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Definition: Bitcoin


(1) For a comparison of the two prominent blockchain platforms, see Bitcoin vs. Ethereum.

(2) Bitcoin is a peer-to-peer digital currency and electronic payment system introduced in 2009 by a person with the alias Satoshi Nakamoto. Although merchants increasingly accept Bitcoins as payment, many people buy and hold for speculation. Since its inception, the value of Bitcoin has skyrocketed, and more than two thousand other cryptocurrencies have been created. For a complete list, visit www.CoinmarketCap.com or www.CryptoCompare.com. See crypto craze, hodler and Bitcoin pizza.

Three Distinct Features
Three things set Bitcoin apart. The first is that its blockchain architecture is decentralized. There is no middleman such as a bank or government agency. In addition, once a transaction has been established on the blockchain, it cannot be altered. See blockchain.

Secondly, using encryption, Bitcoin hides the identity of sender and recipient. The transaction is public but the two parties remain private. Cryptographic algorithms are also used to link blocks in the blockchain, and both of these uses of encryption are why Bitcoin is called a "cryptocurrency." Although used for clandestine transactions because of that, more than 2,000 legitimate businesses in the U.S. and 15,000 worldwide accept Bitcoin as payment. In 2021, Tesla added Bitcoin to its online order form. See public key cryptography and Dark Web.

Lastly, the number of coins generated every year reduces continually until 2140 when coin creation ceases. After that, there will never be more than 21 million Bitcoins in the world. People think that makes Bitcoin inflation proof. See Bitcoin mining.

Anyone Can Buy, Transfer and Sell Bitcoins
Users access their coins from a digital wallet in their own device or employ the services of a cryptocurrency exchange. Once an account is established, coins are bought with national currencies, and a fee is paid for every Bitcoin transaction. See Bitcoin wallet, Bitcoin exchange and Bitcoin ATM.

Extremely Volatile
Like a share of stock, the value of a Bitcoin fluctuates on the crypto exchanges with huge volatility. However, even with the gigantic dip in 2018, a single coin has risen from virtually nothing to more than $50,000 in 10 years. As of 2021, Bitcoin's market cap is over $1 trillion. See Bitcoin pizza.

Bitcoin Split
In 2017, Bitcoin split into three versions, and the original Bitcoin was enhanced for performance (see Bitcoin Cash, Bitcoin Gold and SegWit).

Bitcoins Are Mined!
The strangest thing about Bitcoins is the way they come into existence. Bitcoin "miners" compete with each other to update the blockchain with new transactions, and they are rewarded with Bitcoins created "out of the blue" for their own account. See Bitcoin mining.

Traction - Then Hacking
In late 2010, Bitcoin was becoming popular in the open source and underground communities. By mid-2011, there was an attack on the Japan-based Mt. Gox exchange, and a hacker extracted coins worth nearly $500,000. In early 2014, Mt. Gox filed for bankruptcy, because it was revealed that the exchange concealed the loss of hundreds of thousands of Bitcoins.

Who Is Satoshi Nakamoto?
Nakamoto's true identity was never disclosed; however, articles attributed to him are written in flawless English. Australian computer scientist Craig Wright claims that he and business partner Dave Kleiman are the inventors, although this is disputed. Cryptography pioneer Nick Szabo, who designed a decentralized digital currency in the 1990s has also been hailed as Nakamoto (NS initials possibly reversed?), but he denies it. No matter who Satoshi Nakamoto is, in order to commemorate the developer, fractions of Bitcoins are called "Satoshis." One Satoshi is equal to 0.00000001 Bitcoin.

Government Printing vs. Bitcoin Generation
When people argue that Bitcoins are no less valid than the U.S. dollar, there is a distinction. Bitcoins have nothing to back them up but the faith of the people using them. Although the same might be said of U.S. currency, the United States has the IRS and other federal agencies to ensure that people pay taxes. Nevertheless, proponents claim that Bitcoin and other blockchain-based platforms are revolutionizing all kinds of transactions worldwide. For more information, visit www.bitcoin.org, www.bitcoincharts.com, www.blockchain.info and http://en.bitcoin.it. See BIP, Bitcoin transaction, Bitcoin vs. Ethereum, stablecoin and Silk Road.