Bitcoin (abbreviated as BTC; symbol: ₿) is the first decentralized cryptocurrency.
Transactions within the peer-to-peer Bitcoin network are verified by nodes through cryptography and recorded in a public distributed ledger known as a blockchain, without any central authority.
Consensus among nodes is achieved through a computationally intensive process called mining, which relies on proof of work to secure the Bitcoin blockchain.
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This mining process consumes significant amounts of electricity and has faced criticism for its environmental impact.
Rooted in free market ideology, Bitcoin was created in 2008 by the pseudonymous Satoshi Nakamoto.
The use of Bitcoin as a currency began in 2009 with the release of its open-source software.
In 2021, El Salvador became the first country to adopt Bitcoin as legal tender. While it is often viewed as an investment, many scholars have described it as an economic bubble.
Its pseudonymous nature has raised concerns about its use by criminals, prompting several countries to impose bans on it by 2021.
Things You Never Knew About Cryptocurrency
A cryptocurrency, or crypto, is a digital form of currency designed to function as a medium of exchange through a decentralized computer network, independent of any central authority like a government or bank.
From a financial perspective, cryptocurrencies have evolved into their own asset class, though, unlike traditional asset classes like equities or commodities, formal sectors within crypto are not yet clearly defined.
Ownership records for individual coins are stored in a digital ledger—a computerized database that uses strong cryptography to secure transaction records, control the creation of additional coins, and verify transfers of ownership.
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While the term “cryptocurrency” is widely used to describe many fungible blockchain tokens, they are not considered traditional currencies.
In various jurisdictions, cryptocurrencies have been classified as commodities, securities, or currencies, depending on local laws. Practically, they are generally viewed as a distinct asset class.
Some cryptocurrency systems use validators to maintain their networks.
In a proof-of-stake model, token owners stake their holdings as collateral to gain authority over the token in proportion to their stake.
These stakers typically earn additional tokens over time through rewards such as network fees or newly minted tokens. Small amounts of cryptocurrency that aren’t worth spending due to transaction fees are referred to as “dust.”
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Cryptocurrencies are typically not issued by a central authority and do not exist in physical form, though there have been experiments with physical coins.
Most rely on decentralized control rather than central bank digital currencies (CBDCs). When centralized, cryptocurrencies are minted or issued by a single entity, but with decentralized control, they operate through distributed ledger technology, most commonly blockchain, which acts as a public transaction database.
Bitcoin, the first cryptocurrency, was released as open-source software in 2009.
By June 2023, there were more than 25,000 cryptocurrencies in existence, with over 40 boasting market capitalizations exceeding $1 billion.