Bitcoin for dummies: here is a short guide for beginners.
Bitcoin is an open-source computer protocol released on October 31st, 2008 by an unknown author calling himself Satoshi Nakamoto. The original PDF of this protocol is freely and publicly available at e.g. bitcoin.org/bitcoin.pdf.
This protocol was then used to create P2P software that enabled the creation of the world’s first decentralized currency.
This currency consists of a public ledger, called a blockchain, which can be consulted and verified by anyone so that each user can check that everything is correct.
The first block on the Bitcoin blockchain was mined by Satoshi Nakamoto himself on January 3rd, 2009, and its details are publicly available at blockchair.com/bitcoin/block/0, for example.
Nowadays, we generally refer to the protocol as Bitcoin with a capital B, while we refer to the coin as bitcoin, with a lowercase b.
In fact, this purely digital currency consists solely of transactions that are recorded in blocks that are added to the blockchain every 10 minutes or so.
These transactions are nothing more than bitcoin being sent from a sender to a recipient.
Bitcoin for dummies: why is it a unique currency
Bitcoin does however have some characteristics that make it a unique currency.
For one thing, it is the first decentralized currency ever issued in the entire history of mankind. In fact, Satoshi Nakamoto, by making the Bitcoin protocol public, has practically given it away to mankind, who can use it freely without any restrictions.
The protocol is based on a peer-to-peer (P2P) network, where all participants have the same rights and opportunities. There are no bosses, no hierarchies, no masters, but there is also no single issuer or manager: the protocol effectively manages itself.
Secondly, it is also the first currency in history with a deflationary nature. In fact, not only is the protocol virtually unchangeable, but it even envisages that fewer and fewer BTC (BTC is the ticker for bitcoin) will be created, so that in about a hundred years’ time all the BTC that can exist will have been extracted. In other words, there can never be more than 21 million.
In order to guarantee that there are bitcoin for everyone – the inhabitants of planet Earth are over 7 billion – every single bitcoin has been made divisible down to the hundred millionth, and the smallest fraction of a bitcoin, or one hundred millionth of a BTC, is commonly referred to as a satoshi, in honour of its creator.
Since there is a cap on the number of bitcoin that can ever exist, at some point the monetary supply of BTC will cease to be inflationary, and since every now and then some BTC is ‘lost’, at that point the monetary supply of BTC actually in circulation will actually start to shrink.
Moreover, although all transactions recorded on the blockchain are public, they are also pseudo-anonymous, i.e. there is no name of the sender or recipient, only their so-called ‘public addresses’, i.e. random alphanumeric strings from which it is not possible to trace the name of their owner.
Finally, it must be said that the person who hid behind the pseudonym Satoshi Nakamoto has not been seen since 2011. In other words, not only does nobody know who he is, but all traces of him have been lost for at least ten years. Many claim that he is deceased.
In reality, this is only a small part of what Bitcoin is. Bitcoin is much more than what has been described in this short guide and in order to acquire all the basic information you need a lot of time, will and patience, and a lot of studying to be able to learn all the many important concepts that lie beneath the surface of this brilliant and extraordinary project.
