WHAT IS BITCOIN?
The Bitcoin concept first came onto the scene in late 2008 when it was posted to an obscure mailing list by a shadowy author going by the name Satoshi Nakamoto (the image above was at the top of the paper).
From the beginning, Satoshi envisioned a digital analog to old-fashioned gold: a new kind of universal money that could be owned by everyone and spent anywhere. Like gold, these new digital coins were worth only what someone was willing to pay for them—initially nothing. But the system was set up so that, like gold, Bitcoins would always be scarce—only 21 million of them would ever be released—and hard to counterfeit. As with gold, it required work to release new ones from their source, computational work in the case of Bitcoins.
Bitcoin also held certain obvious advantages over gold as a new place to store value. It didn’t take a ship to move Bitcoins from London to New York—just a private digital key and the click of a mouse. For security, Satoshi relied on uncrackable mathematical formulas rather than armed guards.
But the comparison to gold only went so far in explaining why Bitcoin ended up attracting such attention. Each ingot of gold has always existed independent of every other ingot. Bitcoins, on the other hand, were designed to live within a cleverly constructed, decentralized network, just as all the websites in the world exist only within the decentralized network known as the Internet. Like the Internet, the Bitcoin network wasn’t run by some central authority. Instead it was built and sustained by all the people who hooked their computers into it, which anyone in the world could do. With the Internet, what connected everyone together was a set of software rules, known as the Internet protocol, which governed how information moved around. Bitcoin had its own software protocol—the rules that dictated how the system worked.
The technical details of how all this worked could be mind-numbingly complicated—involving advanced math and cryptography. But from its earliest days, a small group of dedicated followers saw that at its base, Bitcoin was, very simply, a new way of creating, holding, and sending money. Bitcoins were not like dollars and euros, which are summoned into existence by central banks and held and transferred by big, powerful financial institutions. This was a currency created and sustained by its users, with new money slowly distributed to the people who helped support the network. People who joined the Bitcoin network were, quite literally, both customers and owners of both the bank and the mint.
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