What is Bitcoin (BTC)?

In October 2008 a document was published online by a guy calling himself Satoshi Nakamoto. The document, also called a whitepaper, suggested a way of creating a system for a decentralised currency called Bitcoin.

This system claimed to create digital money that solves the double spend problem without the need for a central authority.

At its core Bitcoin is a transparent ledger without a central authority, but what does this confusing phrase even mean?

Well, let’s compare Bitcoin to the bank. Since most money today is already digital, the bank basically manages its own ledger of balances and transactions. However the bank’s ledger is not transparent and it is stored on the bank’s main computer. You can’t sneak a peek into the bank’s ledger, and only the bank has complete control over it.

Bitcoin on the other hand is a transparent ledger. At any point in time I can sneak a peek into the ledger and see all of the transactions and balances that are taking place. The only thing you can’t figure out is who owns these balances and who is behind each transaction. This means Bitcoin is pseudo-anonymous – everything is open, transparent and trackable but you still can’t tell who is sending what to whom.

Let’s explain this with an example. Before you can see certain rows from Bitcoin’s ledger. We can see that a certain Bitcoin address sent 10,000 Bitcoins to another Bitcoin address on May of 2010.

blockchain-basics-BTC-transaction.png


This specific transaction is the first purchase that was ever made with Bitcoin and it was used to buy 2 pizzas by a guy named Laszlo. Laszlo published a post back in 2010 asking for someone to sell him 2 pizzas in exchange for 10,000 Bitcoins. Well, someone did, and now the price of these two Pizzas is worth well over 100 million dollars today.

Bitcoin is decentralized
there’s no one computer that holds the ledger. With Bitcoin, every computer that participates in the system is also keeping a copy of the ledger, also known as the Blockchain. So if you want to take down the system or hack the ledger you’ll have to take down thousands of computers which are keeping a copy of it and constantly updating it.

Bitcoin is digital
This means there’s nothing physical that you can touch in Bitcoin. There are no actual coins, there are only rows of transactions and balances. When you “own” Bitcoin it means you own the right to access a specific Bitcoin address record in the ledger and send funds from it to a different address.

Why is Bitcoin such big news?
Well for the first time since digital money came into existence we now have an alternative to the current system. Bitcoin is a form of money that no government or bank can control.

Think about the time before the Internet, how centralized the flow of information was. Basically if you wanted information you could get it from a few major players like the New York Times, The Washington Post and others like them.

Today, thanks to the Internet, information is decentralized and you can communicate and consume knowledge from around the world with the click of a button. Bitcoin is the Internet of money – it’s offering a decentralized solution to money.

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