What Is A Bitcoin? Bitcoin Is Hope (2024)

Welcome fren, to Bitcoin 101! If you’re finding this page wondering what is a Bitcoin then you’re in an envious position. You’re about to learn for the first time about one of the most amazing inventions in human history! As we specialize in both Bitcoin and online teaching – with over 10,000+ paying students world wide already – you’re in good hands. So strap in, take your first orange pill and let’s send you down the rabbit hole…

Side Note: If you prefer a shorter, less in depth guide, check out our 4 minute overview piece How Does Bitcoin Work For Dummies?

What Is A Bitcoin (BTC)?

So what exactly is Bitcoin? Bitcoin is the first and most globally recognized cryptocurrency. It is a free, fully open source, decentralized and entirely digital currency for all.

OK explain Bitcoin to me like I’m 5: Bitcoin is online money that enables instant payments. Free for anyone, anywhere in the world to use at any time. It uses peer-to-peer technology (like torrents) and can be used without any permission from a government or central authority. It cannot be stopped or censored. Its rules cannot be changed, no matter how rich or powerful a country or person is.

Created by cryptographers (Cypherpunks technically) to cure the money problems caused by big governments and big banks it joins their other world changing technologies such as encryption of the Internet, encrypted messaging and the Tor project.

Some basic properties of Bitcoin:

• Limited Supply: There will only ever be 21 million bitcoins as defined by the monetary policy which for all intense and purpose, will never be changed
• Distributed: All Bitcoin transactions are saved to the Blockchain (a database if you will). A copy of this blockchain is voluntarily stored on tens of thousands of computers called “nodes” all across the world. With so many copies in so many place (even in space!) it’s one of the most distributed and decentralized networks ever created.
• Always Open: Bitcoin, unlike traditional financial markets or banks, never sleeps. You can buy, sell, send or receive it globally, 24/7/365. Due to its distributed nature, it’s virtually impossible for the network to go down.
• Transparent: When you make a transaction with Bitcoin it is added to the blockchain. This ledger is public and viewable to anyone world wide. This allows everyone, everywhere, to always make sure everyone is playing by the rules.
• Peer-To-Peer: There are no trusted third parties such as banks or government institutions involved during a Bitcoin transaction. The transaction goes directly from one person to the other. This reduces counterparty risks, decreases fees and speeds things up
• Sovereign: The Bitcoin network exists independently of any country, government or company. No one controls, owns or runs it and as such, it is completely sovereign.
• Permissionless: It can be used without having to ask anyone for permission. You don’t need to created an account, sign up to a company or tell anyone who you are to use it. This is extremely important for billions of people who are not allowed to register with legacy financial institutions.
• Pseudo-Anonymous: You do not need to identify yourself to use Bitcoin. There are no names recorded during a transaction, instead they are tied to an address that is a bunch of randomly generated letters and numbers. It should be noted that it’s still possible to link these randomly generated Bitcoin Addresses to real life names if care is not taken to protect your Bitcoin Privacy
• Censorship Resistant: As Bitcoin doesn’t require any trusted third parties and can be sent and received simply via software that’s run on any computer, it’s incredibly difficult for anyone to “ban” it. To stop a Bitcoin transaction a government effectively has to stop the Internet or go into an individuals home using physical force making it highly resistant to censorship.
• Easily Divisible: Each 1 BTC can be easily divided into 100 million separate pieces called “Satoshi” or “Sats”. It doesn’t cost anything to divide a bitcoin up and it’s also just as easy to add any number of these smaller pieces back together again making it very easy to use.
• Protected: The worlds biggest supercomputer, made up of millions of independent and globally distributed networked computers called “miners” protect every Bitcoin. This network hasn’t been hacked since its inception and continues to grow in size every year.
• Choice Of Fee: Each Bitcoin transaction usually requires a fee (paid in bitcoins) to send it. While most banks or other institutions have set fees that you cannot choose or change, with Bitcoin you get to set the fee for every transaction. The higher the fee, the quicker the transaction will get confirmed by miners. You can even set a fee of zero and there is a chance it will still be processed when the network use is low. A fee of at least 1 Satoshi is recommended though so the transaction doesn’t get stuck.
• Final Settlement: Bitcoin transactions, once confirmed in a block which takes on average 10 minutes, are irreversible and final. They cannot be clawed back via “charge backs” or other parties meaning you can be certain that the bitcoins you receive are truly yours.

What Can You Do With Bitcoin?

While the Internet is at its heart a very simple idea – the connection of two or more computers – it quickly becomes more than the sum of its parts when scaled up thanks to the Network Effect. Bitcoin, just like the Internet, becomes much more than its parts when scaled up.

It allows people to transfer value without any third party, bank or government in between. A simple idea, but one that quickly enables a host of world changing capabilities that we’ve never had access to before. While some of these capabilities have already been realized (for example transferring billions in minutes for a few dollars) many are still to come as Bitcoin grows over time.

For now, for us regular non multi-billionaires, Bitcoin still allows a number of critical things. It allows anyone to:

• Store monetary value over time. While not immediately different to say, putting your money in a bank account, Bitcoin isn’t inflated away at 2-3% (or 9.1% at the moment!) each year. Instead it has a current inflation rate of 0.83% which reduces every ~4 years in a set way. Simply keeping your money stored throughout time (10 years, 100 years) and it not being siphoned away or debased by taxes / inflation / companies going bankrupt is a major Bitcoins use.
• Store monetary value without anyone’s permission. While this might seem like a trivial thing to be able to do to anyone that has a bank account in a first world country, billions of people in the world cannot get a bank account and thus, can never save their money long term, send it to others or receive it for activities like running a business. With Bitcoin, this is now free for anyone with a smartphone to use forever.
• Store monetary value beyond the reach of a government. For those in first world countries, this isn’t a big concern as currencies like the dollar or the Euro don’t suffer from hyperinflation. For billions more people under authoritarian regimes or double or triple digit inflation this is a critical use. Most of these people have no choice but to use the currency of their country, currencies that are often seized by tyrants, inflated away to nothingness or just declared worthless overnight. Bitcoin gives them a choice and a impenetrable safe storage place for the first time in history.
• Send money overseas instantly and cheaply. If you’ve ever tried to send someone overseas $10 (or even a larger amount) you’ll know how difficult, slow and costly that “simple” exercise can be. It involves multiple banks, currency conversions, fees and intense privacy invasive “checks”. By contrast, with Bitcoin you can send anything from $1 to the aforementioned billions with final settlement occurring in minutes and for cents. For more info, check out our detailed piece How Long Does Bitcoin Take To Send?
• Send free and instant Remittance. Remittance is a multi-billion dollar industry that charges horrendous fees (5%-50%) and takes weeks over the legacy financial rails. With Bitcoin and the Lightning Network remittance can be instant and free for everyone. Being entirely online it also saves people from having to travel for hours every week just to withdraw the money from a physical location where they have a high chance of being robbed.
• Transact without being banned. While you might think of terrorists or drug lords as the only “baddies” being banned by banks, there are many countries where simply being female means you cannot have a bank account. Sex workers (and even those simply discussing sex) are also often banned or demonetized. Bitcoin allows for them to transact and have access once again.
• Take their wealth with them when fleeing a country. Even in Europe, fleeing a war torn country isn’t off the table these days and with Bitcoin you can take any amount of wealth with you either with a Hardware Wallet (also sometimes called a Signing Device that’s basically just a USB drive) or by even just remembering 12 short words.

That’s not all either, there are Layer 2 applications built on top of Bitcoin that enable instant and near free transactions of fractions of a cent enabling creators to charge for their content by the page, second, podcast, video, minute and many other things too.

Things are just starting with Bitcoins adoption currently estimated to be at the same point as the Internet was back in 1997 or so, plus it’s growing at a faster rate too! Over the next decade even newer, more amazing capabilities will emerge just like what happened with the Internet. You can also learn more about where you can spend your bitcoins and how Bitcoin debit cards work in our piece on What Can You Do With Bitcoin?

When Was Bitcoin Created?

Satoshi Nakamoto released the famous Bitcoin Whitepaper in October of 2008. On the 3rd of January, 2009 the first Bitcoin block was mined, called the “genesis block” or Block 0. They continued working on the project with other developers until 2010 when they left the project. You can get more details about the creation of Bitcoin in our piece When Did Bitcoins Start?

Who Owns / Runs / Controls Bitcoin?

No one owns, runs or controls Bitcoin.

While someone (or multiple someones) under the pseudonym Satoshi Nakamoto were the ones who originally invented Bitcoin by publishing the whitepaper for it, no one, not even Satoshi, owns, runs or controls it.

The identity of Satoshi Nakamoto still has not been verified to this day. This, together with how Bitcoin works, means that it is truly a public good just like how no one “owns” or “controls” the Internet.

Companies or people can build things on top of it or suggest new improvements via Bitcoin Improvement Proposals, but unless the entire world approves the change by voluntarily using those new changes nothing is altered. Many (mistakenly) believe miners “control” Bitcoin or that there is a registered company somewhere that releases new versions but this isn’t the case.

Who Decides How Bitcoin Is Governed?

Just like most free and open source (FOSS) protocols, Bitcoin isn’t static and changes over the years. But who gets to decide what changes are made to Bitcoin? The answer is everyone!

As there is no owner, company or CEO of Bitcoin, these decisions are made through Bitcoin governance. This is a formal process that involves proposals being put forth by anyone, those proposals being reviewed and discussed by all over time and then the users of the Bitcoin network “voting” on them by choosing to run that new software change on their computers.

Bitcoin users span a wide array of different types all with different opinions and motives. From the nodes and miners, to wallet developers, to exchanges and the people who use bitcoins this wide array makes it extremely difficult to change Bitcoin as any new proposal must benefit all parties.

How Is Bitcoin Used?

You can buy Bitcoin, sell it, use it to purchase goods and services anywhere in the world and you can also send it to any other Bitcoin Address (which can be owned by a person, persons or even a code driven Smart Contracts).

You can send a whole Bitcoin (1 BTC) or a small part of it such as 0.0001 BTC (see units below). While some day traders buy and sell Bitcoin on its worldwide, 24/7/365 market to try and speculate, others use Dollar Cost Averaging (DCA) to invest in it long term.

As outlined in the above section “What Can You Do With Bitcoin?”, there are many other things you can use it for, but the most common involve people creating a Bitcoin Wallet and buying / selling / sending it at various times for different reasons.

Why Is Bitcoin Valuable?

Things have “value” mainly because people and society in general all agree at that point in time that it has value. Historically, people have used many different physical items as money such as seashells, tulips or Rai stones, but throughout all of it the most enduring form of money has been gold.

Gold is durable, relatively easy to divide up and most importantly rare. It’s difficult to secure, verify and transport over long distances though. Similarly, Bitcoin has value for these reasons and more:

• People agree it’s useful to store and exchange value
• It’s easy to divide up (see units below)
• It’s rare (it’s highly unlikely there will ever be more than 21 million Bitcoins)
• It’s durable (millions of computers have protected the network for over a decade)
• It’s easy to secure and verify
• It’s easy to transport over long distances as it can be sent instantly anywhere
• It’s permissionless, unstoppable and uncensorable

There are more reasons that people find Bitcoin valuable, but even the ones above are more than enough to distinguish it as one of the most significant inventions in human history. Never before has human kind had such a perfect money available, let alone available to everyone, equally, all over the globe.

What Are The Units Of Bitcoin?

Bitcoins have the currency symbol ₿ in front of them and are highly divisible, especially since transactions involving whole Bitcoins are no longer quite so common given 1 Bitcoin is now worth so much. Bitcoin is decentralized, so there is no official organization or central authority to set official names for units.

Since 2014, the most common units for Bitcoin (abbreviated BTC or XBT) are:

• 1,000,000 BTC = megaBitcoin
• 1,000 BTC = kiloBitcoin
• 10 BTC = decaBitcoin
• 1 BTC = 1 Bitcoin
• 0.01 BTC = 1 cBTC = 1 centiBitcoin (also referred to as bitcent)
• 0.001 BTC = 1 mBTC = 1 milliBitcoin / mbit / millibit / bitmill
• 0.000 001 BTC = 1 μBTC = 1 microBitcoin / ubit / microbit / bits
• 0.000 000 01 = 1 satoshi / sat

The smallest value that the Bitcoin network supports sending is the Satoshi, one hundred-millionth (0.000 000 01) of a Bitcoin. In other words, the network does not support sending fractions of a Satoshi.

Since it is a hard limit, it seems natural to use it as a unit, though it currently has very little value. The plural of Satoshi is Satoshi: “Send me 100 Satoshi”. This base unit is named after the pseudonymous creator(s) of Bitcoin, Satoshi Nakamoto.

Special Note! Be aware that 1 BTC = 100 Million Sats, NOT 1,000 Million Sats! We’re used to things growing in groups of 3 (eg 1 -> 1,000 -> 1,000,000) but Bitcoin only splits into 8 decimal places not 9. So rather than there being 1,000 million there is only 100 million.

This is why some suggest we should move towards the Satcomma Standard  where denominations would be written as ₿1.23,456,789. This allows the user to clearly see that there are 123 million Satoshi while at the same time also seeing that that is equal to 1.23 Bitcoins.

How Do You Buy Bitcoin?

Buying bitcoin is no different to trading other currencies such as the USD for EURO. You can buy a whole bitcoin (1 BTC) or fractions of a bitcoin (0.005 BTC) and doing so usually incurs a trading fee which is a percentage of the trade amount. Buying bitcoins can be done in many online and IRL places and comes in two types:

1. Non-KYC/AML Decentralized Exchanges (DEX)
2. KYC/AML Centralized Exchanges (CEX)

KYC (Know Your Customer) or AML (Anti Money Laundering) rules are now near universal across all centralized exchanges. These rules require you to surrender all your personal information (name, address, DOB, drivers license, photo etc) to a private company for permanent record keeping and sharing with many third parties and governments before they allow you to transact.

Companies like Binance, Coinbase, eToro, PayPal, RobinHood or any other program / company that asks for your identity are KYC/AML Centralized Exchanges. To buy bitcoins through them you will need to create an account with them, prove your identity by giving up all your private information and then fund that new account with fiat money like USD or EUR or other cryptocurrencies.

>> Deep Dive: Crypto Exchange Bankruptcies

Keep in mind that you’re sending funds to a completely independent company that likely isn’t as regulated, secure or backed by your government as legacy financial institutions. There is no “Federal Guarantee” if the company goes bankrupt or simply steals your money. As such, ensure you properly investigate and trust any third party exchange you interact with and give your money / bitcoins to.

If you purchase through one of these regulated entities, you essentially tag your Bitcoin Addresses to your personal identity forever. This immense breach of your Bitcoin Privacy is extremely dangerous to you in multiple ways including third parties hacking and steal this data, CEX’s selling this data, your identity forever being linked to the bitcoins you buy and these companies or government preventing you from using your bitcoins.

Non-KYC decentralized exchanges can be a little slower, but as noted above they completely side step all the very serious issues that Centralized Exchanges have. This is because you don’t have to reveal your real world identity to use them.

When you open the program for the first time, it creates a random profile that isn’t linked to your real name. When the trade occurs, it only goes from you to the receiver (or visa versa) and there is no other companies or entities in between.

Below are some of our top Crypto Exchanges:

How Do I Mine Bitcoin?

Bitcoin Mining is the process of adding transactions to the Bitcoin blockchain. To reward miners that provide this critical service, the Bitcoin network pays them in bitcoins via transaction fees and the block reward.

As more and more miners have entered the Bitcoin network over the years the difficulty rate has increased. While you could easily mine bitcoins on your home laptop years ago now it’s really only possible using custom designed pieces of hardware called application-specific integrated circuit or ASICs.

Once you’ve bought and setup your mining hardware, you simply join a mining pool and let it run! It will automatically join the mining pool and start hashing day and night to try and solve that challenge. If any of the miners in your pool solve it, you all share the block reward based on how much Hash Rate you’ve committed to the network.

>> Learn More: What Is Bitcoin Mining?

The Pro’s And Con’s Of Bitcoin

Like any technology Bitcoin can be used for good or evil and has both benefits and drawbacks. While going through these pro’s and con’s it’s good to remember that you can’t make something that does everything the best or that satisfies everyone completely.

What Are The Benefits Of Bitcoin?

Throughout history, virtually all currencies evolved over large periods of time without anyone really sitting down and designing them (for examples see sea shells or glass beads). Even the fiat currencies we use today have been hap haphazardly cobbled together and altered over a century by bickering nations (all with their own agendas) during the throws of global financial crises or world wars.

As such, none of them were cohesively designed by a single entity with a clear goal of bringing the best money possible to all of the world and without any desire to benefit from it like Bitcoin was.

Because of this, Bitcoin is one of the hardest, most modern, unique and custom engineered monies in history. It has a number of world class benefits that have already been listed above.

What Are The Drawbacks Of Bitcoin?

Bitcoin was built to do a few things exceptionally well. Those few things include being decentralized and distributed, requiring no trusted third parties, being open and secure, having a limited monetary supply and being extremely resistant to censorship.

As such, to prioritize these goals it meant that other factors needed to be sacrificed such as speed. Everything is a balancing act and Bitcoin is no different. Con’s of Bitcoin include:

• Energy Use: The Proof-of-Work (PoW) mechanism that not only controls the issuance of new bitcoins but also secures the network and confirms new transaction onto the blockchain uses a massive amount of power. Many compare it to small countries like Sweden which sounds like a lot, but it’s important to consider how much energy a global monetary system should use. Many global monetary systems, such as the USD, not only use energy for the many institutions, banks, ATMs, data centers but also for the huge military presence required to “back it”. This total energy use far outstrips Bitcoin’s meager energy use for an arguably worse quality monetary network, something we cover more in Bitcoin Myths. High energy use is also separate to high carbon emissions and Bitcoin is estimated to be anywhere from 39% to 73% renewable making it one of the cleanest industries in the world. Importantly, this energy is a feature, not a bug, as it ties Bitcoin to a real world, limited resource which is what truly enables its scarcity.
• It’s Young: Bitcoin debuted in 2009 and as such, is still an incredibly young and evolving asset class. As there has never been anything like it in the world before, there is uncertainty over its future as well as how it will react to varying degrees of stresses such as depressions, regulation, quantum computers or hacking.
• Its Hacking Exposure: While it’s impossible for online hackers to steal your physical gold or cash stored in a draw, Bitcoin is entirely digital meaning it has a much bigger surface attack area for hackers to exploit. With the rise of centralized exchanges, this further increases the risk to people loosing their bitcoins to hacks or scams.
• Its Speed: Due to Bitcoins consensus rules, it can only process around 7 transactions per second (TPS) which is about 605,000 per day. While this may sound like a lot, Visa claims to be able to do 24,000 transactions per second making Bitcoin seem quite slow by comparison. However it should be noted that comparing Bitcoin and Visa to each other is like comparing apples to koalas. Thanks to Layer 2 scaling protocols like the Lightning Network (which has no fundamental limits to the amount of transactions per second it can handle) and other upgrades such as batched transaction Bitcoin is gradually overcoming its speed issue. For more info, check out our detailed piece How Long Does Bitcoin Take To Send?
• Its Criminal Use: A drawback of having an unstoppable, uncensorable network is that good as well as bad actors can use it. The most famous example was the Silk Road website that got shut down in 2014 which sold illegal substances using bitcoins as payment. While it’s indeed true that criminals use Bitcoin, in reality they have been able to use cash for centuries. On top of this, the legacy financial system has been shown to allow far more illegal drug money or money laundering than anything close to what’s happened on the Bitcoin network as also covered in our Bitcoin Myths piece, so this isn’t something unique to Bitcoin. As the ledger is entirely public, it may even make criminal activities even harder to get away with.

What Are The Risks Of Investing In Bitcoin?

To begin with, you should always consult a registered financial professional on whether or not you should invest in anything, even Bitcoin, as only they will have access to your full financial situation, personal details and thus be able to make a properly informed opinion on whether it is a good investment for you or not.

As Bitcoin has seen phenomenal growth over the past decade – going from under $100 to more than $20,000 USD per bitcoin at a growth rate of 200%+ per year – there has been a huge rush to speculate and day trade with it. As such, it should be made clear that speculating is very different to investing.

Speculative Trading refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value

Investopedia

Investing, broadly, is putting money to work for a period of time in some sort of project or undertaking in order to generate positive returns

Investopedia

One of the key differences between the two is how long you trade/invest for. For the purposes of this piece, we are exclusively referring to the risks of investing in Bitcoin, not day trading / speculating. We believe that this is basically just gambling and shouldn’t be done unless you’re 100% happy to lose all your money. Risks of investing in Bitcoin include:

• Volatility: Bitcoin’s still a highly volatile asset that changes price every second, every day
• No Insurance: Deposits in banks are usually insured by the government in case the bank goes bankrupt, Bitcoin has no backup or insurance policy
• Protocol Risk: Although the Bitcoin network, protocol and cryptography that secures it have been battle tested over the past 10+ years, it’s still always possible that someone, somewhere finds a design flaw. Quantum computers could also succeed where classical computing has so far failed to crack its encryption which may shatter the worlds faith in Bitcoin. That being said the protocol and code behind Bitcoin is quite possibly the most reviewed and hardened in existence. With a Market Cap of hundreds of billions of dollars, this effectively serves as a “bug bounty” which anyone able to compromise the network would be able to claim. So far, no one seems up to the task.
• Fraud / Bankruptcy: While holding your own Private Keys secures you against this risk, many users still allow other third parties to custody their funds for them (or hold the private keys on their behalf). This trust in a third party such as a centralized exchange then exposes them to other risks such as Crypto Exchange Bankruptcies, being a victim of hacking, being shut down by a government or simply doing fraudulent things. To avoid this, it’s recommended you always remove your bitcoins from any exchange and hold your own private keys. This also greatly increases your Bitcoin Privacy too.
• Regulation: As Bitcoin is still very new, regulations are still quite unknown and are evolving as time goes on. As Bitcoin grows and draws more attention upon itself, regulation is expect to increase
• Hacking: While this is a risk with virtually all assets in today’s modern world, Bitcoin is often stored by the user and not a financial institution and as such, may not be secured as well if the user isn’t very technical. This can lead to users losing their bitcoins to any number of hacking tricks that wouldn’t otherwise be possible. It should be noted though that using a dedicated Hardware Crypto Wallet can significantly eliminate this risk.
• Fungibility: While the Bitcoin network sees all bitcoins as equal, countries, governments or even private companies may mark certain bitcoins. This mark may mean they don’t get processed by them or are otherwise censored in some way by merchants. You could still send/receive them using your own Bitcoin Wallet, but this marking reduces the fungibility of bitcoins and could potentially strand your asset if this happened to you. This risk could potentially be solved via Bitcoin Mixers and coin mixing protocols such as CoinJoin, but again this is a risk that will likely evolve over time as Bitcoin grows.

To help mitigate these real risks we recommend:

• Always taking full control of your private keys and never trusting third parties
• Start small with an amount of money you’re fully willing to lose
• Like with everything online, assume everyone (including us!) is a scammer
• Learn as much as you can about Bitcoin from us and others. The more you understand Bitcoin, the more confidence you’ll have and the higher a level you’ll achieve
• Don’t get greedy. Don’t buy altcoins. Don’t try and time the market, just DCA sats

The Athena Assessment

What is a Bitcoin? It’s hope.

Hope to hundreds of millions of people all around the globe that are using it to escape monetary repression, hyperinflation, or capital controls. It has a huge number of benefits and has proven its worth for over a decade now confirming block after block after block without fail. No matter what you do, everyone uses money which is Why Everyone Should Learn About Bitcoin.

Is it perfect? Of course not. But it is a fundamental step forward for all human kind, an invention that has been given to the world by an anonymous, exceptionally brilliant inventor. Will it endure for hundreds of years, bring the first sound money to all humans and usher in a new stage of humanity? Hopefully.

For now, join us here at Athena Alpha as we delve further into the details of Bitcoin, its amazing technologies and future week after week. Our newsletter is focused on helping smart people like you learn what Bitcoin is and how it works so you can buy, use, store and invest in it safely.

For the free readers and Beginners out there, we’ll be providing some of the most in depth teachings – all explained simply – to you at no charge to help you get started. For those that want to get serious about learning Bitcoin, using it securely, Advanced Bitcoin Privacy, investing and more, sign up to our Athena Alpha Pro now! If you’re already a Bitcoiner then you can even subscribe with Bitcoin!

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