Bitcoin
Bitcoin (₿, BTC, XBT) is a cryptocurrency, a digital currency that operates independently of a central bank or single administrator and can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto and started operating in January 2009.
Contents
Overview
Bitcoin is a decentralized digital currency. This means that no single entity, such as a government or financial institution, controls the network. The network is maintained by a distributed community of users and miners.
The smallest unit of Bitcoin is called a satoshi, named after the creator. One satoshi is equivalent to 0.00000001 BTC. There is a hard cap on the total number of Bitcoins that will ever be created, set at 21 million. This limited supply is a key characteristic influencing its potential value and often leads to it being compared to scarce resources like gold.
History
The concept of Bitcoin was introduced in October 2008 through a white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System," published under the pseudonym Satoshi Nakamoto. The paper described a decentralized digital currency that would eliminate the need for trusted third parties in financial transactions.
The Bitcoin network officially began on January 3, 2009, with the mining of the first block of the blockchain, known as the "Genesis Block". The first Bitcoin transaction occurred on January 12, 2009, between Satoshi Nakamoto and developer Hal Finney.
Early development involved a small community of cryptographers and developers. The first real-world transaction using Bitcoin took place on May 22, 2010, when Laszlo Hanyecz paid 10,000 BTC for two pizzas, an event now commemorated annually as "Bitcoin Pizza Day".
Over the following years, Bitcoin's value experienced significant volatility, undergoing several boom and bust cycles. Despite this, its infrastructure, community, and awareness grew, leading to increasing adoption as both a speculative asset and a medium of exchange. Regulatory attention and the emergence of thousands of other cryptocurrencies have also shaped its history.
How it Works
Bitcoin operates on several core technical concepts:
The Blockchain
The Bitcoin blockchain is a public, distributed ledger that records all confirmed Bitcoin transactions. It is a chain of blocks, where each block contains a list of validated transactions and a cryptographic link to the previous block. This structure makes the blockchain tamper-resistant; once a transaction is added to a block and the block is added to the chain, it is extremely difficult to alter. Copies of the blockchain are held by many participants on the network, ensuring decentralization and transparency (while preserving user anonymity through addresses).
Mining
Bitcoin mining is the process by which new Bitcoin enters circulation and new transactions are added to the blockchain. It is performed by participants called "miners" who use powerful computers to solve complex cryptographic puzzles.
The first miner to solve the puzzle for a new block gets to add the block of verified transactions to the blockchain and is rewarded with newly minted Bitcoin (the block reward) plus transaction fees from the transactions included in the block. This process, known as proof-of-work, requires significant computational effort, which helps secure the network and prevent fraudulent transactions. The block reward halves approximately every four years in an event called "the halving", limiting the total supply.
Transactions
A Bitcoin transaction is a transfer of Bitcoin value between Bitcoin wallets. It works using public-key cryptography. Each wallet contains a pair of cryptographic keys: a public key and a private key.
- The **public key** is used to generate a Bitcoin address, which is like an account number that you share with others to receive Bitcoin.
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- The **private key** is a secret number used to cryptographically sign transactions, proving that you own the Bitcoin you are sending.
When you send Bitcoin, you create a transaction request specifying the recipient's address and the amount. You sign this request with your private key. This signed transaction is then broadcast to the Bitcoin network. Miners verify the signature using your public key and confirm that you have enough Bitcoin to spend. Once verified and included in a block, the transaction is confirmed and permanently added to the public ledger.
Wallets and Keys
A Bitcoin wallet is a software application or hardware device that stores your public and private keys and interacts with the Bitcoin blockchain. It doesn't hold the actual Bitcoin (which only exists on the blockchain) but holds the keys needed to access and control your Bitcoin. Protecting your private key is paramount; if it is lost or stolen, you lose access to your Bitcoin.
How to Pay with Bitcoin
Paying with Bitcoin is similar to making a digital payment, but it requires a Bitcoin wallet and the recipient's Bitcoin address.
- Get a Bitcoin Wallet:
Choose a wallet. Options include: * Software Wallets: Apps for desktop, laptop, or mobile devices (e.g., Exodus, Electrum, mobile wallet apps). * Hardware Wallets: Physical devices that store your keys offline for enhanced security (e.g., Ledger, Trezor). * Web Wallets / Exchange Wallets: Wallets hosted by a third-party service or cryptocurrency exchange. These are convenient but involve trusting the third party with your keys.
- Acquire Bitcoin:
If you don't have Bitcoin, you can get it by: * Buying it on a cryptocurrency exchange (like Coinbase, Binance, Kraken, etc.). * Receiving it as payment for goods or services. * Receiving it from another person.
- Initiate a Transaction:
* Get the recipient's Bitcoin address. This is a unique string of characters (e.g., `3FfTWKz5j5hZc2qX8z5W5X8X2Y2P5Y2Q5p`). You might also use a QR code provided by the recipient's wallet. * Open your Bitcoin wallet application. * Find the "Send" or "Pay" option. * Enter the recipient's Bitcoin address in the designated field. Double-check the address carefully, as Bitcoin transactions are irreversible. * Enter the amount of Bitcoin you want to send. Your wallet might show the equivalent value in a traditional currency like USD or EUR. * Set a transaction fee. This fee is paid to the miners and affects how quickly your transaction is likely to be included in a block and confirmed. Higher fees usually mean faster confirmation times. Your wallet might suggest a fee based on current network conditions. * Confirm the transaction details. Your wallet will use your private key to cryptographically sign the transaction.
- Broadcast and Confirm:
* Your wallet broadcasts the signed transaction to the Bitcoin network. * Miners pick up the transaction, verify it, and include it in a block they are trying to solve. * Once the block containing your transaction is successfully mined and added to the blockchain, your transaction is considered confirmed. For small transactions, one confirmation might be sufficient. For larger amounts, more confirmations (e.g., 3 or 6) are often recommended to ensure a higher degree of certainty. Each confirmation corresponds to a new block being added on top of the block containing your transaction.
Advantages
- Decentralization: Not controlled by a single authority.
- Accessibility: Usable by anyone with an internet connection.
- Potential for Lower Fees: Transaction fees can be lower than traditional wire transfers, especially for international payments (though they fluctuate based on network congestion).
- Transparency: All transactions are recorded on the public blockchain.
Disadvantages
- Price Volatility: The value of Bitcoin can fluctuate significantly and rapidly.
- Transaction Speed: Confirmation times can vary, sometimes taking several minutes or longer, especially during peak network activity or with low fees.
- Security Risks: Losing your private key means losing your Bitcoin. Wallets can also be vulnerable to hacking if not secured properly.
- Regulatory Uncertainty: The legal and regulatory status of Bitcoin varies widely by country.
- Environmental Concerns: The proof-of-work mining process consumes significant amounts of energy.
Pulsed Media: paying with cryptocurrency
In PulsedMedia you can pay also with cyptocurrency, including with Bitcoin.
Unfortunatelly refunds are not possible when paying with cryptocurrency.
