Bitcoin – the innovator
Summary: Bitcoin benefits from being an early player in the crypto space and is well-known by many. It uses the energy-heavy mining framework for verifying transactions and has limited potential when used for transactions, due to the limited transaction bandwidth. Bitcoin is often acknowledged as a store of value rather than a transaction media due to its scarcity.
Bitcoin (BTC) is a decentralized globally distributed cryptocurrency launched in 2009. Bitcoin is not issued nor backed by central banks, traditional banks, or intermediaries. Each transaction is verified on a decentralized ledger known as a blockchain, with the help of massive computer power across the globe – known as miners - acting as the middleman. No entity can change transactions or balances on the network when the transaction has been confirmed by several miners. This method of verifying transactions is known as proof-of-work. This method has, however, been heavily criticized as it demands a significant amount of electricity and computing power. Furthermore, the consensus mechanism makes the network extremely unscalable which means the Bitcoin-network is only able to handle around 5 transactions per second. Thus many investors more see Bitcoin as a store of value than a cryptocurrency which is being used for transactions.
Bitcoin's total supply is fixed at 21 million. The network is often acknowledged for this scarcity. As of writing, slightly above 18.6 million Bitcoins are in circulation. Until the total supply of 21 million is hit, new Bitcoins are being added to the supply through a fixed algorithmic process every 10 minutes. In return for verifying transactions, miners are rewarded with the new Bitcoins entering the supply. To minimize the number of new Bitcoins added to the supply on an ongoing basis, the amount miners receive is halved every fourth year until the total supply has been hit. That is expected to take place around the year 2140. Afterward, it is anticipated that miners will keep verifying transactions as they keep the transaction fees in return. The last halving occurred in May 2020 which reduced the reward from 12.5 to 6.25 BTC. The next halving is currently expected to occur in March 2024, on which day the reward will be reduced to 3.125 BTC.
Bitcoin originsThe whitepaper explaining the principle behind the cryptocurrency was published in late 2008 by a pseudonym called Satoshi Nakamoto before the cryptocurrency was launched in early 2009. To this date, nobody publicly knows the identity behind Satoshi Nakamoto, or whether it was a single person or a group. Satoshi Nakamoto is rumored to own as many as 1.1 million Bitcoins. However, these Bitcoins are to this day untouched.
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