Bitcoin 101

Bitcoin is the world's first cryptocurrency created in early 2009. However, it was preceded by a series of research and developments. Today, we'll briefly introduce you to the history of virtual money.

What Is Cryptocurrency

Cryptocurrency is a digital currency that represents encrypted information protected against forgery. Unlike traditional (fiat) money, cryptocurrency is decentralized — it's not controlled by Central Banks or other financial institutions.

Cryptocurrency is mined using hardware and special software. The mining process is a calculation of complex cryptographic algorithms, and the mined coins are a set of encrypted data. The amount of coins that can be mined is limited, meaning that cryptocurrency is protected against inflation.

How It All Started

In 1992, a former Intel Corp. employee named Timothy May suggested an idea of creating an independent anonymous digital currency to his cryptographer friends. What for? To radically change the structure of corporations and to oust the state from control over financial transactions.

His friends liked the idea. The first person to try to implement it was Jim Bell who used to work for Intel, just like Timothy May. However, his goals were absurd and illegal: he wanted to use the mined digital money to hire assassins and kill the politicians who the society is dissatisfied with. He soon got under the radar of law enforcement agencies — and it ended for him.

In 1998, a graduate of the Washington University, Wei Dai, came up with an idea to create an online financial system B-money that would be free for its users and exempt from taxes. At the same time, a programmer, Nick Szabo, started working on creating a digital currency which led to the emergence of the Bit Gold virtual money. However, Szabo couldn't solve a number of important issues related to labor spent on mining the coins, to their nominal value and — more importantly — to transaction tracking and decentralization.

Answers to these questions were not found until 2008 when the mysterious Satoshi Nakamoto appeared on the cryptographic horizon. This mysterious stranger was the one who came up with the Bitcoin concept based on a chain of data on completed transactions.

In 2010, Nakamoto left the project, and no one has heard from him since. Even though the Web regularly publishes information about how he has been discovered. Nakamoto allegedly owns 1 mln bitcoin, but no one has exact information about him or his capital.

The Bitcoin cryptocurrency was created and started developing in January 2009, but it's a totally different story — and we'll tell you about it another time.

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