By definition, Bitcoin is the first cryptocurrency in history and also the first application of blockchain technology. Bitcoin is the name of the blockchain and its coin; which can also be referred to by the acronym BTC. The history of Bitcoin began in 2008 when Satoshi Nakamoto published a document online in which he explained that he had created a payment system that was independent of banks, unbound by geographical and political limits, and resistant to inflation. Nakamoto’s identity is unknown, it is not even known whether the creator of Bitcoin is an individual or a group of people, but his creation has revolutionised the global economic and technological system. Bitcoin, in a nutshell, is a peer-to-peer, i.e. without intermediaries, and decentralised electronic payment system.
Bitcoin’s origins can be traced back to at least two elements. Although Nakamoto was its creator, the ideas and concepts behind Bitcoin were shared by many even earlier, mainly by representatives of the cypherpunks, a group of digital privacy activists. Bitcoin’s basic technology is cryptography, which makes transactions pseudo-anonymous: the identity of the contracting parties is replaced by alphanumeric strings.
Moreover, the history of Bitcoin is closely linked to the historical period in which it was conceived. The year 2008 was the height of a worldwide economic crisis that led to a loss of confidence in financial systems: Bitcoin was born as an alternative economic system, wanting to be the starting point for building different monetary policies.
At the moment Bitcoin is mainly traded, however in order to be used as a currency for everyday transactions, Bitcoin’s blockchain relies on a decentralised and parallel network of nodes called the Lightning Network. This system allows a large amount of transactions to be processed in a limited time frame. Some think that Bitcoin has the potential to be considered as a safe haven asset, and therefore attribute it the name of “digital gold”.
From a technical point of view, the blockchain on which BTC is based uses a Proof-of-Work consensus mechanism. Thus, the blocks that make up the shared transaction register are created and validated through mining. A Bitcoin, like all cryptocurrencies, is fungible, hence divisible into smaller units. In the case of BTC, these cryptocurrency parts are called ‘satoshi’: 1 satoshi corresponds to 0.00000001 Bitcoin. According to Nakamoto’s protocol, there are only 21 million Bitcoins, some of which have yet to be mined. Bitcoin’s scarcity counteracts its inflation: as a scarce asset, the value of BTC depends on the law of supply and demand.