitcoin (or any cryptocurrency) have value?
To have value, typically, something must be relatively scarce and it must be accepted by others for payment.
Gold, silver, diamonds, and oil, for example, all derive their value from being scarce and expensive to mine. Translating that to a digital currency, there is only a limited amount of Bitcoins available. The original creator stipulated that there would only be 21 million Bitcoins. It’s not known why this volume was chosen.