Bitcoin is digital money that isn’t controlled by any bank or company or person. Bitcoin was invented in 2008 by a pseudonymous programmer called Satoshi Nakamoto. The volunteer network went live in 2009, and people around the world have been contributing to this open-source project ever since.
If you want to get your first bitcoin with just four easy steps, you can follow our guide and get everything you’ll need through our store. In the meantime, here are the simple terms you need to know in order to understand Bitcoin.
BASIC BITCOIN TERMINOLOGY
- Hot Wallet: Downloading a bitcoin wallet to your device is the most convenient way to send and receive small amounts of bitcoin. However, there are important trade-offs to carrying your funds on a device, like a mobile phone, that is connected to the internet.
- Open Source: The Bitcoin network is made up of individual participants, choosing to run particular software that is publicly accessible and collaborative in its maintenance. No single person or company owns, hosts or runs the network, making it highly resilient to threats.
- Decentralization: Bitcoin users, miners and full nodes are scattered all over the world. It is these groups in aggregate that make up the network. With no headquarters, CEO or employees, there is no central point of failure.
- Peer To Peer (P2P): When two people exchange money and goods in person, they are doing so in a decentralized way. But online transactions have continued to rely on trusted third parties because we’ve lacked a way to enforce honesty. Bitcoin incentivizes honesty through its transparent and auditable design.
- Full Node: Full nodes are hardware that maintain a full copy of the Bitcoin blockchain, while enforcing the network’s predefined rules. They can independently validate, broadcast and relay transactions, without the need to trust any third party. This arrangement results in decentralization. (You can buy plug-and-play hardware or build your own full node at home following this guide.)
- Block Explorers: One of the features of bitcoin’s open and public blockchain is the ability to view all historical transactions as well as transactions taking place in real time that settle on Bitcoin’s main layer. Block explorers are tools which capture a live feed of the transaction data produced by the Bitcoin network.
- Timestamps: Bitcoin’s pseudonymous creator, Satoshi Nakamoto, referred to their creation as a “timechain,” as each block includes an approximate timestamp. This makes it possible to determine the sequence of all transactions and ensure no bitcoin can be double-spent. When combined with digital signatures, the Bitcoin blockchain acts as a de facto global public store of record.
- Self Custody: Securing your sats is not a passive exercise. As the value of your bitcoin holdings grows, so should the strength and resilience of your security measures and backup procedures. The reality of being a bitcoiner means continually updating your knowledge regarding best practices and regularly testing your set up. There are many wallet options that you can choose from.
- Private Key: A private key in the context of Bitcoin is a key connected to an address (technically, the address is the hash of the public key corresponding to the private key) that is stored behind the scenes and allows you to send bitcoin that have been previously sent to that address. Note that because of the way the encryption algorithm that Bitcoin uses (ECDSA) works, it is possible to generate the public key and the address from just the private key. It’s very important to keep your private key safe.
Bitcoin means different things to different people. For some, it’s the future. For others, it is a speculative bubble about to burst any day now. And for most, Bitcoin is still a mysterious platform for internet money.
Fully understanding Bitcoin and the changes it is bringing to our world can be a lifetime pursuit. But it helps to start with a few basics. To get a sense of what Bitcoin really is, let’s take a look at the fundamentals of its history, technical underpinnings, status as a financial asset and more.
WHO INVENTED BITCOIN?
Bitcoin was invented by Satoshi Nakamoto, (almost certainly) a pseudonym. No one has been able to conclusively connect the Satoshi Nakamoto moniker to an actual person or group of people.
Satoshi Nakamoto first introduced his proposal to the world in November 2008, when he submitted a white paper that describes Bitcoin to a cryptography mailing list. A couple of months later, Satoshi Nakamoto published the software. On January 3, 2009, Satoshi Nakamoto mined the first-ever Bitcoin block, dubbed the “genesis block,” setting the Bitcoin protocol in motion.
While he was actively involved with the Bitcoin project in the early days, Satoshi Nakamoto vanished in 2011, leaving few clues as to who he might be. Over time, there have been many instances of people claiming to be Satoshi Nakamoto, and others who’ve had that claim thrust upon them, but none with conclusive evidence. Sporadically, there have also been some messages from accounts associated with Satoshi Nakamoto since 2011, but many question the authenticity of these later messages.
There has been a lot of speculation about how many bitcoin Satoshi Nakamoto mined in the early days, when few people had even heard of Bitcoin. Estimates range from about 50 to 1 million. Interestingly, even if the high end of the estimate is correct, Satoshi Nakamoto appears to have touched very few, if any, of his coins.
In the end, most Bitcoiners agree that Satoshi Nakamoto’s true identity doesn’t matter much. The protocol stands on its own, regardless of who or what Satoshi Nakamoto was.
To read more about Satoshi Nakamoto, visit our guide on the inventor of Bitcoin.