When you hear people talking about cryptocurrency, you usually hear them talk about bitcoin. Bitcoin is 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 existence. It 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 cryptocurrency based on blockchain technology.
The first bitcoin transaction took place between Satoshi Nakamoto and Hal Finney in January 2009 in 10 bitcoins. While not much at the time, it would amount to several hundred thousand dollars at today’s valuation!
Satoshi disappeared (after earning an estimated 1 million bitcoin), and the true identity of this individual, or group, remains a mystery to this day.
Bitcoin is transferred from person to person directly, without the help of a third party such as a bank. Bitcoin “miners” are computers on the network verifying encrypted transactions and adding 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. However, there is a limit to how many bitcoins can be made.
As new bitcoins are created, the supply increases, and for every 210,000 blocks 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.
Remember that new bitcoins are created as transactions happen, and not all 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 detail wallets later, but in short, a wallet is a place where the information about your bitcoins is stored. For example, it tells you how many bitcoins you have and other information you need to transfer them. Wallets can be stored in software on your computer (i.e., you can download wallet software that holds your bitcoins) and keep them on a separate physical drive, online exchange, or even a piece of paper with code written.
Your wallet has an address where people can send to and receive from. While sending bitcoins is anonymous because 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.