The origins of the cryptocurrency Bitcoin as well as its inventor Satoshi Nakamoto are cloaked in mystery. It was released in 2008 as open-source software and is a decentralized digital currency that does not come under the regulatory control of any fiscal agency, Government, or Central Bank. Hence, it can be sent by one user to another in any part of the world on the peer-to-peer network, bypassing regular financial institutions like banks. All Bitcoin transactions are verified by network nodes through end-to-end encryption and recorded in a public ledger called the Blockchain.
Over the past decade and more, Bitcoin has ruled the crypto world and till 2020 when data is last available, has accounted for the major share of market capitalization. But lately, other cryptocurrencies like Ethereum and Ripple are catching up fast with Bitcoin and becoming a popular mode of transactions that affect the lives of the common person. Bitcoin, though still leads the pack and pundits wonder if Bitcoin will ever replace real cash or fiat currency.
How is Bitcoin created?
A Bitcoin is created by miners through a system (called mining for the coin) that requires massive computing powers and electricity consumption. The investment required for setting up a network is so large that for individuals operating singly, it is not a viable project. Hence groups of miners get together for this exercise. Every block created and verified by the miners brings rewards of Bitcoins and this is how the crypto is brought into circulation.
However, as per the software launched by Nakamoto, an unlimited number of Bitcoins cannot be mined and the cap has been fixed at 21 million coins. For every 210,000 blocks mined by the miners or 4 years whichever is earlier, the number of coins that can be mined is halved and the rewards payable to miners are reduced by 50%. This process will go on till the cap of 21 million coins is reached.
Currently, about 18.5 million Bitcoins have been mined. That leaves less than 3 million to be brought into circulation. The next halving of mining is due in 2024.
Ownership and transaction
Bitcoins are registered and ownership is established on the Blockchain to a Bitcoin address. For creating an address, all that is required is selecting a random valid key and entering the corresponding Bitcoin address. This computing can be done in a split second but the reverse of computing the private key of a particular Bitcoin address is almost impossible. Hence, users can inform others of a Bitcoin address without revealing the private key.
This private key is critical as a receiver of funds to a Bitcoin address can only unlock the money through the private key. The number of valid keys is so large that it is unlikely that anybody can hack into an account by pairing a private key with the corresponding Bitcoin address. If the private key is lost, the Bitcoin network will not recognize any other evidence of ownership.
This is the main reason why Bitcoin transactions on the Blockchain are considered fully safe and secure.