Bitcoin is the largest cryptocurrency in the world and the first successful digital currency to solve the double-spending problem in 2008. It was created by the mysterious cryptographer Satoshi Nakamoto after the 2008 Global Financial Crisis.
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History of Bitcoin
Bitcoin was born in the wake of the 2008 Global Financial Crisis as a decentralized peer-to-peer cryptocurrency that could evade censorship, centralized control, fiat inflation, etc. The aim behind creating Bitcoin was to create a cryptocurrency that evades any kind of authority abuse. According to Nakamoto, the government’s abuse of printing fiat currency and bailing out large corporations acted against the interests of the common people.
In its early days, Bitcoin was mostly limited to people in tech; however, it soon made its first known transaction after a mysterious person sponsored Laszlo Hayenicz’s two pizzas on May 22, 2010. Soon, Bitcoin was listed on exchanges, and its price grew severalfold over the next half-decade.
By the mid-2010s, Bitcoin was listed on established exchanges such as Mt. Gox.
Bitcoin achieved its first major breakthrough during the 2017 bull run, which increased its global adoption.
The first major institutional adoption of Bitcoin occurred on January 10, 2024, when the US SEC approved 10 Bitcoin ETFs, marking the first major mainstream adoption of Bitcoin. Soon after, in January 2025, the US Bitcoin Reserve Bill was signed into law by Donald Trump. By the end of 2025, corporate Bitcoin adoption had surged to over $250 billion.
How Does Bitcoin Work?
Bitcoin works on blockchain technology, which comprises the:
- Bitcoin Blockchain: A decentralized ledger that keeps all the records of all individual transactions, balances, and addresses anonymously.
- The Bitcoin Cryptocurrency (BTC): A digital currency that does not require any centralized control or infrastructure and is censorship-resistant. It can be spent only once, just like cash.
- The Bitcoin Virtual Machine: A virtual machine made from pooling the computational resources of all the computers in its network. It runs Bitcoin Core, which is central to the blockchain.
- Network Nodes: Individual computers that verify transactions in exchange for a reward, also called miners.
- End Users: Common users with an address on the Bitcoin Blockchain to send and receive Bitcoin Cryptocurrency (BTC).
The Bitcoin Blockchain processes transactions in a unique way, ensuring that all transactions are valid through intensive computations. The steps are mentioned in detail below.
- User initiates a transaction to another user by adding the address, selecting the BTC amount, and signing the transaction.
- The transaction is deposited on a memory pool (mempool).
- A verifier (called a Miner) picks up the transaction and runs an algorithm to find its nonce, a unique string of numbers for each transaction.
- Once the transaction is found valid, it is broadcast to the entire network for further validation.
- When a certain number of miners find the same nonce value after their computations, they relay the information to the original miner.
- The initial miner then adds the transaction to the blockchain.
Bitcoin Halving
Bitcoin Halving is an event in which the reward for successfully mining a block of transactions is halved every 4 years. It occurs every 210,000 blocks after the Genesis Block (i.e., Block #1).
- The First Halving (Jan 3, 2009) reduced the block reward from 50 BTC to 25 BTC.
- The Second Halving (Nov 28, 2012) reduced the block reward from 25 BTC to 12.5 BTC.
- The Third Halving (July 9, 2016) reduced the block reward from 12.5 BTC to 6.25 BTC.
- Fourth Halving (April 20, 2024) reduced the reward from 6.25 BTC per block to 3.125 BTC.
- Fifth Halving (expected Nov 2027 to Feb 2028) will reduce the block reward from 3.125 BTC to 1.5625 BTC.
The need for halving is to make Bitcoin deflationary, as block rewards are the only way new BTC enters circulation. It also reduces miners’ reliance on new BTC and increasingly forces the network to pay miners solely with transaction fees.
