Bitcoin – The First Cryptocurrency

The Birth of Bitcoin

In 2008, during a global financial crisis, an unknown person (or group) using the pseudonym Satoshi Nakamoto published a whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” This paper outlined a new form of money that didn’t require trust in banks or governments. In January 2009, Bitcoin’s network went live. Satoshi mined the first block of the Bitcoin blockchain (known as the genesis block), and the cryptocurrency revolution quietly began.

Bitcoin was designed with a clear purpose: to be an alternative to the traditional financial system. The timing was telling – the first block even contained a cryptic message referencing a newspaper headline about bank bailouts, suggesting motivation to create a currency outside of bank control. Bitcoin introduced a system where people could transfer value directly to each other online, secured by decentralized network consensus (the Proof-of-Work mechanism you learned about in Course 1). No more relying on a bank to update a ledger, Bitcoin’s blockchain is the ledger, maintained by thousands of independent nodes around the world.

A few key points about Bitcoin’s network and rules:

• Decentralized and Permissionless: Anyone with a computer and internet can participate in the Bitcoin network. You don’t need to register or ask permission. This was groundbreaking – value transfer that’s open to all.
• Fixed Supply: Bitcoin’s code ensures there will never be more than 21 million BTC in existence. This scarcity is enforced by the network rules. New bitcoins are released as rewards to miners, but this reward halves every 4 years or so (an event known as the “halving”). As of today, approximately 19.9 million BTC have been mined, accounting for roughly 93% of the total supply. The last bitcoins won’t be mined until around the year 2140. This predictable, limited supply is a stark contrast to fiat money, where central banks can print trillions at will.
• Blockchain and Proof-of-Work: Bitcoin batches transactions into blocks roughly every 10 minutes. Miners (specialized computers) compete to solve a cryptographic puzzle, and the winner adds the next block to the chain (that’s the Proof-of-Work consensus). This process is energy-intensive by design, which makes the network extremely secure – altering Bitcoin’s ledger would require controlling over half of the mining power, an almost impossible feat given the scale.
• Pseudo-Anonymous: Bitcoin addresses are random strings (like 1BoatSLRHtKNngkdXEeobR76b53LETtpyT for example). Transactions don’t contain personal info, so identity isn’t inherently revealed on-chain. However, all transactions are public, and if an address is linked to a real identity (through an exchange KYC, for instance), one can trace the history of its transactions. It’s transparent yet not tied to real names by default.
• Immutable and Secure: Once a Bitcoin transaction is confirmed and buried under additional blocks, it’s effectively permanent. There’s no “undo” or chargeback. This finality is why security is crucial – if you send Bitcoin to the wrong address or lose your private keys, there’s no bank to call for recovery. The upshot is that fraud is nearly impossible without network control, because every transaction is validated by the network majority and etched into the blockchain history.

Why Bitcoin Has Value

At first glance, Bitcoin might sound like just numbers in a computer – so why do people assign real-world value to it? It turns out, Bitcoin’s properties make it attractive as a form of money and as an investment:

• Scarcity: With a hard cap of 21 million, Bitcoin is often compared to gold (which is scarce by nature). In fact, Bitcoin has earned the nickname “digital gold” as a store of value. People expect that as long as demand for Bitcoin increases and supply is limited, the price in fiat terms will trend upward over time. This built-in scarcity is a key reason Bitcoin went from being nearly worthless in 2009 to having a market price of tens of thousands of dollars per coin years later. (Fun fact: In May 2010, someone famously paid 10,000 BTC for two pizzas – an amount worth hundreds of millions of dollars today!)
• Security and Trustworthiness: Bitcoin has been operating continuously for over 14 years without a hack of its core protocol. Its network is now secured by massive computational power worldwide. This security gives people confidence that Bitcoin cannot be easily compromised or inflated. In uncertain economic times, some investors see Bitcoin as a hedge similar to gold, trusting math and code over central banks.
• Portability and Divisibility: Bitcoin is highly divisible (each BTC can be split into 100 million smaller units called satoshis). You don’t need to buy or hold a whole Bitcoin. This means you can own $100 worth of BTC and it’s still Bitcoin. It’s also easily portable – you can carry a billion dollars worth of Bitcoin on a tiny hardware wallet or even just a memorized recovery phrase. Try doing that with gold bars or stacks of cash!
• Global Demand: Bitcoin’s user base has grown dramatically. Few weeks ago (Aug 2025), Bitcoin reached new all-time price highs, trading around $124,400 per BTC. This resurgence, after previous cycles of booms and busts, indicates sustained global demand. Many publicly traded companies, investment funds, and even countries (El Salvador, for example) hold Bitcoin as part of their reserves or treasury. The more people and institutions want Bitcoin, the more value the market assigns to it.
• Decentralization (No Censorship): Because no one controls Bitcoin, people in any country can use it as long as they have internet. It’s hard for authorities to ban effectively (though some have tried) because there’s no central server to shut down. Bitcoin has provided financial lifelines in places with hyperinflation or capital controls. For instance, individuals in Venezuela or Turkey have used Bitcoin to protect their savings against rapid currency devaluation. This real utility adds to its value proposition beyond speculation.

Of course, Bitcoin is not perfect. It has some limitations that you should be aware of:

• Performance: Bitcoin is secure and decentralized, but it’s not very fast or scalable for high volumes of small transactions. It handles roughly 5-7 transactions per second, and during peak usage, its network fees can rise significantly (because space in each block is limited). This makes it less ideal for buying a cup of coffee, for example, unless you use secondary layers like the Lightning Network (an overlay that enables faster Bitcoin payments). Newer cryptocurrencies have tried to optimize for speed and lower fees, as we’ll see later.
• Volatility: The price of Bitcoin in fiat terms can swing wildly. It’s not uncommon for BTC to gain or lose 5-10% of its value in a single day. Over the years, Bitcoin has experienced bull runs (e.g. +1,000% in a year) and harsh crashes (e.g. -80% from 2017 to 2018). While many long-term holders have seen tremendous appreciation, the ride has been bumpy. This volatility means Bitcoin isn’t a stable store of value day-to-day – it’s a risk asset in the short term, even if one believes in its long-term potential.
• Energy Use: Bitcoin’s Proof-of-Work mining consumes a lot of electricity (comparable to some small countries). Critics argue this environmental cost is too high for a currency system. Supporters claim that much mining uses renewable energy and that the security provided is worth the cost. This debate has pushed some newer cryptocurrencies to adopt alternative security methods (like Proof-of-Stake, which we’ll touch on with Ethereum).
• Limited Smart Functionality: Bitcoin’s scripting language is very limited on purpose (for security). It’s excellent for sending value, but you can’t easily run complex applications on Bitcoin’s base layer. This gap led to the creation of other blockchain platforms like Ethereum which allow more programmability.

🔑 Key Terms:

• Bitcoin (BTC): The first cryptocurrency, launched in 2009 by Satoshi Nakamoto. Often referred to as digital gold, it’s a decentralized digital currency with a fixed supply of 21 million.
• Satoshi: (1) The alias of Bitcoin’s creator. (2) The smallest unit of Bitcoin, equal to 0.00000001 BTC, named in honor of the creator. For example, if you own 0.5 BTC, that’s 50 million satoshis.
• Mining: The process by which new Bitcoin are created and transactions are verified. “Miners” use computing power to solve puzzles and add blocks to the blockchain (Proof-of-Work). Successful miners earn newly minted BTC plus transaction fees as a reward.
• Halving: A programmed event in Bitcoin’s code that cuts the mining reward in half every 210,000 blocks (approximately every 4 years). The halving slows down the creation of new BTC over time – for instance, the reward was 50 BTC per block in 2009, it’s 6.25 BTC per block currently (after several halvings). Halvings are significant events that reduce supply issuance, often discussed in Bitcoin’s market cycles.

💡 What This Means for Gate Users: On Gate.com, Bitcoin is one of the primary assets you can trade or invest in. You don’t need to buy a whole Bitcoin – Gate lets you buy fractional amounts, so you could start with as little as, say, 0.001 BTC. When you buy Bitcoin on Gate, you’re participating in this larger phenomenon of digital gold. You can hold it in your Gate wallet for the long term, or trade it for other coins, or withdraw it to your own custody. Many Gate users use Bitcoin as a fundamental part of their portfolio – for example, they might trade altcoins to grow their holdings and ultimately take profit back into Bitcoin, viewing it as a long-term store of value. As you continue learning, remember that Bitcoin often behaves like the anchor of the crypto market: when Bitcoin moves, the rest of the market tends to follow.