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Bitcoin is the world's first cryptocurrency. It was invented on 31 October 2008, and formally launched on 3 January 2009 by an anonymous entity known as Satoshi Nakamoto. Since then, it has been on a trajectory of worldwide adoption.
The word Bitcoin can be used interchangeably to describe 3 things:
Bitcoin (BTC) is Internet money that can be transferred to and from anyone with an Internet connection. Every transfer is a transaction, and each transaction is recorded in a database called the Bitcoin blockchain.
The Bitcoin blockchain contains a full record of every Bitcoin transaction that has ever taken place since 3 January 2009. The blockchain is replicated and continuously synchronised on every single computer that runs the Bitcoin network.
The Bitcoin network is made up of thousands of computers all over the world run by individuals, small businesses and large companies. Each computer that makes up the network is called a node.
Bitcoin has no CEO, headquarters, or official spokesperson. None of the computers that run the Bitcoin network are any more important than any other computer, giving Bitcoin an essential quality of robustness and egalitarianism. Since the network is run by thousands of computers globally, yet simultaneously governed by no-one, it is considered to be highly decentralised.
Bitcoin is made possible by the underlying technology it is built upon – the blockchain.
As the name suggests, a blockchain is a series of blocks chained together. Each new block contains the latest set of transactional data. The blockchain is stored and synchronised across thousands of participant computers worldwide, otherwise known as "nodes".
When a user transfers Bitcoin (BTC) from their address to a recipient's address, that transaction is sent to the Bitcoin network to be processed. The transactions are grouped into blocks and added to the blockchain when a block has been "mined". Once a block has been mined, it is permanently added to the blockchain. Both the block and the transactions within the block cannot be changed once the block has been added to the rest of the chain. A new block of transactions is created roughly every 10 minutes.
The Bitcoin network offers computers an incentive to contribute their computational power to the network. Any computer may join, but the stronger the computer, the more likely that the computer will mine a block and earn a block reward. Bitcoin block rewards are paid out in Bitcoin, and are a predetermined amount of new Bitcoin not yet released into circulation, in addition to all of the fees paid on the transactions included in the block that was just mined.
Halvening events are a permanent reduction in the Bitcoin block reward. These halvening events take place every 210,000 blocks, or roughly every 4 years. When a halvening takes place, the block reward is reduced by half. When the Bitcoin blockchain began in 2009, the reward was 50 Bitcoin per block. Then 210,000 blocks later in 2012, the reward was reduced to 25. In total, there have been 3 halvenings in history – the last 2 taking place in 2016 and 2020. The current reward for mining a block is 6.25 Bitcoin.
The fact there is only 21 million Bitcoin is a side effect of this halvening cycle described above. Because a Bitcoin can be divided into 100 million pieces (called Satoshis), there will come a day wherein the block reward is smaller than the smallest unit of Bitcoin. At this point and time, there will be no more Bitcoin added to circulation, and the total circulating supply will be 21 million Bitcoin. This event will take place somewhere around the year 2140. At this point in time, the miners in the network will be earning rewards solely from transaction fees.
Bitcoin has been active for 13 years. During this time, many events have transpired that have led to Bitcoin becoming the largest cryptocurrency in the world. This is both in user base and market capitalisation. Understanding the history of Bitcoin is a great way to understand the technology as a whole, and where it is headed in the future.
31 October 2008: This is the day that an anonymous entity named Satoshi Nakamoto published the Bitcoin whitepaper to a mailing list consisting of mathematicians and cryptographers.
3 January 2009: Satoshi releases version 0.1 of Bitcoin and begins mining the blockchain. The initial block is inscribed with a message from a UK newspaper: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." This message sits in the genesis block (block #0) of the blockchain and is permanently inscribed for all future generations to see. This gives the public a loose view into the intentions of Satoshi Nakamoto to provide a decentralised "peer-to-peer cash system" that rivals the currencies of the world.
22 May 2010: This day is known as "Bitcoin Pizza Day" and is recognised as the first day that Bitcoin gained validity as a medium of exchange – two individuals (Laszlo Hanyecz, and Jeremy Sturdivant) met on a forum to purchase 2 large Papa John's pizzas worth USD$30 for 10,000 Bitcoin. Laszlo ordered the pizzas, and Jeremy paid for them in USD. In return, Laszlo transferred Jeremy 10,000 Bitcoin, giving each Bitcoin a value of $0.003.
23 April 2011: Known in the Bitcoin community as "Satoshi Disappear Day", this is the day wherein Satoshi Nakamoto left the world stage as the lead developer behind Bitcoin. Their last message reads, "I've moved on to other things", referring to the Bitcoin project. The future of Bitcoin, he wrote, was "in good hands". Since then, Bitcoin has largely been a multinational, leaderless, open source project.
28 November 2012: The first halvening event occurs, reducing the Bitcoin block reward to 25 Bitcoin, from 50.
9 July 2016: The second halvening event occurs, reducing the Bitcoin block reward to 12.5 Bitcoin from 25.
10 May 2017: The first lightning transaction took place (albeit not on Bitcoin, but instead on Litecoin). The Lightning Network was devised in 2015 as a scaling solution for Bitcoin to be able to process hundreds of thousands, if not millions of transactions per second. After 2 years of development, the concept was tested on Litecoin proving the merits of the scaling solution.
1 August 2017: Bitcoin receives an upgrade called Segregated Witness (SegWit) that increases Bitcoin's transaction throughput. The same day, the first Bitcoin fork occurs, creating a second Bitcoin blockchain dubbed "Bitcoin Cash" (BCH). After this date, the "main" version of Bitcoin is dubbed as "Bitcoin Core" with the ticker BTC. After this fork, several more took place in the following years as more people piled into the conversation of what the "one true Bitcoin network" should look like. Some of these networks include Bitcoin Satoshi Vision (BSV), and Bitcoin Gold (BTG).
11 May 2020: The third halvening event occurs, reducing the Bitcoin block reward to 6.25 Bitcoin from 12.5.
7 September 2021: El Salvador becomes the first country in the world to make Bitcoin legal tender. President Nayib Bukele "airdrops" $30 worth of Bitcoin into the Bitcoin wallet of each citizen. The "Chivo Wallet" becomes the official, government endorsed Bitcoin wallet which uses the lightning network to make Bitcoin transactions. El Salvador begins mining Bitcoin using geothermal energy from a volcano.
13 November 2021: Bitcoin receives its first major update since the SegWit upgrade in 2017. Taproot is said to increase the privacy, scalability, and ability to host smart contract-like functionality on the Bitcoin blockchain.
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