First and foremost, Bitcoin is not something you can hold in your hand, at least not any more than you can hold a phone, SD card, or notebook computer in your hands and say that you are holding your entire music and movie collection. That is why the term ‘virtual currency’ is sometimes applied to Bitcoin, as well as the more popular ‘cryptocurrency.’
In fact, the ‘crypto’ monicker is not that accurate when applied to Bitcoin, or any other cryptocurrency. Crypto refers to cryptography which the practice of creating and breaking codes. Yet, Bitcoin’s de-centralized accounting process (more on what that is a little deeper in the post), is somewhat transparent.
Crypto, when applied to cryptocurrency, has more to do with Bitcoin’s origins than what Bitcoin actually is. Bitcoin was born on cryptography forum where, to put it bluntly, computer geeks spend gobs of time talking about mathematical theories that would make most people eyes roll.
Sometime around 2008, a discussion began on one of these forums about how a virtual currency could be created, and more importantly automated, so that it would have no administrator or centralized bank. This led to years of experimentation and arguing on the forum. Not the kind of weird arguing you see on social media, more a gentlemanly geek arguing. After a few years and a couple of false-starts with attempts like B-Cash (Bitcoin’s immediate predecessor), Bitcoin was unleashed on the world.
To add to Bitcoin’s decentralization, this first cryptocurrency has not acknowledged creator or creators. Satoshi Nakamoto is the name credited with creating Bitcoin. To this day, no one knows for sure show Satoshi Nakamoto is. A number of people have claimed to be Satoshi Nakamoto. So far these claims seem to be spurious.
One man, Craig Wright, has made one of the least spurious claims to being Satoshi Nakamoto. He is a computer scientist from Australia who claims to have been part of a team of people who created Bitcoin, and the one who came up with the Satoshi Nakamoto monicker. Yet, the validity of the proof he offered has been questioned as a computer slight-of-hand, as well as his motivation for making the claim. While it is undeniable that he was involved in Bitcoin early on, his motivation to make the claim may have been fostered by a lawsuit he filed against a former partner for $5 billion worth of Bitcoin. He also was convicted of contempt of court by the Supreme Court of New South Wales for violating an injunction against harassing former co-workers.
So no one, or group of people, has yet satisfied the crypto media experts and been able to confirm themselves as the real Satoshi Nakamoto.
So what did this Nakamoto person create?
Bitcoin doesn’t need a bank or any kind of administration for that matter. It is completely decentralized. Transactions are self-verified through what is called the blockchain. A blockchain is a kind of peer-to-peer network. Spotify is an example of a peer-to-peer network.
Bitcoin and all cryptocurrencies can be explained by the following analogy. It’s not perfect, but it’ll do. Imagine you’re in a restaurant and its time to pay the bill. Instead of the waiter totaling your drinks, appetizers, meal, and dessert, the waiter tears up your check and passes the pieces around to the other diners. Those diners do the math on the pieces they have, passing the results to other diners who then add that total their sums and so on. Once the all the calculations have been made the waiter (the blockchain in this analogy) brings you your check.