How did it start…
In the 19th and 20th centuries the most popular currencies in the world could be converted into fixed quantities of gold or other precious metals. However, most countries abandoned this pattern between the 1920s and 1970s, due to the pressure of financing the two world wars and the inability of global gold production to keep pace with economic growth.
People rely on banks to preserve the value of their currency and to protect their money. However, in 2008 and 2009, most banks and other financial institutions failed worldwide and governments had to bail them out at the expense of taxpayers. As a result, Bitcoin was seen as a response to the great economic crisis as the financial world relied on banks as intermediaries for financial transactions.
Satoshi Nakamoto had the idea to remove banks from finance and replace them with a peer-to-peer payment system that did not require third-party confirmation, negating the use of banks to facilitate transactions. Blockchain, a ledger-based network, is how Bitcoin and other cryptocurrencies build trust. When was Bitcoin created?
When the first block, known as the Genesis block, was mined on January 3, 2009, the blockchain was first released. A week later the first test transaction took place. The Bitcoin blockchain was only available to miners who confirmed Bitcoin transactions for the first few months of the network’s existence.
Bitcoin had no real monetary value at that point. Miners and their machines that solve complex mathematics to reward new Bitcoins and verify existing transactions that are valid on the Bitcoin network.
The first financial transaction took more than a year to complete when a Florida man agreed to deliver two Papa John’s pizzas for $25 for 10,000 Bitcoins on May 22, 2010. The initial real value of Bitcoin was set at 4 BTC per penny due to this transaction.
Bitcoin was first described in Satoshi Nakamoto’s white paper “Bitcoin: A Peer-to-Peer Electronic Cash System” in October 2008 and has since created the world of cryptocurrencies we know today. In this article, we will take a closer look at what Bitcoin is and why it has become so popular.
The emergence of Bitcoin in the midst of the financial crisis
In 2008, an economic crisis plagued the world. Unemployment was extremely high and the banks were rescued by the governments. This very year, the white paper “Bitcoin: A Peer-to-Peer Electronic Cash System” was published by the mysterious creator of Bitcoin Satoshi Nakamoto, which described how Bitcoin would work. Certainly, on January 3, 2009, the first Bitcoin block known as the Genesis Block was created. This marked the beginning of Bitcoin, while at the same time creating the n blockchain technology. Over time, the creation of Bitcoin led to the launch of the cryptocurrency market we know today. To this day, Bitcoin is still the market leader by far.
If you want to know more about the history of Bitcoin and cryptocurrencies, you are in the right article.
What Bitcoin aims for
Satoshi Nakamoto’s work aims to reliably remove third parties (intermediaries) from transactions through a peer-to-peer version of electronic cash, as stated in the white paper he wrote. This means that there will be no banks or other institutions to which you would have to entrust your money and that you can freely trade with anyone around the world. As the common motto says, with Bitcoin, you can be your own bank.
Bitcoin is also designed not to be printed unnecessarily as it can be done with traditional money. There is a maximum amount of Bitcoin that can be created in total to avoid this. It is completely open source, with every transaction being publicly visible while maintaining anonymity for its users. Speaking of which, let’s take a closer look at how their trading system works.
Proof of Work
Bitcoin (BTC) uses a transaction verification system known as Proof of Work (PoW). In it, there are the “miners” who try to solve complex cryptographic puzzles to create a Block for the blockchain. Each block contains the information of multiple Bitcoin transactions. The miner who succeeds is awarded a small amount of BTC for the work he has done. In turn, all the miners together give their computing power to the Bitcoin network that gives it stability, security and decentralization.
Even if one miner acts maliciously, all other participants in the network will still verify the correctness of transactions. Therefore, there is not a single point of failure in the network, and there is power in the numbers Vires in numeris in Latin.