What is Bitcoin?

If you’re here reading this I’m assuming that you have at least heard of Bitcoin and know that it has something to do with money. And yes, you would be right. But have you thought about what impact Bitcoin and the peer-to-peer technology it uses might have in global terms?

Bitcoin is often mistakenly called the first cryptocurrency but the concept actually dates back to 1998 when Wei Dan suggested the idea of a new form of money that used cryptography to control its creation and transactions through the Cypherphunk movement. This is a topic that could span many posts but suffice to say it is a system where no central authority has the ability to create or control it. Herein lies the brilliance and also the great significance of Bitcoin; it is basically the opposite of normal currencies such as the US Dollar, Euro, etc. which are created and regulated by their respective authorities. Therefore bitcoin allows money to be exchanged by anyone, anywhere in the world, at anytime. Certainly financial institutions do this nowadays with fiat currencies, but have you seen the fees and woeful exchange rates?

The current day Bitcoin as we know it is based on this idea and it is indeed the first decentralized currency. There is speculation about the actual inventor of bitcoin, but it is credited to a Satoshi Nakamoto who released a paper called “bitcoin: A Peer-to-Peer Electronic Cash System” in 2008. The Bitcoin network appeared in January 2009 with the release of an open-source Bitcoin client (computer software) and the first 50 bitcoins were mined by Nakamoto himself.

In it’s short life, bitcoin has had a torrid run ranging in value from virtually nothing to in excess of US$1,000 per coin (1 unit). It has also had it’s fair share of controversy with fraudulent activity, security concerns, as well as taxation and regulation confusion across a multitude of countries.

Nonetheless, fast forward to today and the current value of all bitcoin in existence is in excess of US$5.7B which is more than the GDP of at least 30 countries. A single bitcoin is currently worth US$383.52.

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