Bitcoin is an invention that for the first time in history allowed a group of software users to create and manage a digital money supply beyond the control of any government or bank.
It’s useful to think of Bitcoin as a software protocol like the ones you interact with every day – think SMTP (which helps route your emails) and HTTP (which ensures that the web content you request from your browser is delivered to you by servers). These technologies are protocols – sets of rules that dictate how computers transfer data.
Without protocols, the network we call the Web would be chaos.
The Bitcoin protocol allows computers running its software to manage a set of data (the block chain) and apply a set of rules that render this data (bitcoins) rare and potentially valuable.
As essential building blocks, the Bitcoin protocol uses:
The Bitcoin blockchain is a comprehensive record of network history validated by people running Bitcoin software (nodes). This ensures that unlike most digital data, which can be freely copied and modified, bitcoins cannot.
Who created Bitcoin?
Although Bitcoin can safely claim to have created the world’s first successful cryptocurrency, its technology is based on decades of ideas about how cryptography could help create digital money.
In 2006, “Satoshi Nakamoto”, a still pseudonymous person or group, started writing the code for a new digital payment system called “Bitcoin”.
Want to know more about the origin and beginnings of bitcoin? You can read our article What is the Bitcoin White Paper?
How does bitcoin work?
There are two main concepts to understand if you really want to understand how the Bitcoin protocol works.
Luckily, we have in-depth articles that break down both of these topics!
Use of cryptocurrencies cryptography to help the network track information in a less data-intensive but extremely secure way. You can find out all about it in our article How do cryptocurrencies use cryptography?
Then, a process known as mining ensures that the information is actually recorded on the blockchain. Again, you can learn all about the mining process, as well as the role crypto plays in the process with our article What is Bitcoin Mining?
What gives value to BTC?
Bitcoin shares many characteristics that give value to traditional products and public funds. Some of these factors include:
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Scarcity
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Sustainability
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Portability
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Divisibility
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fungibility
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Acceptability
Want to know more about each of them? Still have questions about the world’s first cryptocurrency?
Head to the Kraken Learning Center and discover our article What is bitcoin? to get even more information about the Bitcoin protocol.
Remember that it can also to buy and sell BTC for other cryptocurrencies on exchanges like Kraken, which are online 24/7, 365 days a year.
These materials are for general informational purposes only and do not constitute investment advice or a recommendation or solicitation to buy, sell or hold any digital asset or to engage in any specific trading strategy. Some crypto products and markets are unregulated and you may not be protected by government indemnities and/or regulatory protection schemes. The unpredictable nature of crypto-asset markets can lead to loss of funds. Tax may be due on any return and/or increase in value of your Crypto Assets and you should seek independent advice on your tax position.
