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“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” – Satoshi Nakamoto
In a bit over a decade, Bitcoin rose from an experiment to a global sensation. Nowadays, many see Bitcoin as a reliable long-term investment despite the coin’s turbulent history. Above all, it represents a viable solution for gaining financial freedom outside of institutional control.
In this research guide to Bitcoin, we’ll try to unravel all the myths and mysteries surrounding the world’s most popular cryptocurrency.
Market Data
Btc
1Rank
Bitcoin
$26.354 price
0.49219% price change
24 hours+0.49%
7 days-2.79%
14 days+0.46%
30 days+1.27%
1 year+38.15%
$514 B marketcap
$10.5 B 24h trading volume
$26 145,00 / $26 819,00 24h low / 24h high
What is Bitcoin?
Bitcoin (BTC) is a type of digital money. Also, it is the first cryptocurrency in history and made its official debut in 2009. Bitcoin’s main goal is to help users send and receive virtual cash quickly, safely, and almost for free.
Fiat currencies, such as USD, EUR, GBP, etc., are under central financial institutions’ control, like banks and governments. Therefore, they are centralized under one authority that acts as an intermediary between users. For instance, a bank may regulate fees and impose restrictions on those who hold traditional money and use its services.
On the other hand, Bitcoin is a peer-to-peer digital currency. It has no physical representation. More so, it is decentralized. So, it remains outside the control of any financial institution.
Instead of relying on the banking sector, BTC is part of a virtual financial system upheld by thousands of computers worldwide.
Bitcoin gives users complete freedom over their assets. Furthermore, it is not subject to censorship, double-spending, or time and geographical restrictions. Lastly, without the need for intermediaries, Bitcoin transactions are cheaper and safer than through traditional banks.
What is the purpose of Bitcoin?
Bitcoin has a permissionless nature. It means that anyone with an Internet connection can use it. As a result, it financially empowers people from different backgrounds and communities across the world.
You can transfer Bitcoin globally for a variety of use cases without anyone stopping you. But, conversely, banking institutions may put a block on your assets and restrict your financial freedom.
Simply put, Bitcoin is the latest technological advance in the perpetual evolution of our financial world. It gives more power to its users and may help virtually anyone improve their financial situation.
What makes Bitcoin so popular?
Besides being decentralized and permissionless, Bitcoin is also borderless and partially anonymous (pseudonymous). It means that users can transfer it globally without having to reveal their entire identity.
On the other hand, transferring fiat money with a debit/credit card requires revealing your personal details. More so, it may not be possible between certain countries and might take several days to complete.
Bitcoin is also popular because there is a finite amount of it. Still, it is available worldwide and in high liquidity. So, in the long-term, as it becomes rarer, it can only increase in value.
Because it makes for a good investment over the years, many users refuse to sell their bitcoins, a practice is also known as “hodling.”
Is Bitcoin legal?
The most common concern regarding Bitcoin is its legality. However, Bitcoin is entirely legal in most developed countries across the world, including the US, Japan, and the UK.
Some nations, like China and India, restricted Bitcoin use heavily without entirely outlawing it. Nevertheless, most governments are working on ways to tax and adopt it as part of their particular financial regulations.
Note: Before investing in BTC or using it, make sure that you comply with the laws regarding cryptocurrencies in your state.
How does Bitcoin work?
Bitcoin payments operate on a peer-to-peer (P2P) network, a collection of computing devices that jointly share and store files. Every participant in this network is a peer. In our case, it is a BTC holder.
We’ll take the hypothetical case of three Bitcoin holders, Alice, Bob, and Carol, to explain how Bitcoin works.
When Alice sends Bob bitcoins, the transaction details appear on a data sheet on the network, also known as a block. Every participant can see this information, including Bob. Should Bob suggest sending the same bitcoins to Carol, she can see that he has them by looking at that block.
As participants to the network engage in more transactions, more and more blocks are created, thus developing a blockchain. More so, all the participants have an identical copy of the blockchain stored on their devices. Therefore, instead of a bank holding all this information, the BTC holders use it to validate and process transfers.
Block creation on the Bitcoin blockchain takes place through a special mechanism called “mining.”
What is a blockchain?
A blockchain is a collection of financial records, also known as a ledger. In the case of the Bitcoin blockchain, users can only add data to it. Also, once it is recorded there, it is almost impossible to modify and delete.
The Bitcoin blockchain contains the entire transactional history of the network. It means that you can go back and verify every single BTC transfer down to the very first one on January 12th, 2009. The blockchain manages this feat by including a link to the previous block in every ensuing block.
That link is a hash of the previous block. The blockchain transfers data one way through hashing to create a unique “fingerprint” of the input. Changing that fingerprint in one block would require modifying all the fingerprints to the first block on the chain. That procedure would end up invalidating all the transactions. Therefore, it is virtually impossible to edit old entries.
Is Bitcoin safe?
Bitcoin is a relatively secure technology. As a result, you can use it safely for various financial purposes. However, there are some risks you should consider before investing in it.
Firstly, this cryptocurrency is highly volatile. Its price may increase in time, thus giving you a significant ROI. However, it may also plummet below the value you paid for it initially. A good rule of thumb says that, as with every financial investment, you should never invest more than you can afford to lose.
Bitcoin uses digital signatures, passwords, and hash functions as security standards. All this data is susceptible to loss, forgetfulness, and cyber theft.
A Brief History of Bitcoin
Bitcoin first saw the light of day on the 18th of August, 2008 when the domain bitcoin.org was registered. Later that year, the Bitcoin whitepaper, authored by Satoshi Nakamoto, was published on a cryptography mailing list.
Bitcoin seems to combine various pre-existing technologies. For instance, it involves blockchain, which was described as early as 1991 by research scientists Stuart Haber and W. Scott Stornetta. Also, it uses a similar system to Reusable Proof Of Work (RPOW), which is the work of computer scientist and cryptographic activist Hal Finney.
At first, Bitcoin was nothing more than a valueless hobby token that cryptography fans would send among them for fun. Then, however, it quickly gained the media’s attention, financial institutions, and other crypto enthusiasts across the world.
On 22 May 2010, Laszlo Hanyecz from Jacksonville, Florida, made the first real-world Bitcoin transaction when he paid 10,000 BTC for two pizzas from Papa John’s. Ironically, if he had paid the same amount in 2021, the cost of the pizzas would have surpassed $600 million.
Over the years, Bitcoin has been the subject of many speculations. For instance, some accused it of being a scam. Those allegations started gaining weight, especially in the aftermath of the 2017 Bitcoin bubble crash, which saw the cryptocurrency’s value drop from $19,783 to below $7,000 in just two weeks.
Nevertheless, Bitcoin has also attracted the support of many businesses and economists across the world. In the past decade, several companies have adopted it as a method of payment. Also, the cryptocurrency attracted over $1 trillion in investment from people worldwide. As a result, BTC went from a value of less than $1 in 2009 to its all-time high of $64,863.10 in April 2021.
Who created Bitcoin?
Nobody knows for sure. A certain Satoshi Nakamoto signed the Bitcoin whitepaper, but no one has ever seen this person or acknowledged its existence.
Satoshi Nakamoto is most probably a pseudonym for the creator or team of developers behind Bitcoin. Under this name, several posts on cryptography and computer systems appeared on the bitcoin forum. However, they instantly disappeared in 2010. Since then, nobody has heard of Nakamoto in any form. So, the person(s)’ identity remains a mystery.
Over the years, there have been numerous investigations and speculations as to who Satoshi Nakamoto may be. Several developers, including cryptographers Nick Szabo and Hal Finney, were behind the pen name. However, all of them strongly denied their connection with the birth of Bitcoin.
As of today, we know very little about Satoshi Nakamoto. More so, we can only guess their origin. The name is of Japanese origin. However, the vocabulary present in their forum posts points to a native English speaker. But, then, the timestamps of the postings hint at the person probably living on the North American Eastern coast.
All we know is that Nakamoto made the first BTC transfer to Hal Finney on 12 January 2009. Then, he proceeded to mine over 1 million BTC. Lastly, he disappeared after handing over the reins to developer Gavin Andresen. The latter then became the Bitcoin lead developer at the Bitcoin Foundation.
How are new Bitcoins created?
There is only one way to bring new bitcoins into existence, and that’s through a computing process called “mining.” Nevertheless, this process can only produce a finite supply of coins, which has been set from Bitcoin’s inception to 21 million units. The entire amount of bitcoins will reach exhaustion once all of the coins are mined. However, that event is unlikely to take place before the year 2140.
How does Bitcoin mining work?
As we mentioned before, Bitcoin transactions create data sheets on the network. Next, the computers that sustain the blockchain, also known as miners, have to solve a cryptographic puzzle. Only upon its completion, the transaction data will be validated and converted into a block before becoming part of the blockchain.
The puzzle-solving process requires a great deal of computing power, which many compare to digging, hence the metaphorical name of mining.
The system incentivizes the computers who take part in mining. For instance, the one who solves the puzzle faster gets a small reward in Bitcoins. If a miner decides to cheat by providing an invalid block, the network will instantly reject it. So, the miner will not get anything in return for the mining costs.
How long does it take to mine a Bitcoin block?
The exact period of mining a block fluctuates slightly. For instance, the Bitcoin protocol constantly adjusts the mining difficulty to take roughly ten minutes.
Can I mine Bitcoin on my PC?
At first, Bitcoin was possible to mine using desktop computers and laptops. However, the increasing mining difficulty required stronger and stronger computers. This led to the advent of Application Specific Integrated Circuit (ASIC) hardware.
This type of ultra-computers has a decisive advantage over common PCs when it comes to mining Bitcoin. Oftentimes, they will solve puzzles ahead of any desktop or laptop computer. As a result, today, it is difficult, if not almost impossible, to mine BTC at home.
How many bitcoins are there?
As of July 2021, over 18.7 million bitcoins have been mined out of the maximum supply of 21 million. However, it will take nearly 120 years more to mine the rest. The reason behind it is the gradual halvings (every 4 years) that reduce mining rewards and make the process harder.
How can I buy, store or sell my Bitcoin?
Buying Bitcoin may seem difficult at first. However, it gets easier when you break it down into small and simple steps:
Ensure that you have a secure internet connection
Have a cryptocurrency wallet
Have a valid payment method such as a debit/credit card or a bank account
Choose an online cryptocurrency exchange
Connect your payment method to the exchange
Purchase Bitcoin and have it sent to your personal crypto wallet
It is that simple! Furthermore, US residents from all states (except Hawaii) can buy Bitcoin with PayPal. The steps are similar, but instead of connecting your credit card to the exchange, you do so with your PayPal account.
Most cryptocurrency exchanges employ the Know Your Customer (KYC) practice. Therefore, they will ask for personal identification documents. Popular crypto exchanges include Binance, Coinbase, Bitstamp, and Bitfinex.
Alternatively, you can purchase Bitcoin from physical ATMs across the world. As of 2020, almost all the crypto ATMs ask for ID before you can complete a purchase.
What can I buy with Bitcoin?
You can make money with Bitcoin by buying it at a low price and selling it later when the value exceeds the purchase cost significantly. However, you can also use Bitcoin to pay for stuff online, such as:
Flight tickets
Accommodation
Real estate
Food
Clothing
Gift cards
Online subscriptions
These are just a few of the many commodities you can buy with Bitcoin. In addition, an increasing number of businesses worldwide accept Bitcoin as a method of payment. Generally, these services are secure, and the risk of hack attacks is small. Nevertheless, you should always do your due diligence before using Bitcoin for online purchases.
How can I store my Bitcoin?
You can store Bitcoin in cryptocurrency wallets. However, since bitcoins do not have a physical representation, the wallet isn’t the traditional pocketbook. On the contrary, a crypto wallet is made of two serial numbers:
A public address – You send this to other crypto users so they know where to send you digital assets.
A private key – The access code that gives you ownership to the funds available at the public address
IMPORTANT NOTE! You are the only one who should know the private key to your crypto wallet. Sharing it with someone will give them access to your cryptocurrencies, and most likely lose all your assets. In the crypto world, you never get reimbursed for wallet theft. So, that extra power you get over your financial assets also comes with more responsibility.
Bitcoin is a secure technology that is unlikely to fall victim to cybercrimes. However, the same thing doesn’t apply to crypto wallets. If hackers are to strike, they will attack your cryptocurrency storage. Therefore, choosing a safe cryptocurrency wallet is critical to your investment.
When you have to choose a Bitcoin wallet, you can pick from a variety of crypto wallets, such as:
What are hot wallets?
These crypto wallets are called “hot” because they are always connected to the internet. That makes them more susceptible to cyber-attacks. On the other hand, these applications are easy to use on your desktop or mobile devices. They are quick to access and trade on the go. Lastly, they are affordable but never free.
Most cryptocurrency exchanges offer their own wallets where you can store your Bitcoin. Also known as custodial wallets, these apps do not provide you with private keys. Instead, the exchanges store your entire portfolio in a relatively secure wallet on their platforms. Their advantage is that if you lose your password, you can always regain access to your assets.
However, you should be aware that exchanges do not specialize in high-security protocols. So, you might be better off with a third-party crypto wallet.
Examples of hot wallets for Bitcoin include Electrum, Exodus, and BitPay.
What are cold wallets?
Contrary to hot wallets, these forms of crypto wallets are not connected to the internet. Therefore, the risk of hackers stealing your bitcoins is “dead cold.”
Cold wallets come in two forms:
Hardware – They are electronic devices similar to USB memory sticks that have been purposefully modified to store private keys securely. Examples of cold hardware wallets for Bitcoin include Ledger Nano S, Trezor One, and Ledger Nano X.
Paper – Deemed to be obsolete and not encouraged by the bitcoin community anymore. A paper wallet is the plainest form of crypto wallet. Simply put, it is a piece of paper with your private key written on it.
Cold wallets may offer better security than hot wallets, but they have their disadvantages as well. For instance, they are less flexible. So, they are not ideal for fast trading. Nevertheless, they are an excellent option for long-term storage.
How can I sell my bitcoins?
To cash out your bitcoins, you need to access a cryptocurrency exchange platform. Similar to buying Bitcoin, you only need to place a sell order. However, this time you exchange Bitcoin for a fiat currency of preference.
If you have a bank account connected to your profile on the platform, the money equivalent to the sale will go there. Alternatively, if you are a US resident, you can send the money to your PayPal account.
You can also sell your Bitcoin for other cryptocurrencies. For example, most crypto exchanges, such as Binance and Coinbase, allow you to trade BTC for various digital assets.
What if I lose my Bitcoins?
This frightening question is on the minds of all Bitcoin holders, especially new investors. It is easy to fear the loss or theft of a currency that never takes a physical form. Nevertheless, losing your bitcoins is not that simple.
The best part about owning Bitcoin is that you have full responsibility for your funds. You don’t depend on banks or other financial institutions to keep your digital cash safe. Your best choice is to store it in a secure crypto wallet. Then, write down the seed phrase that the wallet provides.
A seed phrase is a list of words containing all the necessary information for recovering your crypto funds on-chain. Keep it written on a piece of paper or use other storage options and store it in a safe. This way, you can always restore access to your Bitcoin. Remember, if you lose your private keys (seed phrase), you will never be able to recover your Bitcoin.
How do I make money with Bitcoin?
Investing in Bitcoin can be profitable in the long term. However, as is the case with every financial investment, there is the risk of losing your money.
There is no secret recipe for making money with Bitcoin. Some investors “hodl” and never sell the Bitcoins they acquire. They hope that the price will skyrocket sometime in the future and increase their wealth considerably.
Other Bitcoin holders prefer to sell BTC as soon as it returns a small profit. Then, they use that income to buy other cryptocurrencies and speculate on their value boost margins.
Alternatively, some Bitcoin traders have a hybrid strategy of the two above. For instance, they sell some of their bitcoins to buy other cryptos. And, they also keep a Bitcoin portfolio separately that they never touch.
Lastly, you can use your Bitcoin as a lending product. On some decentralized finance (DeFi) protocols, you can lend your BTC to up-and-coming crypto projects. This practice provides you with a reliable profit from interest.
SWOT Analysis
Strengths
Bitcoin is under the sole control of its users. Governments, banks, and other institutions cannot tax you the same they do with every transaction involving fiat currencies. More so, trading Bitcoin is partially anonymous. Therefore, your financial situation is strictly your business.
Another great advantage of owning Bitcoin is its low risk of theft. Hackers can steal your crypto wallet if you are not careful. But, they can't actually steal BTC from you like they would with your physical money. In conclusion, Bitcoin’s confidentiality and security are its strengths.
Weaknesses
When it first came out, Bitcoin promised lightspeed fast transactions. Contrary to traditional bank transfers that used to take almost a week to complete, BTC transfers would take minutes. Unfortunately, the network’s architecture wasn’t designed to support the traffic and the sheer number of users that it has today. As a result, BTC transfers are getting slower and slower.
Additionally, Bitcoin is highly volatile. Its value has had a seesaw movement since its inception. Therefore, you can lose a great deal of money if you decide to sell at the wrong time. In conclusion, Bitcoin’s increasing sluggishness and volatility are its weaknesses.
Opportunities
Bitcoin Opportunities
Nowadays, technology advances faster enough to create large security loopholes in our traditional financial system. For instance, banks and other institutions are regular targets for cybercrimes that result in massive funds leaking from their clients.
Bitcoin promises a whole new level of safety for its users, who have complete independence from traditional banking institutions.
Additionally, more and more businesses adopt Bitcoin as a form of payment. A positive example comes from the world’s largest retail company, Amazon, which encourages its clients to use cryptocurrencies. In conclusion, Bitcoin’s growing adoption and sustainability are its opportunities.
Threats
Bitcoin is out of the control of middlemen like banks and governments. That’s a good thing, but it is also a potential threat. Many BTC transactions are untraceable, which gives an extra reason for them to be used in illegal activities. As a result, governments have an excuse to enforce strict laws and regulations against its use and ownership.
Additionally, some speculate that Bitcoin is losing ground against other cryptocurrencies, such as Ethereum and a handful of DeFi projects. For now, its dominance is stable. However, in the long run, it may lose many of its investors to more innovative and advantageous digital assets. In conclusion, Bitcoin’s potential use in criminal trade and its slow development are its threats.
5 reasons to invest in Bitcoin
In the past five years, Bitcoin investments have spurred countless “get rich quick” stories of varying degrees of success. You probably heard about teenage Bitcoin millionaires. However, as tempting as becoming insanely wealthy overnight may seem, it’s not the only incentive for investing in Bitcoin.
Here are the Top 5 reasons to buy into Bitcoin:
Bitcoin adoption is on the rise
With every passing day, Bitcoin gains in popularity worldwide. Even after its price drops by 50%, businesses and organizations everywhere continue to adopt it. Giant brands like Amazon, Microsoft, Wikipedia, and AT&T accept it as a method of payment or donation. Therefore, it is clear that Bitcoin’s fame and use can only go north from here.
Governments are steadily regulating Bitcoin
In 2021, El Salvador became the first state in history to accept Bitcoin as legal tender. Other countries plan to do the same in the upcoming years. Also, in Bitcoin-friendly countries, such as the US, the UK, and Japan, BTC transactions are regular. These events point to a potential relaxation on cryptocurrency regulations within this next decade.
The Bitcoin price can only go up
As adoption increases and regulations loosen up, Bitcoin should become more than a nerdy investment. Its use will become consistent and a reliable alternative to spending fiat currencies. In return, BTC will gain stability, and therefore, enhanced credibility. Lastly, Bitcoin has a history of surging and crashing but always setting new all-time high records after every bubble burst.
Bitcoin has no geographical limits
Bitcoin is borderless. This means that you can send BTC anywhere in the world in a matter of minutes. More so, you don’t depend on a bank to transfer it, and you don’t have to pay fees to anyone. All you need to ensure is that you and the receiver have an internet connection and secure crypto-wallets.
Bitcoin halvings and the imminent scarcity
More than one century will pass before the last Bitcoin will be mined. By then, several halving events will reduce the mining reward. Also, Bitcoin will supposedly reach its finite market cap of 21 million units. All of these factors will make it scarce, and therefore, highly valuable. Investing and holding onto it can provide access to a rare digital commodity not only for you but for your descendants as well.
The Bitcoin Halving
What is the Bitcoin Halving?
For every block validated and added to the Bitcoin blockchain, the Bitcoin miners receive a reward. However, once every few years, this reward is cut in half during an event called a Bitcoin halving or halvening. However, this doesn’t affect the value of transaction fees.
Satoshi Nakamoto set a cap for the maximum amount of bitcoins to ever exist at 21 million. This way, the coin will not be prone to depreciation and corruption in the long run. Also, it goes in the opposite direction to fiat money, which loses buying power every time new units enter circulation.
Bitcoin halvings are necessary for limiting mining speed but still incentivize miners for over a century to come. As a result, more and more users from different generations will be motivated to take part in the process and build a fee market.
Without the Bitcoin halvings, all the bitcoins would have been mined by 2016.
How does the Bitcoin halving work?
The Bitcoin protocol or the whitepaper does not specify the exact dates for halvenings. However, since its inception, Bitcoin halvings took place roughly every four years:
1st Bitcoin halving on November 28th, 2012 – The miners’ rewards dropped from 50 BTC to 25 BTC
2nd Bitcoin halving on July 9th, 2016 – The block subsidy dropped from 25 BTC to 12.5 BTC
3rd Bitcoin halving on May 11th, 2020 – The reward for validating a block dropped from 12.5 BTC to 6.25 BTC
A Bitcoin halving takes place every 210,000 blocks. Since every block’s creation takes about 10 minutes, we can approximate that a halving event will take place once every 2,100,000 minutes.
At this early time in Bitcoin history, it is difficult to predict the exact effects of Bitcoin halvings. Some say that as the reward will drop, many miners will quit the process. That’s because the cost of mining could surpass the value of the reward. However, it could also stimulate the development of more cost-effective mining solutions.
Others argue that with every halving, the Bitcoin value will surge. This was indeed the case for the past two halvings. However, it is difficult to say if it will happen again in the long run.
When is the next Bitcoin Halving?
The next Bitcoin halving is expected to take place in 2024. At that point, the mining reward will drop from 6.25 BTC to 3.125 BTC.
Bitcoin Scalability
What is scalability in Bitcoin?
Scalability is the ability of a blockchain to upgrade and ensure the processing of a higher number of transactions. For instance, let’s say Bitcoin was a webshop designed to process 100 customer purchases in 1 second. However, due to its increase in popularity, it now has to process 10,000 purchases in the same amount of time. Clearly, it cannot achieve that feat. So, upgrade works are necessary to help it improve its performance.
Why does Bitcoin need to scale?
Bitcoin is not a server-based website. However, it is a complex blockchain system with obvious limitations. One of them is that it can only process a limited number of transactions per block.
On the Bitcoin blockchain, miners receive transaction fees from users who want their transfers to become part of the next validated block. However, the blockchain has not been designed to withhold the sheer number of transactions on it every day.
The large accumulation of transactions forces users to engage in a bidding war to have theirs added to the blocks. The ones that don’t make it reach the network’s “waiting room,” also known as the “mempool.”
Naturally, miners validate the transactions with the highest fees. Also, they use the profits to improve their computers’ mining power. So, users who are stingy and don’t bid may see their transactions swim in the mempool for a considerable period.
Bitcoin’s goal is to function as a day-to-day payments platform. However, with this level of sluggishness, it strays more and more from its purpose. Soon, other blockchains may take advantage of Bitcoin’s scalability issues and provide better solutions. That’s why the Bitcoin blockchain needs to scale and do it quickly.
How many transactions can Bitcoin process?
As of July 2021, Bitcoin can process roughly 5 transactions per second. Transaction speed is critical to the blockchain’s scalability, and subsequently, to widespread adoption. Unfortunately, in almost 13 years of existence, Bitcoin’s transaction speed has dropped from nearly 7 per second to 4.6.
What is the Lightning Network?
The Lightning Network is a proposed scalability solution for the Bitcoin blockchain. It is also known as a layer-2 solution because it is a protocol built on top of the original Bitcoin protocol.
On the Lightning Network, users can trade funds for free and almost instantly. Here’s how it works:
Two users agree to a transfer and lock up their coins at a special address.
The address only releases the funds when both parties agree on the conditions.
The transfer creates a unique, private ledger that doesn’t notify the main chain of its details and progress.
When the transfer is completed, the ledger announces the main protocol, which updates the users’ balances accordingly.
The Lightning Network allows for the creation of countless unique ledgers. As a result, thousands of transfers can occur simultaneously without slowing down the main Bitcoin protocol. The network is still under development. However, continuous optimization should see it become a critical breakthrough in blockchain technology.
What are Bitcoin forks?
Bitcoin is a permissionless, open-source system. This means that anyone can modify its protocol by adding new rules or deleting old ones. However, some changes can lead to incompatibility and restrictions for some of the network’s nodes. These changes are generally marked by soft and hard forks in the protocol.
What are soft forks?
A soft fork is a change to the blockchain rules that enables benefits both old and new nodes. For instance, let’s suppose that half of the network decreases the block size from 2MB to 1MB. After that point, the other half of the network, the older nodes, can still receive 1MB blocks and send them forward without any issues. The newer nodes, however, will not recognize 2MB blocks.
This hypothetical decision would create a change in the system, a soft fork that would keep all the nodes working together. The Segregated Witness, or SegWit, is an example of a soft fork on the Bitcoin blockchain.
What are hard forks?
Similar to soft forks, hard forks implement new changes to the blockchain’s functioning rules. However, these changes eliminate the possibility of collaboration between new and older nodes.
For example, half of the network decides to increase the block size from 2MB to 3MB. But, then, the older nodes cannot recognize 3MB nodes, like, in the previous example, newer nodes could not recognize blocks larger than 1MB.
Hard forks represent irreversible schisms in a blockchain’s evolution. A well-known example is the 2017 controversial hard fork on the Bitcoin blockchain. Then, a part of the network wanted to increase the block size to facilitate higher output and lower transaction fees. However, when the rest of the network opposed it, they still introduced the rule. As a result, they created Bitcoin Cash, an independent Bitcoin community from the original one.
What do we know about Bitcoin?
Is Bitcoin a scam?
No, Bitcoin is not a scam. It is a technology that works identically regardless of its value. For instance, when 1 BTC was worth less than $100, it still functioned just as well as trading for $64,000.
In more than a decade of existence, Bitcoin has proven itself as a reliable and safe technology. Nevertheless, it has also been the object of money-laundering scams, phishing, and other illegal schemes. This is because, just like fiat money, BTC has tradable value.
Is Bitcoin a bubble?
No, Bitcoin is not a bubble. However, due to its high volatility, it has been the subject of massive price oscillations in its history. This has led many to call Bitcoin a speculative bubble. Fortunately, this technology doesn’t fit that definition.
Bitcoin is a fully decentralized digital commodity. Its value depends on how credible people find it on the free market. Long periods of excessive enthusiasm can skyrocket its price. Conversely, sudden sentiments of FUD (fear, uncertainty, and doubt) can cause its trading value to plummet. In each scenario, it is not an intentionally-led speculative bubble.
Does Bitcoin use encryption?
No, Bitcoin does not use encryption. As a result, all the network’s users can see and read all the transaction details down to the first BTC transfer. However, certain apps and crypto wallets use encryption to protect digital assets storage and use.
Is Bitcoin too risky?
Yes and no. Bitcoin’s risk factor depends on your responsibility and common sense. Put, if you research the technology and do your due diligence, there’s no reason you shouldn’t give Bitcoin a try.
Investing in Bitcoin may be risky. However, like all the dicey investments, this one can deliver you high rewards. That being said, you should never invest in Bitcoin or any other financial asset more than you are willing to lose.
Who are the Bitcoin team members?
Contrary to most cryptocurrency projects, Bitcoin is not under the control of a handful of developers. Instead, Bitcoin is controlled by all Bitcoin users around the world.
In the beginning, Bitcoin was under the control of two developers. The first one, Satoshi Nakamoto, is said to be responsible for the protocol’s creation. However, he left the project in late 2010, and nobody knows his identity or nationality.
The second developer, Martti Malmi, is the founder of the Bitcoin Forum. As of July 2021, he is not an active developer on the Bitcoin network anymore. However, he continues to manage the domain names bitcointalk.org and bitcoin.org.
Upon his disappearance, Nakamoto left Bitcoin in the hands of a select group of developers led by Gavin Andresen, a software developer.
Hal Finney was a developer for PGP Corporation and recipient of the first bitcoin transaction from Satoshi Nakamoto. Some have speculated that he could be Nakamoto. However, Finney staunchly denied it throughout his life.
Today, the Bitcoin network is an independent, open-source project with contributors from around the world.
Which public companies own Bitcoin?
Bitcoin has attracted the interest of many and successful public companies. As a result, they have made significant investments in this cryptocurrency, thus validating its asset value. Some of the most prestigious organizations to own Bitcoin include:
MicroStrategy – 105,085 BTC (which accounts for 0.5% of the global amount of bitcoins)
Tesla, Inc – 42,902 BTC
Galaxy Digital Holdings – 16,400 BTC
Voyager Digital LTD – 12,260 BTC
Square Inc. – 8,027 BTC
Marathon Digital Holdings Inc – 5,784 BTC
Coinbase Global, Inc. – 4,482 BTC
Bitcoin Group SE – 3,947 BTC
Hut 8 Mining Corp – 3,522 BTC
Among the private firms that own Bitcoin, Block.one has the most with 140,000 BTC. In the category of exchange-traded funds (ETFs), Grayscale Bitcoin Trust leads with ownership over 654,600 BTC. Lastly, two countries own bitcoins – Bulgaria (213,519 BTC) and Ukraine (46,351 BTC).
Bitcoin Timeline
2008
Inception
18 August – The domain name bitcoin.org was registered.
31 October – Satoshi Nakamoto publishes a paper called A Peer-to-Peer Electronic Cash System to a cryptography mailing list, which became its whitepaper. The document states the start of a new financial system away from any governmental or centralized control.
2009
Genesis Block
3 January – Satoshi Nakamoto creates the Bitcoin blockchain by mining the “genesis block.” He also created the first 50 Bitcoins, which can never be used or spent.
11 January – Hal Finney, who had created the first reusable proof-of-work system (RPoW) in 2004, made the first-ever public tweet about Bitcoin, stating simply “Running bitcoin.”
12 January – The first BTC transfer takes place when Nakamoto sends 10 bitcoins to Hal Finney.
2010
Bitcoin Pizza
22 May – Laszlo Hanyecz from Jacksonville, Florida, made the first real-world Bitcoin transaction when he paid 10,000 BTC for two pizzas from Papa John’s.
Satoshi Nakamoto suddenly disappears leaving the reins of Bitcoin in the hands of a select group of developers led by Gavin Andresen. A few years later, Bitcoin analysts estimated that Nakamoto mined over 1 million BTC before vanishing into thin air.
Bitcoin makes its first steps into becoming a tradable good after its value surges from $0.0008 to $0.83.
2011
Silk Road
Bitcoin’s price increased from $0.50 in January to $5.27 in December. During this period, most of the users and traders were participants to the Silk Road, an online black market and the first modern darknet market that operated from 2011 to 2013.
Bitcoin’s popularity has stimulated the creation of other cryptocurrencies, such as Litecoin and Namecoin.
2012
The Bitcoin Foundation
Bitcoin’s value oscillated greatly throughout the year. It grew as high as $13.30, but it also went through steep downfalls. More than once, it lost over 50% of its value in less than a week.
The network introduces the new BTC measurement system that states the value of 1 bitcoin (BTC) equivalent to 1,000 millibitcoins (mBTC), 1,000,000 microbitcoins (μBTC), or 100,000,000 satoshis.
In September, Gavin Andersen launches the Bitcoin Foundation with the mission to promote Bitcoin’s development and adoption.
1 November – The Bitcoin-Qt version 0.5.0 reference implementation was released. Also, the developers used the software library, Berkeley DB in release 0.8 to diminish blockchain synchronization time.
2013
The "Mt. Gox" Saga I
March – The Bitcoin blockchain temporarily split into two independent chains with different rules due to a bug in version 0.8 of the bitcoin software. The two chains functioned at the same time for about six hours while registering the same transaction history. It took the downgrading to version 0.7 by most of the nodes on the network to resume normal operation.
During the March split, the largest Bitcoin exchange at that time, Mt. Gox, halted BTC deposits. As a result, the price dropped by 23% almost instantly. This would be the first of many issues that led to Mt. Gox’s downfall.
The US Financial Crimes Enforcement Network (FinCEN) put into effect regulatory guidelines for Bitcoin and other decentralized digital assets. It also established that BTC miners who would sell their mined bitcoins would be subject to registration as Money Service Businesses (MSBs).
April – The Bitcoin exchanges BitInstant and Mt. Gox started experiencing delays in processing payments because of insufficient capacity. As a result, the BTC price dropped by nearly 70% before increasing by 50% in just a few hours. Bitcoin’s volatility was the talk of the town back then.
15 May – The first time a government agency seized bitcoins was when the US authorities discovered that Mt. Gox had not registered as a money transmitter with FinCEN in the US.
October – The FBI seized about 30,000 bitcoins from the dark web website Silk Road, following the arrest of Ross William Ulbricht, the leader of the black market. The entire amount was later sold to venture capital investor Tim Draper.
December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. The news resulted in a steep drop in value for Bitcoin.
By the end of the year, Bitcoin traded as high as $1,164. However, it was marked by intense volatility that saw its price oscillate heavily from one day to another.
2014
The Mt. Gox Saga II
Mt Gox filed for bankruptcy in Japan (28th of February) and the US (9th of March) citing that it had lost over 750,000 of its customers’ bitcoins. Also, it could not explain the disappearance of around 100,000 of its own bitcoins. At that time, the total of lost/stolen bitcoins accounted for 7% of all bitcoin in the world and was evaluated at around $473 million.
20 March – Mt. Gox reported on its website that it found 199999.99 bitcoins—worth around $116 million—in an old digital wallet used before June 2011. This event increased speculation against the exchange’s dealings. In the coming months, the French developer Mark Karpelès, and Mt. Gox’s CEO were arrested by the Japanese police on suspicion of fraud. By May 2016, creditors of Mt. Gox had claimed they lost $2.4 trillion as it went bankrupt. To this day, only $5.5 million of the entire sum was restored to the exchange’s customers. Eventually, Karpelès was sentenced to 30 months in prison for falsifying data to inflate Mt. Gox’s holdings by $33.5 million.
30 July – The Wikimedia Foundation started accepting donations in Bitcoin.
Throughout the year, Bitcoin’s price oscillated between $300 and $770.
2015
Bitcoin Gets updated
16 February – The network released the 0.10 version of Bitcoin software. This update included a consensus library that provided programmers with easy access to the rules governing consensus on the network.
30 July – Ethereum, a decentralized, open-source blockchain with smart contract functionality was launched by programmer Vitalik Buterin. The project would become Bitcoin’s main rival on the cryptocurrency market in the years to come.
13 November – A new update, the 0.11.2 software version, allowed developers to add a new feature that enabled transactions to be made unspendable until a specific time in the future.
Throughout the year, Bitcoin’s value oscillated between $300 and $434.
2016
More Updates
15 April – The network released the 0.12.1 version of Bitcoin software. This update was crucial because it enabled several soft forks to occur concurrently.
July – The CheckSequenceVerify soft fork activated.
23 August – A new update was released, version 0.13.0 of Bitcoin Core, which was developed by over 100 contributors from around the world.
October – The latest update to Bitcoin Core, the 0.13.1 version, came with the “SegWit” soft fork, which involved a scaling improvement that aimed to optimize the bitcoin block size. However, this new feature wasn’t approved immediately by the network.
Throughout the year, Bitcoin oscillated between $433 and $959.
2017
Bitcoin Goes Mainstream
February – Bitcoin broke the $1,000 barrier for the first time and started trading north of it.
15 July – The network finally approved the SegWit software upgrade, which was supposed to support the Lightning Network. This event led to a spectacular surge in Bitcoin’s value, which reached $2,748 less than a week later.
1 August – A part of the Bitcoin network that wanted a larger block size chose to use SegWit to generate a hard fork. The first of its kind, this schism led to the creation of Bitcoin Cash.
24 October – A second hard fork in the original Bitcoin network saw the creation of Bitcoin Gold.
During this year, Bitcoin experienced a spectacular rise in popularity. More and more investors, including notable public figures, started buying bitcoins. Also, several services and companies started accepting Bitcoin as a form of payment. As a result, the Bitcoin price rose from $998 in January to set an all-time high of $19,783.06 on 17 December 2017.
2018
The Bitcoin Crash
January – The first big Bitcoin crash took place. Several thefts and hacks involving cryptocurrency exchanges (such as Coincheck, Bithumb, Coinrail, and Bancor) led to a steep fall in price. This was marked by intense FUD in the market and the desperation of numerous BTC investors to retrieve their funds.
February – China officially banned trading in bitcoin for its citizens and companies. As a result, the Bitcoin price fell even lower.
Throughout the year, Bitcoin registered a 625% loss in value and dropped from nearly $20,000 to as low as $3,200.
2019
Youtube Bans Bitcoin
Bitcoin started trading at about $3,000. However, it quickly regained market credibility to attract new investors. As a result, it touched the $10,000 level in June. Unfortunately, intense volatility brought it back to around $7,000 by the end of the year.
December – YouTube suddenly removed all the materials regarding Bitcoin and cryptocurrencies. However, the video-sharing platform quickly reversed its decision stating that they had “made the wrong call.”
2020
Bitcoin & COVID-19
March – The world enters an abrupt and unexpected standstill due to the COVID-19 pandemic. Everywhere in the world, the panic and desperation of investors see most of the financial markets degenerate. The crypto market didn’t make an exception, and Bitcoin’s price fell from roughly $10,000 to below $3,000.
Following the week of 11 March 2020, cryptocurrency exchange Kraken recorded an 83% increase in new account registrations. This was due to the new investors, who wanted to capitalize on the uncertainty marring the market during the first days of the pandemic.
August – The business intelligence software firm, MicroStrategy, invested $250 million in Bitcoin as a treasury reserve asset.
September – The Canton of Zug, Switzerland, announced that it will start accepting tax payments in Bitcoin by February 2021
October – The financial service company Square, Inc., which also owns Twitter, placed approximately 1% of its total assets (roughly $50 million) in Bitcoin.
November – PayPal announced that U.S. residents could buy, hold, or sell Bitcoin.
30 November – Bitcoin surpassed its former ATH for the first time since the 2018 crash to reach $19,860.
December – The Massachusetts Mutual Life Insurance Company, one of the oldest organizations in the United States, announced a $100 million investment in Bitcoin.
2021
Bitcoin Becomes Legal Tender
1 January – Bitcoin starts the year trading at $29,000.
19 January – Tesla’s CEO, Elon Musk, transformed his Twitter handle into a Bitcoin image, and tweeted “In retrospect, it was inevitable.” This small message caused a sudden increase in BTC price, which reached $37,299 in less than one hour.
25 January – MicroStrategy reiterated its commitment to buy more Bitcoin in the future.
8 February – Tesla announced the purchase of $1.5 billion worth of Bitcoin and that it will accept BTC as a form of payment for its vehicles.
18 February – Elon Musk stated that “owning bitcoin was only a little better than holding conventional cash, but that the slight difference made it a better asset to hold.”
Elon Musk’s tweets and consecutive BTC adoptions by various big-brand companies led to an unforeseen rise in Bitcoin popularity. As a result, Bitcoin’s market capitalization surpassed $1 trillion.
14 April – Bitcoin reached its last all-time high to date, at $64,863.10.
13 May – Elon Musk tweeted that Tesla won’t accept payments in Bitcoins for its cars anymore. He explained that the Bitcoin mining process creates too many environmental concerns and contravene Tesla’s commitment to a more eco-friendly future. Several of Musk’s denigratory tweets about Bitcoin, which followed in the next two months, caused its price to fall by nearly 50%.
9th June – The Legislative Assembly of El Salvador voted legislation to make Bitcoin legal tender in El Salvador, starting with September 7, 2021.
In the same month, the Bitcoin network announced a new software upgrade called Taproot. This new feature should support Schnorr signatures and improved functionality of smart contracts and of the Lightning Network. The changes should come into effect in November 2021.
All Crypto Adventure content is not investment advice. It is intended for informational purposes only. DO NOT miss construe any such information or other material as legal, tax, investment, financial, or other advice.
DO YOUR OWN RESEARCH
Crypto Adventure encourages all of its readers to conduct a thorough analysis of all projects. It is essential to do your own analysis before making any investment based on your circumstances. If possible, consulting a financial professional is also recommended prior to making any investment decisions.
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