Bitcoin

Bitcoin is the first and most popular cryptocurrency with the largest market capitalization. The term “bitcoin” is abbreviated as BTC.

Typically, the term “Bitcoin” is capitalised when referring to the network, while the coin itself is denoted with a lowercase “b.”

History of bitcoin’s creation

Since the early 1980s, cryptographers have attempted to develop an independent electronic payment system, but their efforts were unsuccessful. In 2008, an anonymous developer (or group of developers) known as Satoshi Nakamoto presented a description of the protocol and principles of a peer-to-peer network.

The protocol was finalised in early 2009, with the first block and 50 bitcoins generated on 3 January. On 12 January of the same year, the creator sent 10 bitcoins to Hal Finney, marking the first official transaction on the network.

In September 2009, Martti Malmi sent 5,050 bitcoins to a user named NewLibertyStandard, receiving $5.02 in his PayPal account in return—this was the first exchange of cryptocurrency for fiat money.

The first purchase of real goods with bitcoins occurred on 22 May 2010, when Laszlo Hanyecz bought two pizzas from Papa John’s for 10,000 bitcoins (valued at approximately $41). This date has since been commemorated as Bitcoin Pizza Day.

Although Satoshi Nakamoto ceased involvement in the coordination of the Bitcoin network in mid-2010, the network continues to evolve and expand, driven by a dedicated community of developers and users. The success of Bitcoin has spurred the creation of numerous cryptocurrencies and crypto projects, leading to the development of an entirely new financial industry.

Features of the Bitcoin network

The creation of the Bitcoin network was driven by the public’s growing distrust of government and banking institutions following the financial crisis of 2007-2008. The developers aimed to establish an independent financial system, free from the control of state authorities. This led to the development of a decentralised digital payment system based on blockchain technology (for more details on what blockchain is, see our related article), with open-source code licensed under the MIT licence.

Adding transactions to the blockchain ensures that no single user can gain control of the network, thereby maintaining its resilience and security. Participants who contribute their computing power to the mining of new blocks and securing the network are rewarded with new coins. This process is known as mining (for more details on what mining is, see our related article). To encourage network growth, bitcoin mining has a competitive element.

Within the Bitcoin network, users can send and receive bitcoins directly through peer-to-peer transactions, without intermediaries or additional fees.

Features of bitcoin as a currency

A total of 21 million bitcoins can be mined. As of 2023, approximately 90% of this total has already been mined. Since the process of mining new blocks becomes increasingly difficult and the reward is halved every 210,000 blocks, the rate at which new coins are produced is expected to decrease. Developers anticipate that all 21 million bitcoins will be mined by 2040.

Experts highlight several advantages of bitcoin over traditional fiat currencies, including:

• Decentralisation – bitcoin is not controlled by any central authority;
• Anonymity (though not entirely);
• Protection against inflation;
• Security of transactions.

Bitcoin’s price is not backed by any physical assets or government guarantees; it is determined solely by supply and demand. Bitcoin is known for its high volatility, with its value capable of changing dramatically. The asset’s highest price reached in 2024 was over 73,000 USD.

There is still no global consensus on how to legally regulate bitcoin and other cryptocurrencies to prevent their use for criminal activities, money laundering, and terrorist financing. However, the significance of this rapidly expanding market cannot be ignored. As a result, an increasing number of countries are developing and implementing laws to establish the legal status of digital currencies and the rules governing related activities. Examples include the European Union with its MiCA (Markets in Crypto-Assets) Regulation, the United States, Japan, and South Korea.