When you hear people talking about cryptocurrency you usually hear them talk about bitcoin. bitcoin is by far the most popular, but it is not the only cryptocurrency available. There are hundreds of other cryptocurrencies and new ones popping up daily.
Bitcoin was the first cryptocurrency to come into existance. It was was released in 2008 by Satoshi Nakamoto as a way to create a decentralized digital currency. It is an open-sourced software, meaning anyone can view the source code and even create their own cryptocurrency based on the blockchain technology. The first bitcoin transaction took place between Satoshi Nakamoto and Hal Finney in January 2009 in the amount of 10 bitcoins. While not much at the time, it would amount to several hundred thousand dollars at today’s valuation! Satoshi dissapeared (after earning an estimated 1 million bitcoin) and the true identity of this individual, or group, remains a mystery to this day.
Bitcoin is transfered from person to person directly, without the help of a third party such as a bank. Bitcoin “miners” are computers on the network that verify encrypted transactions and add them to the blockchain. Anyone can set up a mine if they know how. The miner that successfully mines a new block is rewarded with newly created bitcoins and transaction fees. There is a limit as to how many bitcoins that can be created. As new bitcoins are created the supply increases and for every 210,000 blocks that are added to the blockchain the reward for miners is cut in half. Eventually the reward will be zero and the limit of 21 million bitcoins will be mined.
If that is all too confusing, just remember… new bitcoins are being created as transactions happen and not all bitcoins have been created yet. But there is a limited supply of 21 million bitcoins that will be reached eventually (estimated in 2140).
When you buy a bitcoin it is stored in a bitcoin wallet. We will go into detail about wallets later but in short, a wallet is a place where the information about your bitcoins are stored. It tells you how many bitcoins you have as well as other information you need to transfer those bitcoins. Wallets can be stored in software on your computer (ie. you can download wallet software that store your bitcoins) or you can store them on a seperate physical drive, online exchange, or even a piece of paper with code written on it.
Your wallet has an address where people can send to and receive from. While sending bitcoin is anonymous in the sense that there is no identifiable information, it is traced by your wallet address and this information is on the public ledger. You can own multiple wallets and addresses and there is no personal information attached to your wallet. Bitcoin can be sent by using your address or by scanning a QR code with your cell phone (we will describe this in detail later)
Bitcoin is becoming popular with support from major online retailers such as overstock.com, expedia, newegg, and Microsoft.