Did you know that the first-ever Bitcoin transaction was to purchase a pizza? Or that nowadays you can use the cryptocurrency even to book a spaceflight with Virgin Galactic? Interestingly, as these two fun tidbits might be, they highlight how the once mysterious Bitcoin has now become almost mainstream.
Yet still, there remain plenty of people out there who don’t even have the faintest understanding of how it all works. So if you happen to be baffled by BTC, then here are four basic facts that you may not be aware of yet.
1) Bitcoin Is A Mathematical Currency
Most traditional currencies have historically been based upon physical assets (gold being the #1). While this may have become more abstract over the last century or so, no national currency has yet been based purely upon mathematical puzzles.
Bitcoin (BTC) is instead mined by using computer processing power to solve extremely complicated equations.
Entire mining ‘farms’ consisting of thousands of high-end processors exist in locations (primarily where electricity is very cheap) devoted to fresh mining currency.
To demonstrate the size of the global mining business, just consider this – the total BTC network is 300 times greater in power than the world’s five largest supercomputers combined.
2) There Are A Limited Number Of Coins
For most people, mining is simply out of the question, and the odds of a home user fluking a freshly minted coin are now comfortably in the hundreds of millions to one.
This is because the equations become increasingly more difficult as more coins are produced. The total number of Bitcoin that can ever be mined is capped at 21 million, with around 16.5m already having been claimed.
Yet, despite the size of the mining network, it is predicted that it will take until 2040 for the final coin to be extracted. So for the general user, it is simply much easier to buy bitcoin using conventional currency than attempt to mine their own!
3) Is Bitcoin A Tradable Commodity?
While there has been considerable speculation on the Bitcoin exchanges by brave investors, there is a running debate over whether BTC is a commodity or not.
Some argue that simply because it is a tradable currency, then it may as well be deemed as such; after all, it does have a tradable value.
Others argue that because the currency is not underpinned by anything tangible (like standard currencies are), it is not appropriate to consider it alongside other exchanges, assets, bonds, or commodities.
Whichever way you look at it, BTC is notoriously volatile and a high-risk investment. Yet until the 2018 crash, the currency had enjoyed growth six years out of seven – and sometimes that amounted to thousands of percent.
4) Bitcoin Is Not Entirely Anonymous
Anyone can set up an electronic wallet, buy some BTC, and set about purchasing/trading whatever they wish. The relative anonymity that was previously assumed has not quite turned out to be the case.
As BTC uses blockchain technology, there is a permanent ledger of every transaction that takes place. Anyone can view this, and should someone know your Bitcoin public address, they can view how many coins you have as well as your transaction history.
The only way to stay more secure is to use coin mixing services, which charge around 8-12% commission – but even these offer only an extra layer of security. Tracing who owns what is very difficult, especially if they use a good VPN, but never entirely impossible.
Those are just four little things to consider when looking into learning a little more about how Bitcoin works.
Considering that nobody for certain knows who even invented the system (there have been many scammers claiming to have done so) besides a ‘Satoshi Nakamoto‘ – increasingly believed to be a pseudonym – it is quite remarkable how much faith has been placed in the system throughout the world.
Bitcoin may be the biggest cryptocurrency out there, but don’t forget that there are dozens of others out there to look at, too, each with their own fascinating story to tell.