In 2008, the global financial system entered one of its worst crises in modern history. Major financial institutions failed or required government support, markets fell sharply, and millions of people around the world lost jobs, savings and homes.
In October 2008, a person — or group — using the name Satoshi Nakamoto published the Bitcoin Whitepaper. It described a peer-to-peer electronic cash system that could allow people to transfer value without relying on a bank or other central intermediary.
On January 3, 2009, the Bitcoin network began operating when its first block — known as the Genesis Block — was created.
That was the beginning of Bitcoin.
Bitcoin is a decentralized digital currency. It can be transferred between users over the Bitcoin network without requiring a bank to process the transaction.
Think of it this way:
When you send money through a bank, the bank maintains the account records and decides how the payment is processed. With Bitcoin, transactions are verified and recorded by a decentralized network instead of one central bank or company.
Bitcoin has several important properties that make it different from traditional currencies:
1. Decentralized
No single government, bank or company controls the Bitcoin network. Independent participants around the world run Bitcoin software, validate transactions and maintain copies of its blockchain.
2. Limited Supply
The Bitcoin protocol limits the total supply to 21 million BTC. New Bitcoin enters circulation through mining, but the rate of new issuance decreases over time through an event known as the halving.
3. Transparent
Bitcoin transactions are recorded on a public blockchain. Anyone can inspect the transaction history and independently verify activity on the network, although Bitcoin addresses do not automatically reveal the real-world identity of their owners.
4. Borderless
Bitcoin can be sent between compatible wallets across national borders without requiring the Bitcoin network itself to operate through a traditional international banking system.
Many beginners ask: if Bitcoin is digital and has no physical form, why does it have value?
Value does not require something to be physical. Money, gold, shares and other assets have value because people are willing to exchange goods, services or other currencies for them.
Bitcoin’s market value comes from a combination of factors:
Bitcoin’s price still depends on supply and demand. Its market value can rise or fall significantly, which is why Bitcoin should not be considered a guaranteed store of value or investment return.
Bitcoin is sometimes described as digital gold because both Bitcoin and gold are scarce assets, but they have very different characteristics.
Gold:
Bitcoin:
This comparison is why some investors view Bitcoin as a digital alternative to traditional scarce assets. However, Bitcoin is much newer than gold and its price is generally far more volatile.
Bitcoin miners receive newly issued BTC as part of the reward for adding valid blocks to the blockchain. After every 210,000 blocks — roughly once every four years — this block subsidy is cut in half. This event is known as the Bitcoin halving.
The halving gradually reduces the rate at which new Bitcoin enters circulation. This predictable issuance schedule is an important part of Bitcoin’s scarcity.
Previous halvings have occurred during periods that were later followed by major Bitcoin market cycles. However, a halving does not guarantee that Bitcoin’s price will rise. Price is influenced by many factors, including demand, liquidity, regulation, investor sentiment and broader economic conditions.
It is important to separate the Bitcoin network from the services people use to access it.
Bitcoin’s underlying protocol uses cryptography, proof-of-work mining and decentralized validation to protect the integrity of its blockchain. The network has operated for many years without a successful attack rewriting or taking control of the Bitcoin blockchain in the way people often mean when they say Bitcoin itself was “hacked.”
That does not mean owning Bitcoin is risk-free. Exchanges and wallets can be compromised, private keys can be stolen or lost, phishing attacks can trick users, and cryptocurrency transactions are generally difficult to reverse after they have been confirmed.
“Not your keys, not your coins.” If another service controls the private keys to your Bitcoin, you depend on that service to safeguard and provide access to your funds.
Learning how wallets, private keys and security practices work is therefore just as important as understanding Bitcoin itself.
In the next topic we will learn how blockchain technology works and how Bitcoin uses it to maintain a shared transaction history.