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Bitcoin is a decentralized cryptocurrency originally described in a 2008 whitepaper by a person, or group of people, using the alias Satoshi Nakamoto. It was launched soon after, in January 2009.
Bitcoin is a peer-to-peer online currency, meaning that all transactions happen directly between equal, independent network participants, without the need for any intermediary to permit or facilitate them. Bitcoin was created, according to Nakamoto’s own words, to allow “online payments to be sent directly from one party to another without going through a financial institution.”
Some concepts for a similar type of a decentralized electronic currency precede BTC, but Bitcoin holds the distinction of being the first-ever cryptocurrency to come into actual use.
Bitcoin’s whitepaper was published pseudonymously in 2008 by an individual, or a group, with the pseudonym “Satoshi Nakamoto”, whose underlying identity has still not been verified.
The Bitcoin protocol uses an SHA-256d-based Proof-of-Work (PoW) algorithm to reach network consensus. Its network has a target block time of 10 minutes and a maximum supply of 21 million tokens, with a decaying token emission rate. To prevent fluctuation of the block time, the network's block difficulty is re-adjusted through an algorithm based on the past 2016 block times.
Anyone can create a bitcoin account or bitcoin address. There is no approval process. Transactions are tied to this bitcoin address. The owner of the bitcoin address is not recorded in the transaction record. The owner is also not required to link real-world information to their account. This makes purchases with bitcoin private.
But bitcoin is not completely anonymous. If public information can link someone to their bitcoin address, then all their transaction can be linked back to them. Similarly, if a transaction can be traced back to an IP address, location information can be linked to a bitcoin address. Therefore, bitcoin is considered pseudonymous because a user’s identity is hidden, but it is not truly anonymous.
Bitcoin is perfectly legal in most countries. There are a handful of exceptions, though – be sure to read up on the laws of your jurisdiction before investing in cryptocurrency.
In countries where it’s legal, government entities take varying approaches to it where taxation and compliance are concerned. The regulatory landscape is still highly underdeveloped overall and will likely change considerably in the coming years.