Bitcoin facts for kids
Quick facts for kids Bitcoin |
|
|---|---|
Logo of Bitcoin
|
|
| Denominations | |
| Plural | Bitcoins |
| Symbol | ₿ (Unicode: Error using : Input "20BF" is not a hexadecimal value.) |
| Precision | 10−8 |
| Subunits | |
| 1⁄1000 | Millibitcoin |
| 1⁄1000000 | Microbitcoin |
| 1⁄100000000 | Satoshi |
| Development | |
| Original author(s) | Satoshi Nakamoto |
| White paper | "Bitcoin: A Peer-to-Peer Electronic Cash System" |
| Implementation(s) | Bitcoin Core |
| Initial release | 0.1.0 / 9 January 2009 |
| Latest release | 25.1 / 19 October 2023 |
| Development status | Active |
| Written in | C++ |
| Source model | Free and open-source software |
| License | MIT License |
| Ledger | |
| Ledger start | 3 January 2009 |
| Timestamping scheme | Proof-of-work (partial hash inversion) |
| Hash function | SHA-256 (two rounds) |
| Issuance schedule | Decentralized (block reward) Initially ₿50 per block, halved every 210,000 blocks |
| Block reward | ₿6.25 (as of 2023[update]) |
| Block time | 10 minutes |
| Circulating supply | ₿19,591,231 (as of 6 January 2024[update]) |
| Supply limit | ₿21,000,000 |
| Valuation | |
| Exchange rate | Floating |
| This article contains special characters. Without proper rendering support, you may see question marks, boxes, or other symbols. |
Bitcoin (abbreviation: BTC or XBT; sign: ₿) is the first decentralized cryptocurrency.
Bitcoin was invented in 2008 by Satoshi Nakamoto, an unknown person. Use of bitcoin as a currency began in 2009. In 2021, El Salvador adopted it as legal tender. Bitcoin is currently used more as a store of value and less as a medium of exchange or unit of account. It is mostly seen as an investment and has been described by many scholars as an economic bubble.
In 2020, some major companies and institutions started to acquire bitcoin: MicroStrategy invested $250 million in bitcoin as a treasury reserve asset, Square, Inc., $50 million, and MassMutual, $100 million. In November 2020, PayPal added support for bitcoin in the US.
In February 2021, Bitcoin's market capitalization reached $1 trillion for the first time.
In 2023, ordinals, non-fungible tokens (NFTs) on Bitcoin, went live.
History
The domain name bitcoin.org was registered on 18 August 2008. On 31 October 2008, a link to a white paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto implemented the bitcoin software as open-source code and released it in January 2009. Nakamoto's identity remains unknown.
On 3 January 2009, the bitcoin network was created when Nakamoto mined the starting block of the chain, known as the genesis block. Embedded in this block was the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks", which is the date and headline of an issue of The Times newspaper. Nine days later, Hal Finney received the first bitcoin transaction: ten bitcoins from Nakamoto. Wei Dai and Nick Szabo were also early supporters. In 2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John's pizzas for ₿10,000.
Units and divisibility
The unit of account of the bitcoin system is the bitcoin. It is represented with the currency codes BTC and XBT as well as the symbol ₿. No uniform capitalization convention exists; some sources use Bitcoin, capitalized, to refer to the technology and network, and bitcoin, lowercase, for the unit of account. The Oxford English Dictionary advocates the use of lowercase bitcoin in all cases.
One bitcoin is divisible to eight decimal places. Units for smaller amounts of bitcoin are the millibitcoin (mBTC), equal to 1⁄1000 bitcoin, and the satoshi (sat), representing 1⁄100000000 (one hundred millionth) bitcoin, the smallest amount possible. 100,000 satoshis are one mBTC.
Pseudonymous
One of the differences between using bitcoin and using regular money online is that bitcoin can be used without having an internet connection to link any sort of real-world identity to it. Unless someone chooses to link their name to a bitcoin address, it is hard to tell who owns the address. Bitcoin does not keep track of users; it keeps track of addresses where the money is. Each address has two important pieces of cryptographic information, or keys: a public one and a private one.
The public key, which is what the "bitcoin address" is created from, is similar to an email address; anyone can look it up and send bitcoins to it. The private address, or private key, is similar to an email password; only with it can the owner send bitcoins from it. Because of this, it is very important that this private key is kept secret. To send bitcoins from an address, you prove to the network that you own the private key that belongs to the address, without revealing the private key. This is done with a branch of mathematics known as public-key cryptography.
Public Key
A public key is what determines the ownership of bitcoins, and is very similar to an ID number. If someone wanted to send you bitcoins, all you would need to do is supply them your bitcoin address, which is a version of your public key that is easier to read and type. For example, if Bob has 1 bitcoin at the bitcoin address "ABC123," and Alice has no bitcoins at the bitcoin address "DEF456," Bob can send 0.5 bitcoins to "DEF456." As soon as the transaction is processed, Alice and Bob both have 0.5 bitcoins. Anyone using the system can see how much money "ABC123" has and how much money "DEF456" has, but they cannot tell anything about who owns the address.
Private Key
In the example above, "ABC123" and "DEF456" are the bitcoin addresses of Bob and Alice. But Bob and Alice each have a second key which only they individually know. This is the private key, and it is the "other half" of a Bitcoin address. The private key is never shared, and allows the owner of the bitcoins to control them. However, if the private key is not kept secret, then anyone who sees it can also control and take the bitcoins there. This happened on live TV when Bloomberg's Matt Miller accidentally showed a private key to viewers. The money was taken immediately. The person who took it, told others about it later, saying "I'll send it back once Matt gives me a new address, since someone else can sweep [empty] out the old one."
Technical Details
Blockchain
Sites or users using the Bitcoin system are required to use a global database called blockchain. Blockchain is a record of all transactions that have taken place in the Bitcoin network. It also keeps track of new bitcoins as they are generated. With these two facts, the blockchain can keep track of who has how much money at all times.
Mining
To generate a bitcoin, a miner must solve a math problem. However, the difficulty of the math problem depends on how many people are mining for bitcoin at the moment. Because of how complicated the math problems usually are, they must be calculated with very powerful processors. Cynics of the technology highlight the environmental impact and sustainability of the creation process.
These processors can be found in CPUs, graphics cards, or specialized machines called ASICs. The process of generating the bitcoins is called mining. People who use these machines to mine bitcoins are called miners. Miners either compete with one another or work together in groups to solve a mathematical puzzle. The first miner or group of miners to solve the particular puzzle are rewarded with new bitcoins.
The puzzle is determined by the transactions being sent at the time and the previous puzzle solution. This means the solution to one puzzle is always different from the puzzles before. Attempting to change an earlier transaction, maybe to fake bitcoins being sent or change the number of someone's bitcoins, requires solving that puzzle again, which takes a lot of work, and also requires solving each of the following puzzles, which takes even more work. This means a bitcoin cheater needs to outpace all the other bitcoin miners to change the bitcoin history. This makes the bitcoin blockchain very safe to use.
QR Codes
A popular image associated with Bitcoin is a QR code. QR codes are a group of black and white boxes that are similar to barcodes. Barcodes are a row of lines, and QR codes are a grid of squares. Bitcoin uses QR codes because they can store more information in a small space, and a camera such as a smartphone can read them. The two QR codes on the Bitcoin note are the public and private addresses, and can be scanned with a number of online tools.
Exchanges
Everyone in the Bitcoin network is considered a peer, and all addresses are created equal. All transactions can take place solely from peer to peer, but a number of sites exist to make these transactions simpler. These sites are called exchanges. Exchanges provide tools for dealing in Bitcoin. Some allow the purchase of Bitcoin from external accounts, and others allow trading with other cryptography-based currencies like Bitcoin. Most exchanges also provide a basic "wallet" service.
Wallets
Wallets provide a handy way to keep track of all of a user's public and private addresses. Because addresses are pseudo-anonymous, anyone can have as many addresses as they want. This is useful for dealing with multiple people, but it can get complicated to manage multiple accounts. A wallet holds all of this information in a convenient place, just like a real wallet would. A backup of a wallet prevents 'losing' the bitcoins.
Images for kids
-
Data structure of blocks in the ledger.
-
Electricity consumption of the bitcoin network since 2016 (annualized) and comparison with the electricity consumption of various countries in 2019. The upper and lower bounds (grey traces) are based on worst-case and best-case scenario assumptions, respectively. The red trace indicates an intermediate best-guess estimate. (data sources: Cambridge Bitcoin Electricity Consumption Index, US Energy Information Administration; for details, see methodology )
See also
In Spanish: Bitcoin para niños
- Alternative currency
