What is Bitcoin?
Learn about Bitcoin and its revolutionary impact on money
"Bitcoin is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party."
A Message from Satoshi
"I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party. The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.
Bitcoin is the implementation of that idea – a system for electronic transactions without relying on trust."
Beyond Currency
While Bitcoin is often described as digital money or cryptocurrency, it represents a fundamental breakthrough in computer science and economics. For decades, creating digital cash that couldn't be double-spent without a central authority was thought impossible - the infamous "Byzantine Generals Problem" of distributed systems.
Satoshi Nakamoto's solution combines several existing technologies in a novel way:
- Proof-of-work consensus mechanism
- Public key cryptography
- Distributed timestamp server
- Peer-to-peer networking
Technical Foundation
Blockchain
A chronological, append-only database of all transactions, organized in "blocks" that are cryptographically linked together. Each block contains a timestamp, transaction data, and a reference to the previous block.
Cryptography
Bitcoin uses public-key cryptography to create digital signatures that prove ownership, and cryptographic hash functions (SHA-256) to link blocks and create the proof-of-work challenge.
P2P Network
Bitcoin operates on a peer-to-peer network where all participants run the same protocol rules. There is no central server or authority. Transactions are broadcast to all nodes, which independently verify and relay valid transactions.
Consensus Mechanism
The proof-of-work algorithm requires miners to expend computational resources to add blocks to the chain. This creates economic incentives to follow the rules, as the energy cost is only rewarded if other nodes accept the mined block.
Revolutionary Properties
1Decentralized Authority
For the first time in history, Bitcoin created a monetary system that doesn't require trusted third parties or central authorities. No single entity, corporation, or government controls the Bitcoin network. Instead, it operates by distributed consensus, with thousands of independent nodes enforcing the same rules globally.
2Programmatic Scarcity
Unlike any previous form of money, Bitcoin has a mathematically guaranteed fixed supply. The protocol limits the total supply to exactly 21 million bitcoins. This supply schedule is enforced by code that anyone can verify, creating the first truly scarce digital asset. The mining reward halves approximately every four years, with the final bitcoin projected to be mined around the year 2140.
3Permissionless Access
Bitcoin is open to anyone with internet access. There are no gatekeepers, identity requirements, or approval processes. Anyone can create a wallet, receive, store, and send bitcoin without asking for permission. This financial inclusion is revolutionary for the billions of people worldwide who lack access to traditional banking services.
4Transparent Verification
Every Bitcoin transaction ever made is recorded on the public blockchain. This radical transparency allows anyone to independently verify the current state of the system and its history without trusting any third party. The rules can be verified by anyone running a full node, ensuring that no inflation beyond the schedule or invalid transactions can occur.
5Immutability
Once confirmed, Bitcoin transactions become practically irreversible. Each subsequent block adds exponentially more security through proof-of-work, making the blockchain an immutable record. This immutability creates settlement finality without courts, contracts, or custodians—a property previously impossible in the digital realm.
The Birth of Bitcoin
The Whitepaper
October 31, 2008"I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party." With these words, Satoshi Nakamoto announced Bitcoin on the cryptography mailing list, publishing the whitepaper "Bitcoin: A Peer-to-Peer Electronic Cash System."
Genesis Block
January 3, 2009Satoshi mined the first Bitcoin block (the "genesis block"), containing a message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"—timestamping Bitcoin's birth and highlighting the financial crisis that inspired its creation.
First Transaction
January 12, 2009The first Bitcoin transaction occurred between Satoshi and cryptographer Hal Finney, who was among the first to see the potential of Bitcoin, famously tweeting "Running bitcoin" when he began operating a node.
First Economic Value
October 5, 2009The New Liberty Standard established the first bitcoin exchange rate: $1 = 1,309.03 BTC, based on the cost of electricity required to mine bitcoins. This gave Bitcoin its first economic valuation.
Satoshi's Departure
December 2010After handing over control of the Bitcoin repository to Gavin Andresen, Satoshi gradually withdrew from public involvement. Their final known communication came in April 2011, leaving Bitcoin truly decentralized—with no leader or creator to rely on.
"I don't believe we shall ever have good money again before we take it out of the hands of government. We can't take it violently. But we might find some sly, roundabout way to introduce something they can't stop."