In the world of digital assets, Bitcoin is one of the most popular cryptocurrencies, which was created and introduced in 2008. In this article, we will explore the fundamentals of Bitcoin, including its definition, operation, and the underlying technology that powers this renowned cryptocurrency. Additionally, this article discusses how to use and invest in Bitcoin.
What is Bitcoin?
Bitcoin is a form of digital money. Designed as a cryptocurrency to be a virtual currency, acting as money and a form of payment, but not centralized, which means that it is outside the control of one entity, unlike fiat currency, which is centralized and under the control of the central bank and monetary policy. It doesn’t need the intervention of a trusted third party in financial transactions. All transactions are recorded in a technology system called the blockchain, which is something like a public digital ledger to record all transactions and prevent tampering.
Since 2008, Bitcoin has been introduced by an anonymous person or a group of developers under the pseudonym Satoshi Nakamoto. Since then, it has become the most well-known cryptocurrency and has inspired other developers to create other cryptocurrencies. Let’s move to Bitcoin’s history and how its price has surged over time.
The History of Bitcoin:
Bitcoin was introduced to the public in 2008 by a mystery figure known as Satoshi Nakamoto, who described it as a peer-to-peer electronic cash system. In 2009, Bitcoin was created, and the software was made available to the public after the first mining process, which generates new bitcoins. These transactions for the creation of new bitcoins are recorded and verified on the blockchain system.
For the first time in 2010, Bitcoin was valued. When someone decided to sell their bitcoins for the first time, they swapped 10,000 of them for two pizzas. There was no monetary value assigned to the units of the new cryptocurrency; it was considered impossible to assign a value. If this buyer still has these bitcoins, this means at today’s price, he would have more than $100 million. As bitcoin’s popularity increased and the idea of decentralized currencies caught on, by 2011, the creation of new cryptocurrencies started, and they were called altcoins, aiming to be better than bitcoin in different aspects, like being faster and offering more privacy. Today, we have over 10,000 different cryptocurrencies available, while some sources indicate that the number is closer to 20,000 or even higher, if we count all tokens.
From 2011 to the present, Bitcoin has experienced extreme price volatility and growth. It eventually broke $ 1,000 in late 2013, drawing massive global attention and reaching $20,000 in 2017, fueled by macroeconomic factors and growing institutional interest, surging to a new all-time high of $69,000 between 2020 and 2021.
Nonetheless, in 2023, there was a strong recovery, and by early 2024, we had the historic approval of spot Bitcoin ETFs in the U.S. This overwhelming confidence propelled Bitcoin to new all-time highs of over $73,000, surpassing the previous record set in December 2017. Bitcoin reached over $110,000 in early June 2025. After discussing Bitcoin’s history, let’s explore the blockchain system and its role.
What is Bitcoin’s blockchain?
The blockchain system was invented to be a public digital ledger for recording all transactions that take place across the Bitcoin network. Records are organized into blocks and linked together in a chain. That’s what it’s called: blockchain.
Blockchain blocks contain a list of transactions; each block has one transaction. The recorded transactions are saved permanently to ensure that all information is secured and to track the bitcoin movements. Blocks are linked to ensure the integrity of the transaction history.
What is Bitcoin Mining?
The mining process is an essential step within the Bitcoin network, as it adds new coins to circulation and ensures that all transactions are secure. For clarification: if we assume that we compete, people using computers to solve significant mathematical problems. The first one who successfully solves the problem will be the one who deserves to add a new set of bitcoin transactions (block) to the main bitcoin record (blockchain).
New blocks are added approximately every 10 minutes, depending on the number of people attempting to solve the puzzles. Solving the puzzle is mining, while solvers are miners. This is a simple clarification of the mining process. Now, you will be able to understand how Bitcoin works and how it transfers from one wallet to another.
How does Bitcoin work?
There are different steps to send Bitcoin from one wallet to another as follows:
- Creation: The sender has to specify the amount of Bitcoin and the recipient’s address.
- Signing: The sender uses the private key to digitally sign the transaction, thereby proving ownership of the Bitcoin that will be sent.
- Broadcasting: The signed transaction is considered a broadcast to the Bitcoin network, waiting for verification from miners.
- Verification: Miners are responsible for verifying valid transactions, ensuring that the sender has sufficient bitcoin to send
- Mining: Once the transaction is verified. The miners are trying to solve a cryptographic puzzle and then add it to a new block in the blockchain.
- Confirmation: Once the transaction is added to the new block, this means that the transaction is confirmed. New confirmations occur with each new block added.
Now you may be wondering if there are advantages to having a bitcoin, and on the other hand, what are the disadvantages of having one? So, let’s answer this question by listing the pros and cons of Bitcoin.
Pros and cons of Bitcoin:
| Pros | Cons |
| Decentralization: Peer-to-peer network reduces the risk of supervision, fraud, and government or financial institution intervention. | High Volatility: Bitcoin price is highly volatile and unpredictable, making it a risky investment. |
| High Privacy and Security: Transactions are secured by cryptography, keeping the sender’s and receiver’s names private. | Regulatory Uncertainty: Bitcoin regulations are still developing, affecting its value and uses. |
| Global Transactions: International transfers are faster and cheaper than traditional currency exchanges, which often have high fees and long processing times. | Environmental Impact: Bitcoin mining requires a significant amount of electricity and energy. |
| Limited Supply: The supply is capped at 21 million coins, making it more scarce and potentially increasing its value over time. | |
| Accessibility: Bitcoin is easily accessible worldwide, without the need for traditional banks. |
After briefly discussing the basics of Bitcoin, let’s have a quick comparison between fiat currency and digital currencies like Bitcoin, discovering how you can invest in Bitcoin.
The Key differences between fiat currency and cryptocurrency (Bitcoin):
| Cryptocurrency (Bitcoin) | Fiat Currency | |
| Monitorship | Decentralized, computer networks running open. | Issued by the government and centralized |
| Supply | Limited supply with scarcity. | An unlimited supply can be affected by inflation |
| Value based | Its value is based on supply and demand | It depends on government and monetary policies, economic health, and interest rates. |
| security | It’s secured by a network of computers and a cryptography system | Secured by a third party, such as banks and governments. |
| Physical currency | No physical currency, digital only | Yes, it’s a physical currency that can be used digitally through online banking, payments, and transfers |
| Volatility | High Volatility | More stable compared to crypto |
To conclude these differences, cryptocurrencies are bottom-up, community-governed digital money, unlike fiat currency, which is top-down, government-controlled money.
How to invest in Bitcoin:
Investing in cryptocurrency means that you want to buy it with the intention of an investment. You are buying the bitcoin at its current rate and waiting for its value to increase. However, bitcoin’s price is too high nowadays, so the advice is to invest in bitcoin in another way, without requiring a large capital to start the investment.
Investing in Bitcoin becomes easier than before, because now you can invest in Bitcoin without owning the digital asset itself. Through trading bitcoin CFDs, which enables traders to go long and short positions in bitcoin CFDs, making profits from price movements. This investment approach will be more straightforward for investors who prefer to trade rather than own a volatile asset, such as bitcoin, to avoid stress; thus, you can enter or exit the market at any time without undue stress. Bitcoin CFDs offer leverage, enabling traders to start investing with a relatively small capital and providing the opportunity to trade Bitcoin with as little as $2000.
Summary:
To conclude, Bitcoin is the most well-known cryptocurrency, which is why it inspired other developers to create new cryptocurrencies. Bitcoin can be used as an alternative to fiat currency, especially for online payments or when travelling abroad. It’s essential to be aware of the Bitcoin mechanism and how blockchain and mining work. This knowledge will be a plus when you decide to buy or trade Bitcoin or Bitcoin CFDs. Bitcoin has both pros and cons that need to be considered when trading or holding it.
