Crypto 101: The Beginner’s Guide to Bitcoin (BTC)
Bitcoin is an invention that, for the first time in history, enabled a group of software users to create and manage a digital money supply outside the control of any government or bank.
It helps to think of Bitcoin as a software protocol like those you interact with everyday – think SMTP (which helps route your emails) and HTTP (which ensures 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 enables computers running its software to manage a data set (the blockchain) and enforce a set of rules that make this data (bitcoins) scarce and potentially valuable.
As its essential building blocks, the Bitcoin protocol uses:
- Public-key cryptography, which you can learn more about in our article How do cryptocurrencies use cryptography?
- Peer-to-peer networking, which you can learn more about in our article Bitcoin Full Node Guide: Securing Self-Sovereignty
- A finite supply which you can learn more about in our articles What is Market Cap? And What is a store of value?
The Bitcoin blockchain is a full record of the network’s history validated by individuals running the Bitcoin software (nodes). This ensures that unlike most digital data, which can be freely copied and modified, bitcoins cannot be.
Who Created Bitcoin?
While Bitcoin can safely claim to have created the world’s first successful cryptocurrency, its technology is built on decades of ideas for how cryptography could help create digital money.
In 2006, “Satoshi Nakamoto,” a still pseudonymous person or group, began writing the code for a new digital cash system called “Bitcoin.”
Want to learn even more about the origin and early days of bitcoin? You can check out our article What is the Bitcoin white paper?
How Does Bitcoin Work?
There are two main concepts to understand if you are interested in truly understanding how the Bitcoin protocol operates.
Luckily, we have detailed articles that break down both of these topics!
Cryptocurrencies use cryptography to help the network track information in a less data intensive yet extremely secure way. You can learn all about this in our article How do cryptocurrencies use cryptography?
Next, a process known as mining helps to make sure information is actually recorded on the blockchain. Once again, you can learn all about the mining process, as well as the role cryptography plays in the process with our article What is Bitcoin Mining?
What Gives BTC Value?
Bitcoin shares many of the characteristics that give traditional commodities and government monies value. Some of these factors include:
Want to learn more about each of these? Still have more questions about the world’s first cryptocurrency?
Head over to the Kraken Learn Center and check out our article What is Bitcoin? to get even more information about the Bitcoin protocol.
Remember that can also buy and sell BTC for other cryptocurrencies at exchanges like Kraken, which are online 24/7, 365 days a year. Check out the real time price of bitcoin by going to our bitcoin price page or keep learning about bitcoin with our Learn Center article below.
These materials are for general information purposes only and are not 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 compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your crypto assets and you should seek independent advice on your taxation position.