Bitcoin 101 – An In-Depth Look at the World’s Leading Cryptocurrency
Considering that the world is in the grips of a cryptocurrency frenzy, we aren’t surprised to see more and more people looking to educate themselves on what Bitcoin is and what it has to offer. Now, Bitcoin can be a complex subject matter, as it’s a commodity driven by technical algorithms. However, to invest in Bitcoin, you don’t need to be cryptocurrency genius, as it’s case of simply determining your level of interest. For those with only a passing interest, a causal explanation of Bitcoin will probably suffice, but anyone that has real intentions of utilizing Bitcoin, further knowledge will be required.
No matter your level of interest in Bitcoin, you’ve come to the right place. Given our overall experience in dealing with Bitcoin – we do run the world’s leading Bitcoin online casino after all – we felt that it was about time that we delivered a true lesson in what Bitcoin is all about. Starting with the basics, before looking at the complexities that surround Bitcoin and what the future has in store for the leading cryptocurrency, the following is a true Bitcoin 101!
Defining Bitcoin as a commodity
Created in 2009 by the mysterious Satoshi Nakamoto – a “man” who has yet to be identified as an actual person – Bitcoin stands as the world’s first true digital currency. The whole purpose of Bitcoin, at least during its formative years was to create a currency that was capable of delivering far lower transaction fees than that of standard payment methods. Unlike government-backed currencies, Bitcoin is decentralized, which means that it effectively carries more freedom as a currency and in the way it functions.
There is technically no such thing as a physical Bitcoin – excluding forms of cold storage – with balances kept on a cloud-based public ledger. Balances kept on the globe-spanning public ledger are verified by large-scale computer operations. Bitcoin doesn’t stand as legal tender outside of a few select countries – see Japan, Zug (Switzerland), and Germany – but that hasn’t stopped it from amassing a staggering market cap of more than $185 billion.
The history behind Bitcoin
Bitcoin didn’t just magically appear overnight, with the peer-to-peer technology required to make it a reality being driven by driven by complex methods and processes. Looking through the history books, Bitcoin.org was initially registered as a domain back in 2008, but the identity of the man behind the registration remains unknown due to WhoIsGuard Protection, which keeps it out of the eyes of the public.
Two months after Bitcoin.org is officially registered, Satoshi Nakamoto – or somebody using that as an alias – makes an intriguing announcement via The Cryptography Mailing list at metzdowd.com. It said, “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party. The paper is available at http://www.bitcoin.org/bitcoin.pdf.” This lead to the first public acknowledgment of Bitcoin’s whitepaper – Bitcoin: A Peer-to-Peer Electronic Cash System. Speak to any budding Bitcoin enthusiast or leading Bitcoin analyst and they’ll tell you how this is effectively Bitcoin’s Magna Carta and is a must read, even if it’s only for historical purposes.
Fast-forward to January 2009, and the very first Bitcoin block is mined – Block 0. Dubbed the “Genesis Block”, it carried a rather odd text, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” The exact reason for this text is often debated, but most agree that it was probably a statement on the instability of banking industry at the time. While the “second bailout for banks” detail could possibly suggest that the fact a supposedly liberal and capitalist system, rescuing banks like that, was a questionable issue in the eye’s of Satoshi. Finally, it might be a long-shot, but the reference to the British banking system could also hint that Satoshi is from the United Kingdom. Hot on the heels of the “Genesis Block”, the first version of the Bitcoin software was announced via The Cyptocurrency Mailing list on January 8th. The very next day Block 1 was mined and Bitcoin mining “officially’ commenced.
Powered by a purpose
Bitcoin might not have initially been designed to reinvent the banking industry, but it has grown into something that truly has the power to change the world. The purpose behind Bitcoin was to bring a decentralized currency to the masses, with it delivering low-cost transaction fees and fast transaction speeds. Decentralized is the hot term of the moment, but in the case of Bitcoin it carries plenty of weight and longevity. Its decentralized structure means that no single person, entity, or government can control Bitcoin. Differing from printed money, anyone can mine Bitcoin, with the trust surrounding Bitcoin’s value actually coming about through those using it. All of those mining and using Bitcoin are – in a sense – connected, so there’s no single point of failure that can bring Bitcoin down. If a single user or group of users were to vanish, the value of Bitcoin would remain as is, with the cryptocurrency still being as steadfast as it was previously.
Throughout the years, the purpose of Bitcoin has shifted and transformed, but what remains is the fact that it still has a role to play on a consumer level. While not widely accepted at mainstream stores as of yet, its accessibility is improving. Overstock, KFC, Expedia, Microsoft, and countless other big time retailers are opening up to Bitcoin, with even Bitcoin ATMs popping up in some countries. When you look at the current retail landscape, technically speaking you can buy anything with Bitcoin, which shows that this is a forward-thinking cryptocurrency that carries a true purpose.
From a retail perspective, Bitcoin does carry weight, as it could realistically be used to purchase anything. But, it can be argued that Bitcoin has found its true “home” within the online casino community. Adopting Bitcoin slowly but surely, cryptocurrency has opened the door to new markets and new ways for players to gamble. Standing as the perfect example in the field, BitStarz has really kick-started a Bitcoin revolution that has banished many of the doubters through its approach.
For starters, one of the biggest issues regarding Bitcoin’s use in the online casino domain was the number of actual Bitcoin-accepting games players could play. Through its 1,000 available games, almost half of which accept Bitcoin, BitStarz has certainly put the lack of choice myth to bed. BitStarz has also shown the world that you allow for BTC use at a casino in a similar fashion to standard currencies. This means that you can do more than just deposit and withdraw in Bitcoin at BitStarz, as you can also grab plenty of BTC bonuses and promotions as well. Showing plenty of generosity, the current welcome bonus gives players up to 5 BTC, plus 180 free spins.
BitStarz has proved that the Bitcoin concept doesn’t need to be a niche, closed off venture. Providing standard currency support, along with altcoin support in BCH, LTC, and ETH, it’s clear that Bitcoin – along with other cryptocurrencies – are changing the face of online casino play, with BitStarz leading the charge.
Understanding how it works
If you want to truly understand Bitcoin and how it works, you have to look at its technical side. Now, be warned, you are going to need to stick with us, as Bitcoin can certainly present a bit of a complex commodity to say the least. The term cryptocurrency refers to a digital currency that is encrypted by a sophisticated algorithm; this means that it can be passed between two parties securely. Essentially, the basis for Bitcoin is cryptography, as without cryptography it wouldn’t be possible to encrypt data to such a scale, which is obviously pivotal to the functionality of Bitcoin and various other cryptocurrencies. Cryptography is effectively what powers parts of Bitcoin, helping make it the revolutionary system that it is.
Every Bitcoin increment – even down to 0.00000001 – carries a unique, fully encrypted code that is issued upon creation. The code is made up of a large string of letters and numbers. It should be noted that all bitcoin transactions are public and visible via public ledgers such as blockchain.info, so you’re able to see the transactions occurring in real time, along with their related value.
Anyone that wants to acquire Bitcoin – whether it is via mining or purchase – will require a Bitcoin wallet, which takes the form of another encrypted code. The wallet represents a piece of software where Bitcoin can be sent and received, through the wallet system it ensures that no amount of Bitcoin is ever left without ownership. When active, a Bitcoin wallet – no matter whether it’s online or via “cold” hardware storage – allows someone to store private Bitcoin keys. The purpose of the wallet to protect your funds and effectively act like a vault for your Bitcoin address. When your BTC is sent to your Bitcoin address, the value will show as the balance within your wallet. A wallet is able to hold an unlimited amount of addresses, with each address being the crypto equivalent of a bank account through a long string of numbers and letters.
How Bitcoin actually comes to pass is through mining – which is a whole different subject entirely – with those who contribute to the process being given a reward. As a result, Bitcoin doesn’t represent a product in the sense that it can just be bought. Should you want to acquire Bitcoin then someone would need to want to sell, and obviously vice-versa when you wish to sell.
The nature of Bitcoin means that it is not a currency that can be produced indefinitely unlike EUR or any other international currency, with there only being a finite number of coins that can be mined – 21 million BTC to be precise. 80% of all Bitcoins have been mined at last count, so it’s pretty safe to assume that the cryptocurrency’s value is heavily influenced by supply and demand.
A volatile undercurrent
You’ve probably already seen the news reports regarding Bitcoin’s wild price swings, as its volatility has become pretty well documented by this point. Shooting up to consecutive ATHs before undertaking price corrections, Bitcoin’s recent history has been quite the wild ride. The reason behind the volatility isn’t anything that someone with an interest in Bitcoin can ignore.
As mentioned above, Bitcoin’s value is directly linked to the laws of supply and demand, something that has become prevalent through the growth in Bitcoin exchanges such as BitStamp, Bitfinex, Coinbase, Kraken, and Bittrex. Whenever traders acquire tokens on mass, the price of Bitcoin goes up, while the opposite happens when people move to sell off coins. This results in small price swings occurring on a near daily basis, with even small changes in supply having the potential to cause major price shifts.
Another factor that is sometimes overlooked is that Bitcoin is still extremely new; with it only gain mainstream traction in recent years. Its relatively young nature heavily lends itself to volatility, as due it often being misunderstood, it can make the value of Bitcoin extremely difficult to pin down. Adding to the fact that Bitcoin is still well within its infancy, the mass amount of cryptocurrency is owned by a small pool of people. The latest statistics show that approximately 95% of all Bitcoin is owned by just 4% of people. This means that – should they wish – a single person or entity could flood the market with Bitcoin at any moment, rocking its value in the process.
Finally, government regulations, regulatory bodies, and economics can also influence Bitcoin’s price, even if it is technically indirectly. Bitcoin has received huge boosts from the likes of Japan opening its doors to the cryptocurrency, while regulatory matters and outright bans in other countries have dampened its price.
The future of Bitcoin
Bitcoin – along with other altcoins – might have had a rocky start to 2018, but this isn’t anything that can take away from its bright future. There is no denying that Bitcoin will heavily impact the way the world sees money in the years to come. The move away from centralized currency is well underway, as more people are looking to explore the purposes and influences of cryptocurrency, including global business powers such as Mark Zuckerberg and Elon Musk. With its presence growing, you can fully expect more stores, outlets, and corporations to accept Bitcoin moving forward, even incorporating into daily operations. Japan is leading the way on this front through the increasing number of Bitcoin ATMs, along with many Japanese firms allowing staff to be paid in Bitcoin.
You can also expect Bitcoin to address its biggest stumbling blocks, with the solution to the well-documented scalability issue already being worked around. The Lightning Network is making amazing strides when it comes to transaction costs, effectively bringing Bitcoin back closer to its original intention of being a “peer-to-peer electronic cash system”. While the SegWit2x failed to fix this problem, the Lightning Network is a different story entirely. Representing an on-chain upgrade of sorts, the Lightning Network allows for micropayments to occur between two parties across an open payment channel. What the Lightning Network has the power to do is bring Bitcoin closer to becoming a functional day-to-day currency, as it supports extremely low transaction fees, instant transactions, and increased anonymity. Through the “Sphinx” protocol and a Tor-like anonymity network, Lightning Network payments offer users protected fungibility and near total privacy.
When all of its impressive attributes come together, the Lightning Network effectively allows the load on the Blockchain to be lightened, as the channel allows a user to make as many transactions through it as they wish. The Lightning Network is being labeled as a true game-changer for Bitcoin – with network nodes and channels growing daily – so it should only work to further the cryptocurrency’s usability and mainstream appeal.
Bitcoin is only just getting started!
Bitcoin isn’t a “bubble” as some misinformed news outlets would have you believe. Labeling its shaky start to 2018 as the beginning of the end, the obituaries have been printed here, there, and everywhere – with there being 249 at last count – but as expected these prove to be nothing more than senseless conjecture. Bitcoin’s prominence in the currency market hasn’t happened by chance, it presents a commodity that without question has the power to change the way the world functions, from banking to online casino play, the reach of Bitcoin is vast and near impossible to ignore.
If you’ve stuck with us, you’ve now been run through the ultimate Bitcoin 101, which will have certainly got you up to speed with both the technical and not-so-technical side of the world’s leading cryptocurrency. That being said, this introduction to Bitcoin is only the beginning, with exciting developments on the horizon, stick by BitStarz as we will keep you up to date on all things Bitcoin!