It’s hard to go anywhere these days without seeing a headline or hearing a conversation about Bitcoin. Most of these are simply people trying to figure out what it is, if they should invest and how it works. While the technology behind Bitcoin can get a bit “in the weeds,” it’s not too tough to understand enough to be able to join in the convo with a few facts of your own. Here are 15 fast facts to know about Bitcoin’s genesis and where it’s going.
1. No One Knows Who Created Bitcoin
We live in a society where almost nothing is kept a secret anymore, unless you're the founder of Bitcoin. We know that in 2008 a man named Satoshi Nakamoto invented Bitcoin and published a proof of concept, but now most people believe that to be a pseudonym, and no one met the man in person. There have been several people who people speculate are the founder, but the only "credible claim" is Craig Wright. This Australian computer scientist did several interviews in 2016, and provided proof of his identity that was later found to be false. The world may never know who created the coin behind this crypto-craze.
2. There Are Only 21 Million Bitcoin
It’s widely held that January 3rd is day when Satoshi brought forth the first 50 bitcoin units, making that the day people celebrate as the currency’s birthday. But how did he “create” these 50 units, and how many others are there?
This is where it gets a little confusing, but there are a finite amount of Bitcoin – 21 million. They are set to release on a predetermined timeline. Then people, or miners, can get to work trying to find the Bitcoin in the blockchain (more on that later). The point is that after all 21 million Bitcoin are mined. That’s it; there are no more. There’s a lot of speculation about what will happen to the currency at that time, and there’s no clear consensus about its fate.
3. Think of Bitcoin Mining Like Digitally Mining For Gold
This gets technical, but here’s a brief overview of how mining for Bitcoin works. Bitcoin exists on the blockchain that’s specifically designed to support this currency. Think of it as a public ledger (more like a shared Google doc) as opposed to an internal one like a bank would have. Miners record transactions that happen and in the course of their mining are searching for the released Bitcoin. Anyone can be a miner with the right computer setup and an Internet connection… and if the person can solve the puzzle that comes with the Bitcoin.
Bitcoin is also like gold in that once all of the Bitcoin are mined, that’s it. Same as with gold; there’s only a finite supply.
4. Bitcoin’s blockchain is a little blocky
Every cryptocurrency is different, and Bitcoin is no exception. In fact, though it’s the name that brought cryptocurrencies into the spotlight, there are some limitations with Bitcoin’s blockchain. The “blocks” that are added by the miners are a bit bulkier than some other up-and-coming forms of cryptocurrency, meaning that transactions may take longer to complete. There are also several ways to mine Bitcoin, but some estimate the power being used to do so is more than the power used by entire countries. These are just some of the reasons why people aren’t sure that Bitcoin will be the cryptocurrency that takes us into the new age of digital cash.
5. Bitcoin is Backed by the Winklevoss Twins
If you’ve seen the movie The Social Network, or loosely followed Facebook’s rise, then you’re likely familiar with Cameron and Tyler Winklevoss. These entrepreneurial twins were a couple of the early backers of Bitcoin and are thought to be the first Bitcoin billionaires. While they won’t confirm or deny how many Bitcoin they now own, back in 2013, they got $11 million worth, which was around 1 percent of the Bitcoin that had been circulated at the time. Currently, the twins are working to get the SEC to allow Bitcoin to be traded in an exchange fund. While that has been rejected, there are other companies who are getting creative with how to offer Bitcoin to the masses.
6. Some Bitcoin Are Being Stashed
This is a wealth preservation technique. As Bitcoin’s value continues to rise, some investors are keeping mum about how much they actually own. Not even the Winklevosses will say how many they have. What this does is creates anonymous stockpiles of the cash, since Bitcoin isn’t linked to an identity. Though, some people have speculated that whoever Satoshi is, he has around 1 million Bitcoin in his stash and is holding onto them in case there’s a global demand once the 21 million coins have been released.
7. You Don’t Need Thousands of Dollars to Invest
It seems like every headline is about how much Bitcoin is increasing in value. It started 2017 at just under $800, and is on track to close the year at around $20,000. That’s a big chunk of cash to potentially lose if Bitcoin tanks, but the good news it doesn’t cost that much to buy into Bitcoin. Since the coins are broken up into millions of units, people can simply buy one of those units. Think of it like a dollar broken up into pennies – but on a much bigger scale. People can invest for as little as $10.
8. You Can Buy Bitcoin Lots of Places
There are lots of places and ways to buy Bitcoin, but that’s seemed to be a problem for a lot of potential investors. Since Bitcoin is all digital and not backed or secured by anything, it’s a logical target for hackers. That doesn’t make it an easy target, but it’s a logical one. The alleged hacking of Mt. Gox was one of the most well-known crypto-heists since the currency came into existence. However, because Bitcoin is largely anonymous, there’s no way to find out who was behind it. So, when you buy your Bitcoin, do some research into the company holding it for you, or look into a separate digital wallet. If you’re looking for a simple way to get started, Coinbase is one of the most popular places to buy and sell.
9. You Can Buy Bitcoin From Government Auctions
This seems odd since Bitcoin is without an identity, but there are some cases where buyers can get a bargain on Bitcoin from the government. In 2013, Silk Road was shut down, and the FBI seized 144,000 Bitcoins, then auctioned them off. Silk Road was a website where people could anonymously buy and sell illegal things like drugs, guns, etc. When they were shut down, the government took the Bitcoin from any digital wallets on the site and auctioned them off.
10. Bitcoin is Available on Wall Street … Sort Of
While the SEC is loathe to get on board with any kind of Bitcoin trading, the progress this currency is making can’t be stopped, and people are looking for more ways to make money off it. That’s why when Bitcoin futures launched on the Cboe (Chicago Board Options Exchange) in December 2017, the price of the coin surged yet again. This means investors agree to a predetermined sell and buy price and date. So, if you commit to buying Bitcoin on Monday for $16,000, and it goes up to $19,000 by then, you still get it at the agreed upon $16,000. However, if the price goes down, the buyer has already lost money.
11. Bitcoin is a Highly Volatile Investment
The example of why Bitcoin futures are a bit of a gamble is the larger issue investors have with Bitcoin in general. Because the coin isn’t backed by anything, there’s really no insurance for it other than the assumption that demand will go up, and investors want to have part of the supply. Seeing it go up thousands of dollars in a day, and then the opposite the next is a bit too risky for lots of people to get involved. This is why some investors like Warren Buffett and Jamie Dimon have warned people to stay away, while others like Kevin O’Leary and Mark Cuban have said to only invest what you can afford to lose. Until Bitcoin stabilizes – and there’s no telling when that might happen – only investing what can be lost is a good strategy when approaching Bitcoin and cryptocurrencies.
12. The First Bitcoin Transaction Was Used to Buy Pizza
Because Bitcoin is so volatile, the first transaction made using it has become a bit of a legend. According to reports, Laszlo Hanyecz, a programmer, was the first person to buy something with Bitcoin. He bought pizza. He said he traded 10,000 Bitcoin for it. As of December 17, 2017, that would be worth around $190 million dollars.
13. You Can Use Bitcoin More Places Than You Think
Along the lines of buying pizza, you can see that Bitcoin is still a viable currency. Companies like Overstock.com, Expedia, Newegg and Dish accept Bitcoin as a way to pay. But think twice before doing that. Since the currency is so volatile, there’s no saying that your $50 of Bitcoin might be worth $100 the next day. That’s the gamble these companies are also taking by accepting Bitcoin. However, keep in mind that at the end of the day, Bitcoin was meant to be used as a currency, so paying for things with it is exactly what it was ultimately meant to do.
14. There Are No Bitcoin Refunds for Fraud
This is probably one of the scariest parts for new investors in Bitcoin, and cryptocurrency in general. If someone defrauded you, and you paid in Bitcoin, that’s it. There’s no way to get your money back, and there’s no way to find out who took the cash. Unlike with banks and credit card companies, where if fraud was committed, they'll usually credit it back while they investigate.
Bitcoin is stored in digital wallets that were originally meant to be anonymous so that no one could track what people do with their money. However, that can backfire. So, be sure about purchases before making them, and if you have any kind of uneasy feeling about it, then maybe don’t click “Buy.”
15. There’s a Long Way to Go
Believe it or not, Bitcoin is still in its formative phase, despite already accumulating the value it has. There’s a lot of growing to do not only for this coin and its potential but for cryptocurrency at large. It’s not only the coin itself that has people excited about its future, it’s also the blockchain technology and what can be done with it.
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