It’s a safe bet that you’ve read or heard about Bitcoin in recent months. For good reason, Bitcoin has made its rounds across media circles, and still is at this very moment. If you don’t understand what Bitcoin is, the technology that drives it, or how it works – that’s OK. Many people are in the same boat. After all, stocks are a more popular investment, and so are futures, bonds, and commodities; standard fiat currencies – think United States Dollar and Japanese Yen – are still primarily used for transactions in our everyday lives.
What Is Bitcoin?
Bitcoin is a cryptocurrency – meaning a digital currency that operates using encryption to create new currency and verify transactions, all of which operate in the hands of the human population, rather than trusting elite, central banks – that was founded in 2009 by a mysterious person or group of people going by the name Satoshi Nakamoto.
A man named Nick Szabo laid the foundation for smart contracts, hashing, and ultimately, Bitcoin, over the two decades prior to the foundation of Bitcoin. However, even though many people have speculated that Nick Szabo actually is Satoshi Nakamoto, he’s never come forward as such.
Hal Kinney was involved with the first bitcoin transaction. Although Kinney has since passed away due to Lou Gehrig’s Syndrome, he received several thousand bitcoins – worth nothing more than $20 at that point – and used them to purchase pizza. Herein, this is the first-ever use of bitcoins to purchase an item.
Why Aren’t Bitcoins Tied To Central Banks?
Although governments generally act in the best interest of laypeople, there always remains a possibility of corruption. Modern fiat currencies, like the United States Dollar, are controlled by fiscal policy, including interest rates of borrowing money from the Federal Reserve, how many dollars there are in circulation, and so on.
With Bitcoin, no group of people decides to release more currency – that decision was made when it was created in 2009.
Simply put, Bitcoin is far more trustworthy than central banks because everyone can verify transactions, rather than trusting all-knowing banks to do so. There are also fewer stops along the way; instead of bouncing along several financial institutions, Bitcoin transactions can be facilitated directly by users.
People can buy the cryptocurrency on digital exchanges.