Bitcoin 101: All You Need to Know — Part 1

January 3, 2024
6 min read

Bitcoin (BTC) is the first-ever cryptocurrency to be developed, and, as of today, it is the most well-known decentralized digital currency. It inspired the creation of thousands of other cryptocurrencies, collectively called alternative coins or altcoins.

Bitcoin was created in 2009 by Satoshi Nakamoto, and, according to this paper, it is “a purely peer-to-peer version of electronic cash (that) would allow online payments to be sent directly from one party to another without going through a financial institution.” In addition, there are no exchange rates, the transaction fees are much lower, and transactions take minutes instead of days to complete, as is sometimes the case with traditional cross-border transfers.

Bitcoin would not have existed had it not been for its creator, so let’s mention a few things.

Who is Satoshi Nakamoto?

We wouldn’t be here talking about Bitcoin had it not been for Satoshi Nakamoto, but, unfortunately, there is very little to be said about him/ her/ them because the name Satoshi Nakamoto is a pseudonym. The real identity or identities behind it remain unknown to this day.

There are many theories out there as to who Satoshi is — from the one that says the name is the result of combining syllables from Samsung, Toshiba, Nakamichi, and Motorola — to many other theories involving several people.

Let us mention some of them.

photos of Dorian Nakamoto, Nick Szabo, and Craig Wright on an investigation board.
Dorian Nakamoto, Nick Szabo, and Craig Wright are only three of the "suspects."

Dorian Nakamoto

After a publication in Newsweek magazine in 2014, Dorian Nakamoto was largely perceived to be Satoshi Nakamoto because of the similarity in the names and also because of his professional background. He, however, denied the claim, saying he knows nothing about Bitcoin.

Nick Szabo

Nick Szabo — a cryptographer and the creator of Bitgold (one of the earliest attempts at creating a decentralized virtual currency) — was another person who was claimed to be Satoshi Nakamoto. His project, however, was never implemented, and neither was it confirmed that he, indeed, is the creator of Bitcoin.

Craig Wright

In 2015, WIRED MAGAZINE published their conversation with Craig Wright — an Australian computer scientist and “a bit of everything” kind of person, who said that he has “been involved with all this for a long time” when asked, “How did you first learn about bitcoin?” The article also provided evidence to support their claim that there are visible connections between Satoshi and Wright and that the unknown Australian genius could, in fact, be Nakamoto in disguise.

However, in an editor’s note from 2019, the magazine said that some of Wright’s claims that proved he was Satoshi Nakamoto appeared to be fraudulent and that they changed the article’s headline “to make clear that WIRED no longer believes Wright is likely to be the creator of Bitcoin.”

According to our calculations, the Bitcoin white paper mentions the pronoun we 20 times. That makes it plausible that the creation of Bitcoin was the result of cooperation between several people and not necessarily the work of a single individual.

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Closer to home, one of the first people known to have worked with the founder of Bitcoin in 2009 is Martti Malmi, a programmer from Helsinki, Finland. Among other things, he assisted in writing Bitcoin’s documentation, set up and managed the first Bitcoin community, and wrote C++ code for Bitcoin, as well.

Using his laptop, he mined 55,000 BTCs, some of which he sold several years later, and bought himself a studio which, in his own words, was a:

“Big deal for a 22-year-old who never had much money. Probably the most expensive studio in the world now, but at least I got more than two pizzas.”

Speaking of pizza...

Bitcoin fun facts

Did you know that the first commercial transaction of Bitcoin and real-world items happened in May 2010 when a programmer from Florida, USA, bought two pizzas for 10,000 BTC? Since then, May 22 has been celebrated as Bitcoin Pizza Day in the cryptocurrency community.

slices of pizza on a black board
At the time this article was written, November 2023, 10, 000 BTC were worth over 360 million USD.

Here are some other interesting facts about Bitcoin:

The Times and the Genesis block

The first Bitcoin, known as the “genesis block”, was mined on January 3, 2009, by Satoshi Nakamoto. The genesis block, or the 0-block, contains the message “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”, referring to an article in the Times. It is also a statement about what Bitcoin is — an alternative to traditional banking and centralized financial control. No other Bitcoin blocks contain such references, so the Genesis block is unique.

A photo of the of the newspaper issue the genesis block referred to
The issue of The Times the genesis block referred to is quite sought after.

Lost forever

Studies have shown that around 20% of the existing Bitcoins might be lost forever due to users misplacing their keys or forgetting their wallets. These lost Bitcoins remain inactive on the blockchain, and it is very unlikely that they will ever return to circulation.

Limited amount of Bitcoins

As per design, there are only 21 million Bitcoins in existence, and as of 2023, there are over 19 million in circulation.

a chart by statista on the number of bitcoins in millions as per April, 2023
According to Statista, as of April, 2023, there were close to 20 million of Bitcoins in circulation.

It may seem like there are not many Bitcoins left and that all of them will be mined in a matter of several years, but that is not the case.

Compared to today’s standards, in the early days, mining was relatively easy. Martti Malmi mined his 55000 BTCs using his laptop, but that is because the network was small, and fewer people were involved in the mining process back then. In addition, the mining difficulty was low, and miners were able to solve the cryptographic problems quickly.

As Bitcoin’s popularity grew and as it attracted more and more miners, the difficulty increased, and because Bitcoin mining has a highly competitive nature, so did the need for more powerful equipment.

Today, miners conduct large-scale mining operations and use specialized hardware with significant computational power to successfully add blocks to the chain and be rewarded.

Because the mining process is increasingly time-consuming, and because of Bitcoin’s halving events, which cut the rewards miners receive in half about every four years, it is uncertain whether the 21 million limit will be reached at all. But if it does, the last Bitcoin is expected to be mined by 2140.

On to Bitcoin 101: All You Need to Know — Part 2 to learn more about how Bitcoin mining works, what are some known issues, and what the future holds.

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