The holidays are a time where friends and family come together, share time with and show generosity to one another. What better way to spend time with your family than to tell them some interesting facts about Bitcoin? With so much being said about Bitcoin in the mainstream media, you can be the source of truth for your closest friends and family.
So, cozy up with a mug of hot chocolate and read through our 12 Bitcoin related facts to tell relatives at the holiday table this season.
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market cap, and arguably the most well known. Designed specifically for our Internet age, Bitcoin represents a novel, electronic form of money. Through encryption and a distributed network of miners, Bitcoin is a trust-minimized digital currency that can be sent peer-to-peer at any time.
Since its launch in 2009, Bitcoin's influence on the financial world has been nothing short of monumental. Some experts even suggest that it could ascend to the status of a new world reserve currency. They often refer to it as "digital gold" or "gold 2.0," highlighting its potential as a stable store of value. This narrative has grown so large that sovereign nations now hold Bitcoin on their balance sheet, like El Salvador.
Why Was Bitcoin Created?
The inception of Bitcoin was driven by the necessity of adapting to our digital age, where online transactions are commonplace. Typically, these transactions require a third-party intermediary from the financial sector, trusted by both buyer and seller. Satoshi Nakamoto, however, proposed a different approach: a payment system based on 'proof of work', which is fundamentally based on mathematical principles, not trust. Bitcoin thus emerged as a solution, enabling online payments without the traditional reliance on mutual trust.
How Do Bitcoin Transactions Work?
When a Bitcoin transaction is initiated, the sender transfers a specific amount of Bitcoin to a recipient's address. This isn't just a simple transfer; the transaction undergoes verification by numerous nodes in the Bitcoin network and is then recorded on the blockchain, a public ledger. For this service, the sender pays a transaction fee, which is essentially a reward for the miners who maintain and secure the Bitcoin network.
This transaction fee can vary on the network depending on how many other transactions are being sent at any given time. As we saw in a previous blog, these fees can get so high that a single transaction can cost upwards of $50. This problem highlights the fact that L2 solutions are becoming increasingly critical in the usability of the network for simple transactions.
How Many Bitcoins Are There?
A fascinating aspect of Bitcoin is its limited supply – there will only ever be 21 million bitcoins. This fact is hardcoded into the Bitcoin network, and cannot be changed without a hard fork of the network. As of now, according to Coingecko the circulating supply of Bitcoin is 19,564,168, which gives Bitcoin a total market cap of over $850B.
A fascinating point to note is that approximately 20-25% of all Bitcoins are considered lost. These losses occur for various reasons: people forgetting their wallet passwords, Bitcoin holders passing away without sharing their access details, or simply instances where bitcoins have been forgotten.
21 Million Bitcoins - Is This Enough?
The notion of only 21 million bitcoins might raise eyebrows. How can 8 billion people share just 21 million coins? The answer lies in Bitcoin's divisibility. Each bitcoin is divisible to 8 decimal places. As Bitcoin's value increases, the ability to buy, sell, or pay in fractions becomes crucial. For instance, a transaction could involve as little as 0.00000068 bitcoin. This flexibility ensures that even with a finite number of bitcoins, the currency can accommodate a vast user base.
How Are New Bitcoins Generated?
The creation of new bitcoins is an intriguing process involving 'miners'. These are individuals who contribute computing power to the network. Miners are rewarded with Bitcoins for generating new blocks, which occur roughly every 10 minutes and consist of Bitcoin transactions. Currently, miners receive 6.25 bitcoins per block, a reward that halves approximately every four years. The next halving event is anticipated around April 2024, a pivotal moment for Bitcoin's economy.
Miners can expect to continue receiving these block rewards until the final halving event which is expected to occur sometime in 2140. Although it is unknown what the ecosystem will look like then, the hope is that there is enough activity on the network that transaction fees can replace these block subsidies.
Bitcoin and Energy Consumption
The energy consumption of Bitcoin mining is a hot topic. Critics often label it as wasteful, but it's important to compare it to the energy demands of traditional banking systems, which also require significant electricity for operations, ATMs, and offices. Bitcoin miners tend to gravitate towards areas with cheap, often sustainable, electricity sources, like hydroelectric power. This not only makes economic sense but also taps into otherwise unutilized energy resources. In terms of concrete numbers, it is estimated that the Bitcoin network uses just 0.16% of the world's energy.
Additionally, as we saw in Texas, Bitcoin miners can play a crucial role in protecting our energy grids. Since Bitcoin mining can be turned on or off without significant consequences, at times where there may be a power shortage, these miners can turn off acting as excess reserves that can strengthen the grid's resilience.
Bitcoin's Value and Backing
A common misconception is that Bitcoin, unlike traditional currencies, lacks value or backing. However, Bitcoin's strength lies in the computing power of its miners. Its value, like all currencies, is based on supply and demand. There is no monetary backing to the USD, but rather it is the trust in the US government to pay its debts that gives it value. With Bitcoin's capped supply, its value tends to rise as demand increases. This scarcity and its resistance to inflation are key to its value.
What Can You Do with Bitcoin?
Bitcoin isn't just for holding; it has practical uses. Although for many around the world, especially in areas with hyperinflation, a reliable store of value is all that is needed. You can use Bitcoin to purchase goods and services, to speculate on other assets, mint digital assets like Ordinals or BRC-20 tokens and so much more.
Essentially, Bitcoin has many or all of the properties we know with fiat currencies, except Bitcoin does not have a central intermediary who decides who gets to send and receive Bitcoin. It is truly a currency made for the future accessible by anyone around the globe.
Bitcoin and Criminal Activity
The myth that Bitcoin is ideal for criminal activity persists, mainly due to misconceptions about its anonymity. In reality, Bitcoin is pseudonymous. Every transaction is traceable on its public ledger, making it less appealing for illicit activities compared to untraceable methods like cash or gold.
The UN estimates that annually between 2%-5% of global GDP is used for illicit activities and money laundering through the traditional banking system and cash.” Essentially, crypto is not some private haven where criminals can transact freely and without worry.
Bitcoin Pizza Day
A fun slice of Bitcoin history is celebrated on May 22nd, known as Bitcoin Pizza Day. This commemorates one of the first known purchases with bitcoin in 2010, when a programmer in Florida bought two pizzas for 10,000 bitcoins. At the time these bitcoins were only worth around $30 but today, this would be worth over $440M.
Since this purchase the Bitcoin ecosystem has continued to grow and BTC is now accepted at many different shops and restaurants all around the world.
Where Can I Buy Bitcoin?
Purchasing Bitcoin has become more accessible over time. From the early days of direct transactions with miners or individuals, the ecosystem has evolved. Now, Bitcoin ATMs are available globally, and centralized exchanges like Coinbase, Gemini, and Binance offer easy avenues to buy Bitcoin, although keep in mind the old adage “Not your keys, not your coins" as many exchanges are still centralized and require you to go through an intermediary.
If you would prefer to self custody your Bitcoin, you can download a popular Bitcoin wallet like Leather. With a Leather wallet, users can buy, send and receive tokens and collectibles. They can also connect to different Web3 applications and the wallet is accessible through both a browser extension and desktop app.
Clarifying the Narrative Around Bitcoin
Amidst the laughter and clinking of glasses, sharing these nuggets of Bitcoin wisdom adds a unique flavor to our holiday conversations. Remember, whether you're a seasoned crypto enthusiast or just starting out, the spirit of the season is about connection and sharing. So, as you pass the mashed potatoes and dive into discussions about digital gold, let's cherish these moments of togetherness and the joy of learning something new.
Bitcoin, with its intriguing complexities and revolutionary potential, is more than just a currency – it's a topic that brings us together, sparking curiosity and conversation. Here's to a holiday season filled with warmth, joy, and maybe a bit of Bitcoin banter. Happy holidays, and may your new year be as promising and exciting as the ever-evolving world of cryptocurrency!