Ever heard of Bitcoin, but not sure where it came from, how it works, why it's growing so much? The Big Whale answers your basic questions.
Where does Bitcoin come from?
The incredible story of Bitcoin began on October 31, 2008. On that day, a mysterious Internet user named "Satoshi Nakamoto" posted a nine-page document presenting a theoretical peer-to-peer digital cash system called "Bitcoin. The date is not a coincidence. Even though it has been known for years that Bitcoin was in the making (the idea of a digital currency dates back to the late 1980s), Satoshi published his "white paper" a few weeks after the bankruptcy of the American bank Lehman Brothers and the bailout of many financial institutions by governments around the world.
On January 3, 2009, the first "block" of the Bitcoin blockchain was created on the network (known as the "Genesis Block"), and a first transaction took place between Satoshi Nakamoto's address and that of the American developer Hal Finney, who died in 2014, and whom a large part of the community suspects of being... Satoshi Nakamoto himself. For several years, Bitcoin will make its life in its corner, most often perceived as a technological experiment within the communities of developers and cypherpunk activists, who carry high the protection of privacy on the Internet and of which the young cryptomurrency is the monetary emanation.
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How does it work?
Bitcoin is a decentralized "cryptocurrency" based on the protocol created by Satoshi Nakamoto. It does not depend on any state, central bank or company that could control its issuance and value. This computer program, which automatically issues bitcoins, is the DNA of the cryptocurrency. Among other things, it defines the number of bitcoins that will be issued over the years, 21 million units on the network by 2140. Today, just over 19 million bitcoins have already been created and its issuance decreases over time. Its system is secured by miners and can be improved by developers around the world. With one caveat: for change to occur, it requires community consensus. In this respect, Bitcoin is a very democratic construct.
Who are the minors?
The "miners" are those who make the Bitcoin network work by validating transactions. This validation is done through special computers connected in a network. The miners use the computing power of these machines to verify and validate Bitcoin transactions. In exchange for this validation activity, they themselves receive remuneration in Bitcoins (user transaction fees and the money creation generated by the protocol).
Initially reserved for individuals, "mining" has become very lucrative with the exponential rise in the value of bitcoin, and has been taken over by companies. Before China decided in 2021 to drastically limit this activity - officially for environmental reasons (and more likely to keep strict control over the money flows of its citizens), the country was the overwhelming leader in the sector (up to 65% market share). Since then, it is the United States that has partly taken the lead in this area (43%).
How to buy and sell bitcoins?
As the price of bitcoin continues to rise, the points of buying and selling bitcoins are only increasing. Currently, the easiest way to buy cryptocurrency is on platforms like Coinhouse, StackingSat, Coinbase or Binance. Other more traditional players have also started offering it more recently. This is notably the case of payment giant PayPal or fintechs like Lydia or Revolut.
Who are the users of Bitcoin?
Bitcoin users fall into two broad categories. At one end of the chain, there are individuals. In some countries, such as France, where the banking system is well developed, Bitcoin holders do so primarily for investment purposes. In other parts of the world, especially where there is high inflation and a poorly developed banking system, crypto holders do so to protect themselves from the depreciation of their local currency and to access financial services...
At the other end of the user chain, there are financial players, such as banks, stock market operators, investment funds and more recently companies. In 2021, several giants like Tesla announced that they hold bitcoins in their treasury. The car manufacturer has more than $1 billion in bitcoin in its accounts. The latest phenomenon is the growing interest of states in this asset that has been dubbed "digital gold" due to its rarity and now universally recognized value. In 2021, El Salvador became the first country in the world to make the world's largest cryptocurrency a legal tender. Other countries, especially in Latin America, are considering doing the same.
