Bitcoin is the original cryptocurrency, first created in 2008 by Satoshi Nakamoto to serve as a "peer-to-peer" system of transactions free from the controls of the traditional financial sector.
Bitcoin is by far the most famous blockchain, and possibly the only one that has attracted lasting mainstream attention.
What Are Bitcoin's Defining Features?
There are several qualities that make Bitcoin what it is today:
Blockchain: Bitcoin relies on a blockchain, a distributed ledger made up of a series of blocks. Each block contains data for several transactions, and each block's validity is dependent on other blocks in the chain.
Cryptographic security: Bitcoin addresses and wallets store balances without a "central bank" that controls access. Each address is secured solely through cryptography, as explained here. Though attackers can steal your Bitcoin if they know your private key, nobody can take away your ability to access your balance if you keep your private key safe.
Mining: Bitcoin is generated through a system called "mining," or proof-of-work. Users dedicate their computer power to competitively solve cryptographic problems, generate new Bitcoin, and confirm transactions.
Transparency: Bitcoin transactions are transparent and pseudonymous. This means that anyone can inspect Bitcoin transactions, but not necessarily tie those transactions to an individual.
Open-source: Anyone can fork Bitcoin's code and modify it to create their own cryptocurrency or blockchain.
Decentralization: Bitcoin is designed so that no central authority can control the blockchain, intercept transactions, or censor users—at least, not at a fundamental level.
Small-block sizes: Unlike Bitcoin Cash and Bitcoin SV, Bitcoin aims to keep its block sizes small (1 MB). This arguably reduces Bitcoin's efficiency: small blocks reduce the number of transactions a block can hold, driving up fees and transaction times.
However, the Bitcoin community has introduced other ways to improve Bitcoin's efficiency. Segwit, the Lightning Network, and Schnorr signatures all improve Bitcoin's efficiency without simply raising block sizes.
What Is the Future of Bitcoin?
Bitcoin has existed for over a decade, and it is now facing many challenges.
Price volatility: Bitcoin's price fluctuates rapidly. The price surge of 2017, the price crash of 2018, and Black Thursday of 2020 have all had lasting impacts on how the general public sees Bitcoin as a "store of value."
Market dominance: Since its creation, Bitcoin has been the largest cryptocurrency by market cap. That is, the dollar value of the entire Bitcoin supply is greater than that of any other cryptocurrency.
However, Bitcoin's market dominance has fluctuated significantly since competing cryptos began to emerge in 2017. Right now, Bitcoin accounts for about 2/3 of the crypto market's entire market cap.
Broken branding: The Bitcoin community has fractured since the launch of Bitcoin Cash in 2017. Sites like Bitcoin.com now promote Bitcoin Cash, while Bitcoin.org is dedicated to Bitcoin itself. Bitcoin SV is a third and highly controversial Bitcoin faction. Social media communities may have strict rules on which Bitcoin factions can be discussed.
Commercial acceptance: There are 10,000-100,000 businesses that accept Bitcoin payments, but few accept Bitcoin in its basic form. Many rely on payment processors like BitPay instead, which introduce a point of centralized control and arguably defeat the purpose of Bitcoin.
Privacy: Analytics companies like Chainalysis and Ciphertrace can tie Bitcoin transactions to real identities by "connecting the dots" to known information. Though this has allowed governments to tackle cybercrime and tax evasion, it also undermines the freedom that Bitcoin promises.
Centralization: Though Bitcoin is decentralized, many large companies such as exchanges, mining firms, payment services, and privately owned websites have gained significant influence over Bitcoin—but not total control. Fighting against that control will be important in the future.