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Bitcoin is the largest and most popular cryptocurrency in the world.
- Bitcoin is digital money that can be used to pay for goods and services online
- The movement of Bitcoins is tracked on a blockchain instead of using an intermediary, such as a bank
- Bitcoin was the first cryptocurrency, and the idea for it was introduced in 2008 by the pseudonymous Satoshi Nakamoto
What is Bitcoin?
Bitcoin is a cryptocurrency that can be used to pay for goods and transfer money online. It was the first cryptocurrency, set up in response to the 2008 banking crisis, and remains by far the most valuable one.
With fiat currencies (such as the US Dollar), the national government or central bank holds the levers of power. They decide how much is printed and control its value. Bitcoin, meanwhile, is decentralised and operates in a completely different way, with no one entity in charge. Instead, it uses a blockchain – a public, digital ledger – to track the movement of money, and power is spread out among people who own the coins.
Part of Bitcoin’s rise to prominence is down to the fact that you can buy, sell, or trade it to try to make money. The value of each coin fluctuates in response to supply and demand, which has led to Bitcoin becoming an extremely valuable asset in its own right.
Who created Bitcoin?
The idea for Bitcoin was laid out in a research paper called “Bitcoin: A Peer-to-peer Electronic Cash System” in 2008, but no one knows who wrote it. The true identity of the author, Satoshi Nakamoto, has never been revealed. Many believe Bitcoin was actually created by a group rather than just a single person.
What we do know is why it was created. The first block on the Bitcoin blockchain includes a line of text in the code that reads “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. The research paper itself was released about six weeks after the collapse of Lehman Brothers, one of the defining moments of the banking crisis.
Bitcoin, a digital currency that operates outside of the traditional financial system, is clearly a response to what was going on at the time. Many of the earliest Bitcoin adopters got involved for this reason and its adherents maintain a strong anti-establishment bent today.
A brief history of Bitcoin
Since the very beginning Bitcoin has been popular but controversial. Its fortunes have ebbed and flowed, as mainstream acceptance has run alongside the risk of more government intervention clamping down upon it. Here’s a quick overview of the timeline:
- The Bitcoin white paper was released in 2008 and the network came online at the beginning of the following year. The first transactions also took place in January 2009.
- From the very beginning, it has run up against governmental oversight. Cryptocurrency transactions have been banned in China since 2009 and the Bank of China banned its financial institutions from using Bitcoin in 2013.
- As Bitcoin grew, major companies began to accept it as a payment method. After 2013, a gradual trickle became more of a stream, and the likes of Dell and Microsoft were two of the earlier businesses to introduce Bitcoin payment options.
- Over time, more national governments began to accept cryptocurrency. Japan and Russia legalised crypto payments in 2017, while the government of El Salvador became the first to make Bitcoin legal tender in 2021.
- One of Bitcoin’s defining features is its price volatility. The first real crypto bull run took place in 2017, and Bitcoin’s price rose more than 800% in the second half of the year. That was followed by a ‘crypto winter’, where it lost 65% of its value in the first two months of 2018.
- A similar pattern took place in 2021. As the world shut down due to coronavirus, many poured money into Bitcoin – pushing the cryptocurrency’s value as high as $60,000. Many institutional investors, including hedge funds, began to hold Bitcoin.
How much is Bitcoin worth?
The answer can change dramatically from day to day. Cryptocurrencies like Bitcoin are much more volatile than stocks and their value can rise or fall by 10% or more over the course of a day or two. However, a single Bitcoin is worth thousands and at its peak each one has been valued at over $60,000.
That value is based on many factors, such as market interest and the latest news. Hype is also a major force, so that when something happens – for example, when Tesla announced it would let people buy cars with Bitcoin – people get excited and push the price up. The price changes are often out of all proportion to the actual news itself.
Where can I learn more?
For more information about how Bitcoin works, check out our Bitcoin 101 course that takes you through the basics in detail. To learn more about investing in it, our Bitcoin hub will direct you to all the guides that explain how to do so.
Fact-checking & references
Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.
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