Bitcoin

14 Things You Need to Know About Bitcoin

The cryptocurrency has had a tumultuous existence so far.
14 Things You Need to Know About Bitcoin
Image credit: alfexe | Getty Images
Entrepreneur Staff
News Director
7 min read

Even the most tech savvy among us have a hard time wrapping their heads around Bitcoin. It's a hot topic and a frequent point of discussion among investors, entrepreneurs and stock traders, so you should want to know all about it.

For starters, here's an overly simplified explanation of Bitcoin: It's a digital currency (there are more than 800 now) that isn't controlled by a central authority such as a government or bank. It's created by "miners," who use computers and specialized hardware to process transactions, secure the currency's network and collect bitcoins in exchange. Supporters say it allows for more secure transactions over the internet. That's in part due to blockchain, a technology that records cryptocurrency transactions chronologically in a public digital ledger.

Bitcoin is only eight and a half years old, but it’s the oldest and most highly valued cryptocurrency out there. In such a short time, it’s had a rocky and controversial history, but it’s also attracted a fair share of high-profile supporters. Click through to read 11 bits about Bitcoin that will make you at least sound like you know what you're talking about next time it inevitably comes up.
14 Things You Need to Know About Bitcoin

The birth of Bitcoin

The birth of Bitcoin
Image credit: Ulrich Baumgarten | Getty Images

The origins of bitcoin trace back to 2008, when its creator, who went by the pseudonym Satoshi Nakamoto, published a proof of concept for Bitcoin. The proof was then published to a cryptocurrency mailing list in 2009. Nakamoto left the project in 2010 and disappeared, but other developers picked up the work. Bitcoin's birthday is Jan. 3, when Nakamoto mined the first 50 units of the currency.

14 Things You Need to Know About Bitcoin

An elusive creator

An elusive creator
Image credit: Jonathan Alcorn | Getty Images

The true identity of Bitcoin's creator has never been confirmed. Newsweek claimed to have found Bitcoin's creator in 2014, identifying Temple City, Calif., resident Dorian Satoshi Nakamoto. He has vigorously denied it. In 2015, an Australian entrepreneur named Craig Wright said he was Bitcoin's creator, but he couldn't produce the evidence to support his claim. Whoever Nakamoto is, that person is very rich, as the creator is estimated to have mined a million bitcoins in the currency’s early days.

Related: 5 Essential Podcasts for Entrepreneurs Serious About Cryptocurrency

14 Things You Need to Know About Bitcoin

Very expensive pizza

Very expensive pizza
Image credit: Michael Möller | EyeEm | Getty Images

The first transaction involving bitcoin was reported on May 22, 2010, when a programmer identified as Laszlo Hanyecz said he "successfully traded 10,000 bitcoins for pizza." As of Nov. 28, 2017, 10,000 bitcoins are worth about $99 million.

14 Things You Need to Know About Bitcoin

You can spend bitcoins

You can spend bitcoins
Image credit: Christopher Morris | Corbis | Getty Images
While it may not seem like it, people continue to use bitcoins to buy stuff. The largest businesses to accept the cryptocurrency include Overstock.com, Expedia, Newegg and Dish.
14 Things You Need to Know About Bitcoin

Federal Bureau of Bitcoin

Federal Bureau of Bitcoin
Image credit: ROSLAN RAHMAN | AFP | Getty Images
At one point, the U.S. government was one of the largest holders of bitcoin. In 2013, after the FBI shut down Silk Road, a darknet site where people could buy drugs and other illicit goods and services, it took over bitcoin wallets controlled by the site, one of which held 144,000 bitcoins. Investors have been making a killing by bidding on government-seized bitcoins.
14 Things You Need to Know About Bitcoin

A mountain-sized setback

A mountain-sized setback
Image credit: Chris Ratcliffe | Getty Images
In early 2014, Bitcoin suffered a devastating loss after the alleged hacking of Mt. Gox, a Japanese exchange. About $460 million of the currency (in 2014 value) was stolen. It was the largest loss of bitcoins ever and raised concerns about how secure the currency was.
14 Things You Need to Know About Bitcoin

The billionaires' takes

The billionaires' takes
Image credit: Paul Morigi | Getty Images

Warren Buffett, perhaps the most famous investor in the world, was not so keen on Bitcoin one of the only times he addressed the currency. "Stay away from it. It's a mirage, basically," he told CNBC. "The idea that it has some huge intrinsic value is a joke in my view."

Fellow billionaire investor Jamie Dimon, chief executive of JPMorgan Chase, had even stronger words about Bitcoin: “You can’t have a business where people are going to invent a currency out of thin air. It won’t end well … someone is going to get killed and then the government is going to come down on it.”

But not all billionaires are against Bitcoin. Mark Cuban has said its value is inflated, but he recently invested in a venture capital fund that backs cryptocurrency. Richard Branson, however, has spoken more optimistically about it.

Related: 21 Surprising Facts About Warren Buffett

14 Things You Need to Know About Bitcoin

Super wealthy twins and a smart teen

Super wealthy twins and a smart teen
Image credit: David Livingston | Getty Images

Other notable investors in Bitcoin include Cameron and Tyler Winklevoss (the Harvard-educated twins who sued Mark Zuckerberg claiming that Facebook was based on an idea they'd had). They bought $11 million worth of Bitcoin in 2013, an amount said to be about 1 percent of all bitcoins in circulation at that time. When Bitcoin's value reached more than $11,000 in early December, the twins were declared the first Bitcoin billionaires. The Winklevoss twins have been petitioning the SEC to create a bitcoin exchange traded fund. The agency rejected the idea earlier this year.

Another is investor and entrepreneur Erik Finman, who invested $1,000 into Bitcoin when he was 14 years old and is now a millionaire.
14 Things You Need to Know About Bitcoin

Celebrities want in

Celebrities want in
Image credit: Stefan Hoederath | Redferns | Getty Images
Celebrities have also expressed enthusiasm for the cryptocurrency. Actor and Goop founder Gwyneth Paltrow advises Abra, a Bitcoin wallet, and Ashton Kutcher, Nas and Floyd Mayweather have all invested in Bitcoin startups.
14 Things You Need to Know About Bitcoin

Support from a big financial institution

Support from a big financial institution
Image credit: Nicholas Pfosi | Getty Images

In August 2017, Fidelity Investments became a rare standout among financial institutions in embracing Bitcoin and other cryptocurrencies. The company allows its clients to use the Fidelity website to view their bitcoin holdings held through digital wallet provider Coinbase. "This is an experiment in the spirit of learning what these crypto assets are like and how our customers may want to interact with them," Hadley Stern, senior vice president and managing director at Fidelity Labs, told Reuters.

Related: 10 Pieces of Financial Advice I Wish I Knew in My 20s

14 Things You Need to Know About Bitcoin

A hard fork

A hard fork
Image credit: Sean Gallup | Getty Images
On Aug. 1, 2017, Bitcoin experienced what's being called a "hard fork" as a result of a few issues, including the limited number of transactions that can be processed per second. Essentially, the cryptocurrency split into two, with Bitcoin Cash debuting. Here's how Rob Marvin of PCMag explains the situation: "The Bitcoin fork speaks to a fundamental ideological rift over what's more important: preserving the decentralized nature and independent control of the Bitcoin network, or accelerating transaction speeds to make the cryptocurrency more viable for mainstream ecommerce and payments." Bitcoin Cash allows larger blocks of currency and more transactions per second.
14 Things You Need to Know About Bitcoin

Jaw-dropping

Jaw-dropping

At the end of November 2017, Bitcoin's value reached toward $10,000 per unit. There are some 16.7 million Bitcoin units in circulation, and the cryptocurrency's market capitalization ($167,156,585,840 as of Nov. 28, 2017) is actually higher than that of Disney, McDonald's or IBM, and it is slightly above that of GE.

14 Things You Need to Know About Bitcoin

Publicly traded

Publicly traded
As of early December, there is another way to invest in Bitcoin without possessing some of the digital currency. On Dec. 10, 2017, Bitcoin futures -- "financial contracts obligating the buyer to purchase an asset or the seller to sell an asset," according to Investopedia -- became available on Cboe, a Chicago exchange. What this means for the future of Bitcoin is uncertain, but some argue it will help stabilize the cryptocurrency's wild price fluctuations.
14 Things You Need to Know About Bitcoin

The hidden cost of Bitcoin.

The hidden cost of Bitcoin.
Image credit: Bloomberg | Getty Images

The process to create bitcoin, called mining, is an energy intensive process, with many of the miners using specialized equipment for the process. This computing power has added a burden to energy systems around the globe, and in some countries, such as China, those systems still are powered by coal.

PowerCompare, a U.K.-based energy comparison tariff service, estimates that Bitcoin mining consumes more electricity than 159 countries, including Ireland and most countries in Africa. 

Power consumption for all cryptocurrencies is on track to use more electricity in 2018 than the whole of Argentina, according to Bloomberg.

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  • 14 Things You Need to Know About Bitcoin
  • The birth of Bitcoin
  • An elusive creator
  • Very expensive pizza
  • You can spend bitcoins
  • Federal Bureau of Bitcoin
  • A mountain-sized setback
  • The billionaires' takes
  • Super wealthy twins and a smart teen
  • Celebrities want in
  • Support from a big financial institution
  • A hard fork
  • Jaw-dropping
  • Publicly traded
  • The hidden cost of Bitcoin.
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