Bitcoin is not a new word. Chances are you may have heard about it on the media or from some persons. If you’re wondering what bitcoin is all about and why is it attracting attention all over the globe. This article is an introductory post to what is bitcoin and what we can use it for. Bitcoin is not new. It has been existing for over 10 years now, but the truth is; an average Africans and most people from developing nations do not know what bitcoin means nor what it stands for. Let’s talk about it.
Here in Africa, for example, there’s a common misconception about bitcoin and pyramid schemes. Some people describe bitcoin as some fraudulent investment scheme. This article is an attempt to offer a simple and basic understanding of what is bitcoin.
What is bitcoin?
Bitcoin is a peer-to-peer digital currency that can serve as a medium of exchange pay for goods and services on the internet.
In November 2008, an unknown person or group using the alias Satoshi Nakamoto published a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System on a mailing list. In January 2009, the anonymous inventor Satoshi Nakamoto released the bitcoin software. And he mined the first block of bitcoin known as the genesis block.
Before the invention of bitcoin, several attempts by a trusted third-party based system to create a digital form of currency failed. There were many reasons attributed to their failures. But one notable one was their inability to solve the double-spending problem. How to stop a person from spending the same amount twice.
The internet made the world a global village. Almost everything we do now involves the internet. From our businesses to day-to-day social activities. But the one big gap left unsolved was trust. It becomes an impossible task to transfer value or data over the internet without a third-party.
The invention of bitcoin solved this long-standing challenge, In the bitcoin white paper ‘Satoshi Nakamoto’ explained how bitcoin solves this problem; by completely decentralised like a peer-to-peer file-sharing network, having no central server or controlling authority. Bitcoin became the first successfully created digital currency.
The emergence of bitcoin and other digital currencies is a long continuation of the evolution of money. Before the colonial times, cowry shells, brass, salt and other valuable items in Africa were a means of exchange. Over time, it evolved to paper money (banknotes), which many of us are familiar with.
What is so special about bitcoin?
Bitcoin compared to our local forms of money is a lot different. For example, bitcoin has a predetermined quantity. There can be only 21 million bitcoin ever. And they built it using cryptography to secure each transaction, and a distributed public ledger is known as the blockchain to keep a record of all its transactions. That’s not all. Bitcoin solved not only the double-spending problem but came with interesting features.
4 unique features of bitcoin.
- Decentralised: Decentralisation is a core feature of bitcoin. compared to centralise systems such as banks, bitcoin doesn’t have a central server. But a distributed network of computers known as nodes.
- Trusted: Using cryptography transactions involving bitcoin can be peer-to-peer. There is no need to go through a middleman or third-party, such as banks.
- Borderless: Transactions with bitcoin is not restricted to a particular geographical area. Anyone anywhere connected to the internet can transact using bitcoin.
- Transparency: Bitcoin operates on a public ledger known as a blockchain. the transactions on the bitcoin network are public.
Popular use cases of bitcoin.
- Payment: As I mentioned earlier, the payment of goods and services online using bitcoin is possible. Many companies including Microsoft, HTC, Namecheap amongst other acceptance bitcoin.
- Store of Value: People consider bitcoin as a store of value. This use case is a major driver of its big demand in Africa. African currencies are fast becoming vulnerable to hyperinflation. bitcoin is a viable option to hedge against the falling nature of fiat currencies.
- Speculation: Another major driver of its demand is speculation. The market price of bitcoin and other digital currencies fluctuates. As a result, many people see it as an attractive investment opportunity.