By now most people probably have heard of Bitcoin, one of the first crypto assets that introduced a new concept of money that fully lives on the internet. But, what is Bitcoin? Who created it and how does it work? This article will cover all sides of Bitcoin that you need to know.
Bitcoin is a new asset class that can store value and also sent to anyone around the world for transaction. It is a form of digital money but it is not issued or controlled by any central government. Bitcoin runs by series of computers around the world that form a decentralized monetary network. Bitcoin software is open source, meaning that anyone around the world can run a Bitcoin server and participate to be part of the network.
Bitcoin was created in 2009 by someone going by the alias “Satoshi Nakamoto.” Bitcoin, unlike government money such as dollars or euros, has a limited supply. There will only be 21 million Bitcoin that can exist in this world. This is what distinguishes Bitcoin: it is the first scarce digital asset whose supply cannot be increased or printed in the same way that money can.
Bitcoin is valuable because it is permissionless. Anyone can send and receive Bitcoin to anyone around the world without permission through an internet connection. Bitcoin is censorship resistant, meaning that no one can ban Bitcoin transaction. Bitcoin is also decentralized, which means that everyone can participate to be part of the network. Every Bitcoin transaction is recorded openly so everyone can validate each transaction. Bitcoin is also secured by cryptography that is impossible to penetrate, making it the world’s strongest monetary network.
Many people invest in Bitcoin because they see Bitcoin as a store of value and a hedge against inflation. Bitcoin becomes a store of value similar to gold because it is scarce and hard to produce. But Bitcoin can also be better than gold. Unlike gold, Bitcoin can be sent anywhere globally 24/7 and costs almost nothing to transport. Because of its scarcity, security, high liquidity, and global availability, people believe that the Bitcoin price will go up over time and can be the alternative currency in the future.
If you want to know the intrinsic value of Bitcoin, you can check our article here.
A Bitcoin transaction is just a collection of transaction records that can be accessed by anyone. So instead of exchanging physical paper money, all of the transactions in Bitcoin network is written down and stored in a special database called the blockchain. The Bitcoin blockchain has complete records of who sends what amount to whom since the first time Bitcoin ever existed. Everyone that access Bitcoin will have the exact copy of all the records that are stored in their devices. Every transaction in Bitcoin is secured through cryptography. In order to verify the transaction and to ensure there will be no double-spend, Bitcoin uses a process called Proof-of-Work or mining.
Blockchain is an immutable database, which means that once data is stored in the blockchain, it is extremely difficult and almost impossible to alter, change or delete it. When someone is doing a Bitcoin transaction, the transaction will be broadcasted into the Bitcoin network. In order for this transaction to be validated, there is a process called mining. Bitcoin miners will group transactions into a block and each block is linked with each other like a chain, making it immutable / tamper-proof. This is why Bitcoin technology is called the blockchain.
To validate the transaction and creating a block for the next transactions, miners need to perform proof-of-work. They have to solve complex mathematic puzzle by using computing power. This process requires electricity. Once a miner solves the puzzle and creates a new block, the miner will get two kinds of reward: a) fees attached to all transactions in the block, and b) freshly minted Bitcoin that will be introduced into the circulation.
Technically speaking, getting Bitcoin requires work/energy in the form of computing power/electricity. Proof-of-work mining helps Bitcoin secure its network without any centralized authority. Bitcoin reward is regulated under Bitcoin protocol, and the amount of reward will be reduced over time through Bitcoin halving.
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Halving is a process to ensure that there will only be 21 million Bitcoin. Every roughly 4 years, the freshly minted Bitcoin that is rewarded to miners will be cut in half. When Bitcoin was started in 2009 miners got 50 BTC every time they create a new block. In 2012, the reward was into 25 BTC/block. In 2016, the reward was cut into 12.5 BTC/block. The latest halving occured in May 2020, which reduced the reward to 6.25 BTC/block.
Halving makes Bitcoin more scarce over time. If you want to learn more about Bitcoin halving, you can check our in-depth article here.
Bitcoin price is based on supply and demand. The supply of Bitcoin is limited but the demand continues going up, that is why Bitcoin price goes up from year to year. Every day people around the world would buy and sell Bitcoin, they will create an offer and also bid a price for Bitcoin through crypto exchanges. This activity creates volatility in Bitcoin prices because the Bitcoin market runs 24/7 nonstop. Another factor that affects Bitcoin prices is halving. Bitcoin halving creates a higher scarcity of Bitcoin, reducing the rate of new supply. As supply decreases while demand for Bitcoin remains the same or even rises, people are willing to pay more to get Bitcoin.
Even though the price of Bitcoin keeps on going up since it’s inception, it is still not too late to buy Bitcoin. You can buy a fraction of Bitcoin called satoshi. 1 Bitcoin is equal to 100,000,000 satoshi. Ten years ago, 1 USD is equal to 113,147,771 sats (1.13 BTC). However, at moment of writing this article, 1 USD is now equal to 2,000 sats or 0,00002000 BTC.
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Bitcoin is legal in most countries. In Indonesia, Bitcoin is acknowledged by the Indonesian trade ministry, BAPPEBTI, as a commodity according to “Peraturan BAPPEBTI No. 5 Tahun 2019“. But in Indonesia, Bitcoin is not recognized as a legal tender, because the legal tender in Indonesia is Rupiah.
Investing in Bitcoin is considered safe, however, since Bitcoin transaction is irreversible, as an investor you have to take responsibility with your bitcoin ownership and educate yourself about how to secure your Bitcoin. Through the blockchain, Bitcoin provides a safe monetary protocol that can be accessed on the internet. Bitcoin is the best investment if an investor wants to diversify their portfolio investment because Bitcoin is censorship-resistant, limited, secure, and decentralized.
The easiest way to buy Bitcoin is through a crypto exchange such as Pintu. You can buy Bitcoin and other cryptocurrencies in Pintu App. Pintu is officially registered under BAPPEBTI, so you can ensure that it is safe to buy Bitcoin from us! You can learn how to buy/sell Bitcoin and other cryptos in Pintu here
You can store Bitcoin in Pintu for convenience. If you are tech-savvy, you can store it yourself by using a wallet that provides you the option to store your own cryptographic private keys such as Electrum or Blue Wallet. Or you can use a hardware wallet like Ledger or Trezor. Please keep in mind, when you store your own Bitcoin you are responsible for your own Bitcoin. If you accidentally lost access to your Bitcoin then there will be no customer support that can help you with that.