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If you want to find out what Bitcoin is, you've come to the right place. We’ll explain everything you need to know about the most famous blockchain network and cryptocurrency.
What is Bitcoin (BTC)?
Bitcoin (symbols: ₿, BTC) is the first successfully launched decentralized network and cryptocurrency that utilizes blockchain technology.
Bitcoin is an ecosystem consisting of 3 components:
- Bitcoin blockchain network
- Cryptocurrency used within the Bitcoin network - bitcoin (BTC)
- Users ("nodes") who act as network administrators with their computers
Each of these three elements operates synchronously to create a decentralized payment system.
When referring to Bitcoin as a blockchain network, the word "Bitcoin" is written with a capital letter. When referring to the cryptocurrency, it is written with a lowercase b and denoted by the abbreviation BTC.
Bitcoin enables the secure transfer of value using the Peer-to-Peer protocol (peer-to-peer is a term used to explain that two people can directly exchange value without the need for a bank or other services).
Unlike fiat currencies (EUR, USD, etc.) we use every day, the bitcoin cryptocurrency is not controlled by a central bank or any other institution.
This means there is no entity that can simply "turn off" Bitcoin, or decide who can participate in the network's operations and who can have bitcoin cryptocurrency.
If there is no central body managing Bitcoin, how does the system function?
The entire Bitcoin ecosystem is powered by tens of thousands of users around the world. Anyone can participate in the operation of the Bitcoin network. It's enough to download open-source software on your computer and run it.
History of Bitcoin
Bitcoin is the first successfully created cryptocurrency that was launched in 2009.
However, the concept of digital currencies didn't just appear overnight.
Decades before, there were scientific papers focused on the idea of currencies that could be used in a digital environment.
Wei Dai and Nick Szabo are computer scientists who explored ways to implement electronic money.
They attempted to create their own electronic currency but were limited by the technology of their time.
In 2008, a new concept of digital currency called Bitcoin emerged. The technical specifications and operational methods of Bitcoin were published on the well-known forum BitcoinTalk.
Who is the founder of Bitcoin?
Nobody knows the true identity of the person who created and launched Bitcoin. The creator of Bitcoin used the now-famous pseudonym “Satoshi Nakamoto”.
It's still speculated whether it's an individual or a group of people. From 2008 to the present, the identity of the person or group has remained a mystery.
It was Satoshi Nakamoto who published the so-called Bitcoin Whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” on the BitcoinTalk forum and initiated the Bitcoin network.
Bitcoin was put into operation when Satoshi launched (mined) the first block, also known as the "Genesis block."
This block contained the first 50 bitcoins (BTC).
A few days after the first block was created, the first transaction on the Bitcoin network was made. The sender was Satoshi Nakamoto and the recipient was Hal Finney.
How Does Bitcoin Work?
Many still think that sending bitcoin as a cryptocurrency is done in the same way as sending money through mobile banking.
In reality, the process is a bit different.
For example, let's say Ivana wants to make a transaction and send bitcoin to Marko.
Ivana will not send bitcoin to Marko directly, as one would send euros or kunas.
A transaction within the blockchain more closely resembles writing on a piece of paper (that is accessible to everyone) that Ivana is sending 1 bitcoin (BTC) to Marko.
If Marko sends 1 BTC to Ivana, Ivana will first be able to check, using that list, that Marko indeed has 1 BTC available and that the transaction can be completed.
To better understand how transactions on the blockchain network function, check out our blog about blockchain technology.
This list of transactions is actually a database based on blockchain technology and it is called a distributed ledger, which is simultaneously distributed to all users.
Every person participating in the operation of the blockchain network has an identical copy of the transaction list.
This list is stored on the computer of the person using the blockchain network.
All network users update all changes (new transactions) within the list through consensus.
Transactions are carried out directly using the so-called Peer-to-Peer protocol.
Therefore, the transaction does not go through a payment service (such as Revolut, etc.) or a bank.
The transaction is confirmed by the network itself, i.e., all users within the network through a process called “mining”.
Through this process, transactions are added to new "empty" blocks. When blocks are filled with transactions, they are added to the blockchain.