How Bitcoin Started
Bitcoin is the world’s first cryptocurrency that was created in the aftermath of the 2008 financial crisis, which is deemed one of the most severe global recessions since the Great Depression. The crisis came as a result of the collapse of the U.S. housing market, which proved how inefficient the conventional monetary system was.
The pseudonymous Bitcoin creator Satoshi Nakamoto—possibly an entity or a group whose real identity is still unknown—unveiled Bitcoin via its white paper. Nakamoto declared that Bitcoin aims to create “a new electronic cash system” that is “completely decentralized with no server or central authority.”
The white paper characterized Bitcoin as a “peer-to-peer electronic cash system.” The paper also detailed nuances like how the Bitcoin algorithm works, how transactions are processed, how the technology is secured, mining, and other incidental topics.
What is Bitcoin?
Essentially, Bitcoin is a digital currency, which implies there are no coins to mint or bills to print. It is decentralized, meaning it has no ties to a government, central bank, or any other centralized entity. And it is primarily designed for peer-to-peer usage.
Users don’t have to create an account or provide any personal information to adopt Bitcoin. They are represented by their wallet—a long string of numbers and letters—which describes why users can remain anonymous when using Bitcoin.
Bitcoins are created through “mining,” a term used by the pseudonymous creator that defines the process of making more Bitcoin. Mining is an energy-intensive process that rewards users for utilizing extremely powerful computers to solve computational puzzles. Every time a problem is solved, one Bitcoin block is processed, and the miner is rewarded with a new Bitcoin.
What is The Appeal of Bitcoin?
Many investors view Bitcoin as a high-risk investment option, but not those who understand it. Just recently, SkyBridge Capital CEO Anthony Scaramucci argued that anyone who carefully studies Bitcoin will end up investing in it.
“Anybody that does the homework … ends up investing into it. Look at Ray Dalio, a bitcoin skeptic, now a bitcoin investor,” Scaramucci said in an interview with CNBC. He added that prominent investors like Paul Tudor Jones, Michael Saylor, and Stanley Druckenmiller have drawn the conclusion to invest in Bitcoin after realizing its potential.
The flagship cryptocurrency has been a game-changer since its inception. Here are some major advantages that make Bitcoin appealing to users.
Traditional currencies require users to take permission from banks, governments, or other centralized entities in order to participate in the system. However, Bitcoin offers no such constraints, allowing anyone from anywhere to take part freely and seamlessly.
No Third-Party Seizure
Since there are almost infinite copies of the transactions database, Bitcoin is immune to seizure. No single entity, not even governments, can’t confiscate or freeze someone’s Bitcoin holdings.
Bitcoin is a true peer-to-peer payment system. Since a third-party can’t intercept Bitcoin transactions, there is no viable way to implement a Bitcoin taxation system. However, it is worth noting that using a centralized crypto exchange might abolish this benefit.
Negligible Transaction Costs
Conventional payment solutions like credit cards charge a variable fee that can range from 0.5% to 5% in addition to a flat fee, which makes them quite expensive. However, Bitcoin charges a negligible fee even for transactions worth billions.
No Risk of Charge-backs
Once a Bitcoin transaction is processed, it can’t be reversed. This is a double-edged sword. While it gives users confidence that there is no risk as soon as they receive BTC, it also makes users the sole responsible for all transactions — a small error, and their BTC is gone forever.
Bitcoin Cannot be Stolen (in the Traditional Sense)
A user can only transfer Bitcoin from one wallet if they have the associated private key. Apart from this, there is no way to get around a Bitcoin wallet and steal its holdings.
Potential for High Returns
Bitcoin has gained over 100,000% since its inception in 2009, and proponents believe it still has room for more growth.