smart contracts</strong></a> and a native coin called <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ether./n![\"What](https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_01.o.jpg/" "\\"What")
dedicated section</strong></a> on our Crypto 101 Handbook, explaining all of the different intricacies of smart contract functionality. For now, suffice to say that smart contracts were first introduced on Ethereum, and that they act as a middleman between two parties participating in some sort of a process (such as selling a car).</p>\n<p>The kicker here, though, is that smart contracts are automated, decentralized, and immutable. In theory, they make everything much faster and simpler, too!</p>\n<p>Thanks to smart contracts and some arduous development work, <strong>Ethereum has become the second-largest cryptocurrency project on the market</strong>, right after Bitcoin. This is a massive deal, and has put a pretty big spotlight on ETH, and the technology behind it! In fact, smart contract functionality is where the definition “global computer” originated from, as well. On top of that, it’s also part of the answer to the question <em>“what is the difference between Bitcoin and Ethereum?”</em> - smart contracts!</p>\n<p>While I only gave you a single example of how the technology behind Ethereum can be used in the real world, the possibilities are endless! ETH can theoretically help automate a huge assortment of actions and services, all the while making them much fairer and faster, too. A lot of developers know this, and thus choose to build their own crypto-native projects on the Ethereum blockchain.</p>\n<p>More on that a bit later, though - in order to talk about this side of Ethereum, we need to first look into the history of this cryptocurrency project.</p>\n<h2>The History of Ethereum</h2>\n<p>Ethereum first saw the light of day in 2015. Up until that point, though, the technology behind this blockchain project had already been in development for a couple of years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: The History of Ethereum.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_02.o.jpg/" alt=\"What is Ethereum: The History of Ethereum.\" width=\"1000\" height=\"340\" /></p>\n<p>Whenever we think about Ethereum today, we usually associate it with a man named <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>. He was *one* of the co-founders of ETH, but as you might have guessed, not the only one. In fact, in total, <strong>Ethereum was founded by 8 people</strong>, including the likes of Charles Hoskinson (the founder of Cardano) and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-gavin-wood/">Gavin Wood</strong></a> (the creator of Polkadot).</p>\n<p>Why, then, is Vitalik the only one who people associate with Ethereum, nowadays? Well, it’s a whole big story, in of itself. However, long story short, out of those 8 initial founders, <strong>Vitalk is currently the only one left, working on ETH</strong>.</p>\n<p>Throughout the years, Ethereum had a variety of ups and downs, and has experienced a lot of different updates in the process. While the blockchain was always a bit controversial <em>(mostly due to its problems with scalability and network fees)</em>, the biggest controversy that it has experienced, to date, is likely a hack that happened all the way back in 2016. It was a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-autonomous-organizations-dao/">DAO hack during which a huge amount of Ether was stolen, and that divided the Ethereum community into two.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: Ethereum VS Ethereum Classic.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_03.o.jpg/" alt=\"What is Ethereum: Ethereum VS Ethereum Classic.\" width=\"1000\" height=\"446\" /></p>\n<p>Like, literally - Ethereum experienced a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-fork-blockchain/">hard fork</strong></a>, which resulted in two separate blockchain projects. <strong>Ethereum that we know today</strong> (this is the updated version of the original blockchain, with the security vulnerability fixed), and <strong>Ethereum Classic</strong>, the original ETH project, but with multiple security vulnerabilities still supposedly present. So, when someone asks <em>“what is Ethereum Classic?”,</em> or <em>“what is the difference between Ethereum and Ethereum Classic?”</em>, you’ll now know!</p>\n<p>Now, I’ve also just mentioned a number of different terms - DAOs, hard forks, and so on. If you’re not familiar with any of these terms, or are wondering - what is Ethereum gas, or address types, please feel free to <strong>check out other chapters in our Crypto 101 Handbook</strong> - there's a variety of dedicated sections explaining difficult cryptocurrency topics, as simply as possible!</p>\n<p>The history of Ethereum deserves a section of its own, and I won’t bore you with all of the specific details that made ETH what it is today - instead, we’re going to focus on figuring out <strong>what is Ethereum used for, and how it works</strong>.</p>\n<p>My point here is that, while ETH experienced a lot of bumps in the road, as of writing this section, it’s still one of the most popular cryptocurrency projects in the industry, and one that has paved the way for <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-defi/">decentralized finance</strong></a> (or, DeFi) and a huge variety of technological blockchain advancements.</p>\n<p>In order to get Ethereum explained fully, you do also need to know <strong>what is Wrapped Ethereum</strong>. There's a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-stablecoins/">dedicated section</strong></a> about wrapped coins, in general, but if you come across wETH, and don’t understand what that is, just keep in mind that it simply is Ethereum based on a different network, such as the Binance Chain.</p>\n<h2>What Makes Ethereum Special?</h2>\n<p>Continuing on with this “What is Ethereum?” section, it's actually a good place to transition to <strong>what makes ETH special</strong>, and how it managed to become the second-largest crypto project in the world.</p>\n<p>As I’ve mentioned earlier, many developers, to this day, choose to build their projects on Ethereum. The fact that they are able to do so, in the first place, is one of the big reasons behind the popularity of this blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_04.o.jpg/" alt=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" width=\"1000\" height=\"1011\" /></p>\n<p><strong>You can think of Ethereum as an actual computer!</strong> If you want to play a game, write an essay, or create a slideshow presentation, you can do so on a huge variety of different computers out there - however, if you have the chance to use a time-tested, reliable machine, you would probably go for it, right? While the computer might not support some super-fancy applications, and has some occasional lag, with it, you’d be able to access most games and apps on the market - it’s a huge factor to consider!</p>\n<p>The same is true with Ethereum. If you’re creating a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">decentralized application</strong></a> (a dApp - say, a crypto game), you probably want to do so on a reliable blockchain, and one that houses as many potential players as possible. In both cases, Ethereum comes out on top!</p>\n<p><strong>With most dApps and various crypto projects still being built on ETH</strong>, this incentivizes new developers to do the same (since there’s a booming ecosystem on the said blockchain). From the user perspective, things aren’t much different - if you use an Ethereum dApp, chances are that it will have a large community following, which might not be the case for the same dApp built on a different blockchain.</p>\n<p><em>So… How does this make Ethereum special? </em>Well, to put it in layman’s terms, over time, Ethereum has essentially managed to build a huge following, and a dedicated group of users. This is true both in regards to developers, as well as end-users, who interact with the projects present on this blockchain.</p>\n<p>Initially, Ethereum attracted people due to its groundbreaking smart contract functionality. As more and more people started using the network, this resulted in a snowball effect - with DeFi, NFTs, and crypto gaming surging in popularity, more people are starting to interact with these areas, and with most of the projects being based on Ethereum, this results in the growth of this particular network, as well.</p>\n<h2>Wrapping Up: The Future of Ethereum</h2>\n<p>In this “Ethereum explained” section, we’ve talked about what is Ethereum used for, and what makes this piece of crypto technology so special. At this point, you should be pretty well-versed in all-things-ETH, both when it comes to the history of the network, as well as the hype surrounding it, as well.</p>\n<p><strong>What does the future of Ethereum look like, though?</strong> After all, as time goes on, there are new, more modern and improved networks coming around - ones that seemingly offer many more perks than ETH!</p>\n<p>Well, truth be told, there have been countless <em>“Ethereum killers”</em> over the years - yet, the blockchain still stands tall as one of the most popular crypto projects of all time. Yes, it’s true that ETH isn’t without its issues and controversies - lack of scalability, huge network gas fees, outdated functionalities, and so on. However, as of writing this section, the <strong>Ethereum Merge</strong> has just recently happened.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_05.o.jpg/" alt=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" width=\"1000\" height=\"269\" /></p>\n<p>While it will take some time to see the true effects of ETH 2.0, if you’re wondering <em>“what is Ethereum 2.0?”,</em> just know that this is <strong>the biggest update to the Ethereum network</strong>, as of yet, and it aims to solve (or at least mitigate) many of the issues associated with this blockchain, one of which is the transition from <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work to <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake (so, people would now be able to stake Ethereum). If you’d like to learn more about what all of that means, or the ETH 2.0 update, make sure to go through the whole Crypto 101 Handbook - it features sections covering many of these topics!</p>","meta_title":"What is Ethereum and What is It Used For?","meta_description":"Trying to figure out what is Ethereum? Wondering what is Ethereum used for? You're in luck because you'll find all the answers right here!","meta_keywords":"what is ethereum, ethereum explained, what is ethereum used for, what is ethereum gas, what is an ethereum address, what is ethereum 2.0, what is the difference between bitcoin and ethereum, what is staking ethereum, what is weth vs eth, what is wrapped ethereum, what is ethereum classic, what is the difference between ethereum and ethereum classic","order":7,"language":"en","created_at":"2022-10-05T08:27:32.000000Z","updated_at":"2022-10-17T07:26:10.000000Z","modified_content":"<p>In this section, we’re going to answer the questions <strong>what is Ethereum, and how does it work?</strong></p>\n<p>What visuals come to your mind when you hear the term “global computer”? Some people will probably imagine a sentient being, overseeing all of the different processes that we perform, every day. Or maybe you’re thinking about something along the lines of the Terminator - a dangerous machine that’s out to destroy humanity?</p>\n<p>Well, while everyone is going to have their own thoughts concerning the matter, <strong>“global computer” is actually a term that is</strong> <strong>often used to describe a very well-known cryptocurrency project called Ethereum</strong>.</p>\n<p>In this section, we are going to talk about Ethereum. To be a bit more specific, we’ll look into what is Ethereum, in simple terms, the history of this project (how it came to be), what makes it so special, and we’ll also ponder on what does the future of ETH look like, as well.</p>\n<p><em>So, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is Ethereum & What is it Used For? (Animated Explanation)\"\n title=\"What is Ethereum & What is it Used For? (Animated Explanation)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: The Ultimate Blockchain for dApp Creation: Ethereum</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"The Ultimate Blockchain for dApp Creation: Ethereum\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"HqJVW994hV8\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is Ethereum & What is it Used For? (Animated Explanation)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/HqJVW994hV8/hq720.jpg/"/n alt=\"What is Ethereum & What is it Used For? (Animated Explanation)\"\n title=\"What is Ethereum & What is it Used For? (Animated Explanation)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is Ethereum & What is it Used For? (Animated Explanation)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"HqJVW994hV8\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is Ethereum?</h2>\n<p>Let’s start off with the core question - <strong>what is Ethereum?</strong></p>\n<p>Now, as I’ve hinted in the beginning, the term “global computer” is actually quite accurate, when describing ETH. In technical terms, <strong>Ethereum is a public blockchain software</strong> that allows users to create different middleman-less projects on it, with the help of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a> and a native coin called <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ether.
/ndedicated section</strong></a> on our Crypto 101 Handbook, explaining all of the different intricacies of smart contract functionality. For now, suffice to say that smart contracts were first introduced on Ethereum, and that they act as a middleman between two parties participating in some sort of a process (such as selling a car).</p>\n<p>The kicker here, though, is that smart contracts are automated, decentralized, and immutable. In theory, they make everything much faster and simpler, too!</p>\n<p>Thanks to smart contracts and some arduous development work, <strong>Ethereum has become the second-largest cryptocurrency project on the market</strong>, right after Bitcoin. This is a massive deal, and has put a pretty big spotlight on ETH, and the technology behind it! In fact, smart contract functionality is where the definition “global computer” originated from, as well. On top of that, it’s also part of the answer to the question <em>“what is the difference between Bitcoin and Ethereum?”</em> - smart contracts!</p>\n<p>While I only gave you a single example of how the technology behind Ethereum can be used in the real world, the possibilities are endless! ETH can theoretically help automate a huge assortment of actions and services, all the while making them much fairer and faster, too. A lot of developers know this, and thus choose to build their own crypto-native projects on the Ethereum blockchain.</p>\n<p>More on that a bit later, though - in order to talk about this side of Ethereum, we need to first look into the history of this cryptocurrency project.</p>\n<h2>The History of Ethereum</h2>\n<p>Ethereum first saw the light of day in 2015. Up until that point, though, the technology behind this blockchain project had already been in development for a couple of years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: The History of Ethereum.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_02.o.jpg/" alt=\"What is Ethereum: The History of Ethereum.\" width=\"1000\" height=\"340\" /></p>\n<p>Whenever we think about Ethereum today, we usually associate it with a man named <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>. He was *one* of the co-founders of ETH, but as you might have guessed, not the only one. In fact, in total, <strong>Ethereum was founded by 8 people</strong>, including the likes of Charles Hoskinson (the founder of Cardano) and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-gavin-wood/">Gavin Wood</strong></a> (the creator of Polkadot).</p>\n<p>Why, then, is Vitalik the only one who people associate with Ethereum, nowadays? Well, it’s a whole big story, in of itself. However, long story short, out of those 8 initial founders, <strong>Vitalk is currently the only one left, working on ETH</strong>.</p>\n<p>Throughout the years, Ethereum had a variety of ups and downs, and has experienced a lot of different updates in the process. While the blockchain was always a bit controversial <em>(mostly due to its problems with scalability and network fees)</em>, the biggest controversy that it has experienced, to date, is likely a hack that happened all the way back in 2016. It was a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-autonomous-organizations-dao/">DAO hack during which a huge amount of Ether was stolen, and that divided the Ethereum community into two.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: Ethereum VS Ethereum Classic.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_03.o.jpg/" alt=\"What is Ethereum: Ethereum VS Ethereum Classic.\" width=\"1000\" height=\"446\" /></p>\n<p>Like, literally - Ethereum experienced a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-fork-blockchain/">hard fork</strong></a>, which resulted in two separate blockchain projects. <strong>Ethereum that we know today</strong> (this is the updated version of the original blockchain, with the security vulnerability fixed), and <strong>Ethereum Classic</strong>, the original ETH project, but with multiple security vulnerabilities still supposedly present. So, when someone asks <em>“what is Ethereum Classic?”,</em> or <em>“what is the difference between Ethereum and Ethereum Classic?”</em>, you’ll now know!</p>\n<p>Now, I’ve also just mentioned a number of different terms - DAOs, hard forks, and so on. If you’re not familiar with any of these terms, or are wondering - what is Ethereum gas, or address types, please feel free to <strong>check out other chapters in our Crypto 101 Handbook</strong> - there's a variety of dedicated sections explaining difficult cryptocurrency topics, as simply as possible!</p>\n<p>The history of Ethereum deserves a section of its own, and I won’t bore you with all of the specific details that made ETH what it is today - instead, we’re going to focus on figuring out <strong>what is Ethereum used for, and how it works</strong>.</p>\n<p>My point here is that, while ETH experienced a lot of bumps in the road, as of writing this section, it’s still one of the most popular cryptocurrency projects in the industry, and one that has paved the way for <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-defi/">decentralized finance</strong></a> (or, DeFi) and a huge variety of technological blockchain advancements.</p>\n<p>In order to get Ethereum explained fully, you do also need to know <strong>what is Wrapped Ethereum</strong>. There's a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-stablecoins/">dedicated section</strong></a> about wrapped coins, in general, but if you come across wETH, and don’t understand what that is, just keep in mind that it simply is Ethereum based on a different network, such as the Binance Chain.</p>\n<h2>What Makes Ethereum Special?</h2>\n<p>Continuing on with this “What is Ethereum?” section, it's actually a good place to transition to <strong>what makes ETH special</strong>, and how it managed to become the second-largest crypto project in the world.</p>\n<p>As I’ve mentioned earlier, many developers, to this day, choose to build their projects on Ethereum. The fact that they are able to do so, in the first place, is one of the big reasons behind the popularity of this blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_04.o.jpg/" alt=\"What is Ethereum: DeFi, NFTs, crypto-based games, and smart contracts.\" width=\"1000\" height=\"1011\" /></p>\n<p><strong>You can think of Ethereum as an actual computer!</strong> If you want to play a game, write an essay, or create a slideshow presentation, you can do so on a huge variety of different computers out there - however, if you have the chance to use a time-tested, reliable machine, you would probably go for it, right? While the computer might not support some super-fancy applications, and has some occasional lag, with it, you’d be able to access most games and apps on the market - it’s a huge factor to consider!</p>\n<p>The same is true with Ethereum. If you’re creating a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">decentralized application</strong></a> (a dApp - say, a crypto game), you probably want to do so on a reliable blockchain, and one that houses as many potential players as possible. In both cases, Ethereum comes out on top!</p>\n<p><strong>With most dApps and various crypto projects still being built on ETH</strong>, this incentivizes new developers to do the same (since there’s a booming ecosystem on the said blockchain). From the user perspective, things aren’t much different - if you use an Ethereum dApp, chances are that it will have a large community following, which might not be the case for the same dApp built on a different blockchain.</p>\n<p><em>So… How does this make Ethereum special? </em>Well, to put it in layman’s terms, over time, Ethereum has essentially managed to build a huge following, and a dedicated group of users. This is true both in regards to developers, as well as end-users, who interact with the projects present on this blockchain.</p>\n<p>Initially, Ethereum attracted people due to its groundbreaking smart contract functionality. As more and more people started using the network, this resulted in a snowball effect - with DeFi, NFTs, and crypto gaming surging in popularity, more people are starting to interact with these areas, and with most of the projects being based on Ethereum, this results in the growth of this particular network, as well.</p>\n<h2>Wrapping Up: The Future of Ethereum</h2>\n<p>In this “Ethereum explained” section, we’ve talked about what is Ethereum used for, and what makes this piece of crypto technology so special. At this point, you should be pretty well-versed in all-things-ETH, both when it comes to the history of the network, as well as the hype surrounding it, as well.</p>\n<p><strong>What does the future of Ethereum look like, though?</strong> After all, as time goes on, there are new, more modern and improved networks coming around - ones that seemingly offer many more perks than ETH!</p>\n<p>Well, truth be told, there have been countless <em>“Ethereum killers”</em> over the years - yet, the blockchain still stands tall as one of the most popular crypto projects of all time. Yes, it’s true that ETH isn’t without its issues and controversies - lack of scalability, huge network gas fees, outdated functionalities, and so on. However, as of writing this section, the <strong>Ethereum Merge</strong> has just recently happened.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_ethereum_05.o.jpg/" alt=\"What is Ethereum: From Proof-of-Work to Proof-of-Stake.\" width=\"1000\" height=\"269\" /></p>\n<p>While it will take some time to see the true effects of ETH 2.0, if you’re wondering <em>“what is Ethereum 2.0?”,</em> just know that this is <strong>the biggest update to the Ethereum network</strong>, as of yet, and it aims to solve (or at least mitigate) many of the issues associated with this blockchain, one of which is the transition from <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work to <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake (so, people would now be able to stake Ethereum). If you’d like to learn more about what all of that means, or the ETH 2.0 update, make sure to go through the whole Crypto 101 Handbook - it features sections covering many of these topics!</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-ethereum","youtube_video":{"id":127,"channel_id":1,"sort":23,"video_title":"What is Ethereum & What is it Used For? (Animated Explanation)","description":"What is Ethereum, and what is Ethereum used for?\n\nEthereum is one of the most popular cryptocurrencies - there’s no denying that. Often referred to as a “global computer”, Ethereum is the cornerstone of smart contract technology, and the world of DeFi, overall. However, have you ever thought about what is Ethereum, really, and how does this crypto project work?\n\nIn this video, I’ll tell you about just that. We’ll look into what is Ethereum, in general, as well as talk about the history behind this crypto network. On top of that, I will tell you what makes ETH special, and what the network might look like, in the future.\n\nWhen was the first time you heard about Ethereum? Share your experiences in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What is Ethereum\n0:56 Ethereum Explained\n3:17 History of Ethereum\n5:48 What Makes Ethereum Special?\n7:56 Wrap-up: What is the Future of Ethereum?\n\nMore Related Videos:\n\n🔑 What is a Bitcoin & How Does it work?\nhttps://www.youtube.com/watch?v=DeREwrPVlDg\n🔑 What is a Cryptocurrency?\nhttps://www.youtube.com/watch?v=eVLUrZtKhBk\n🔑 How Does Cryptocurrency Work?\nhttps://www.youtube.com/watch?v=rAtJ7Lw90KA\n\n#WhatisEthereum #EthereumExplained #WhatisEthereumUsedFor","video_id":"HqJVW994hV8","duration":546,"view_count":476,"thumbnail_url":"https://i.ytimg.com/vi/HqJVW994hV8/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-10-12 15:42:21","created_at":"2022-10-12T23:00:03.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"prevSection":{"id":36,"featured_image_id":8008,"original_id":null,"youtube_video_id":125,"author_id":42,"translator_id":null,"chapter_id":2,"title":"What are Stablecoins, Altcoins & Wrapped Coins?","slug":"what-are-stablecoins","definition":"Did you know that an altcoin is essentially any other crypto asset apart from Bitcoin?","status":"published","content":"<p>In this section, we’re going to talk about what are <strong>stablecoins, altcoins, and wrapped coins,</strong> and the differences between all of them!</p>\n<p>The cryptocurrency world is full of industry-specific jargon. There’s a huge number of different terms for you to figure out and understand, when you’re just starting out with your crypto journey!</p>\n<p>Many of these terms can get really confusing, and clamp up into one, huge mess. This is especially true when you consider all of the different cryptocurrency-related expressions and names! Well, today, <strong>I’m going to clear up some of that confusion for you.</strong></p>\n<p>In this section, we are going to talk about altcoins, stablecoins, and wrapped coins. First, I’ll tell you what each of these are, and give you some examples. Then, we’ll also discuss where are these crypto assets mainly used.</p>\n<p><em>So, let’s get to it!</em></p>\n<h2>What are Altcoins, Stablecoins, and Wrapped Coins?</h2>\n<p>To start things off, in order to understand these concepts better, we need to break down each of the terms, individually.</p>\n<p>The <strong>altcoin</strong> definition is, honestly, the simplest of the three, as far as understanding it goes. However, it’s also a term that has a lot of history, and has changed a bit, over the years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Altcoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_01.o.jpg/" alt=\"What are stablecoins: Altcoins.\" width=\"1000\" height=\"277\" /></p>\n<p>From the very origin of the term, “crypto altcoins” referred to <strong>all other cryptocurrencies that aren’t <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. So, whether it be Ethereum, Cardano, or Shiba Inu, all of these would be called “altcoins”, since they are NOT Bitcoin. <em>Simple!</em></p>\n<p>With time, however, the cryptocurrency market EXPLODED - there are new coins and tokens coming into the market seemingly every single day! This is why, at some point in time, people started using the terms “altcoins”, “best altcoins”, and looking at “where can I buy altcoins?”, in reference to <strong>all of the different cryptocurrencies that are</strong> <strong>not the top-10 assets</strong> - Bitcoin, Ethereum, Ripple, and so on. So, in other words, if a coin or token isn’t in the top-10 list, it’s considered an “altcoin”.</p>\n<p>Not sure what’s the difference between crypto coins and tokens? Well, I have <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/coin-vs-token/">a dedicated section on this topic</strong></a> - make sure to check it out, and learn all of the essential differences!</p>\n<p>Going back to what are altcoins, you can look at it like this: imagine that a candy shop stocks a single chocolate bar brand. It’s the most popular brand, and has been around forever. With time, there are new brands of chocolate coming into the shop, and gaining popularity - some become super-popular, while others come and go. So, at some point, everyone will know all of the main, most popular brands - the first one, and then a few others, that have managed to gain popularity over the years -, while the rest of the chocolate bars will be viewed as “alternatives”.</p>\n<p>If you want to keep it simple, though, you may also view altcoins as <strong>“alternatives to Bitcoin”.</strong> So, whenever your friends say that they’re thinking about “investing in altcoins”, you will now know what they mean!</p>\n<p>Moving on, <strong>what are stablecoins?</strong> Well, they’re a really interesting concept. While they have been subject to a lot of controversy, as of late, it’s worth stating that the premise behind stablecoins is quite complicated, and can be tricky to truly comprehend!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoin pegged to fiat.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_02.o.jpg/" alt=\"What are stablecoins: Stablecoin pegged to fiat.\" width=\"1000\" height=\"772\" /></p>\n<p>So, how do stablecoins work? Well, a stablecoin is a cryptocurrency asset that is <strong>pegged to a fiat (or, governmental) currency</strong> - in most cases, this will be the Unites States dollar. Here, “pegged” means that the value of a single stablecoin is “tied” to the dollar - one stablecoin will <em>(theoretically) </em>always be worth one dollar <em>(or one unit of the currency that it’s pegged to)</em>.</p>\n<p>Following that, the term <strong>“backed”</strong> will always come up when talking about stablecoins, too. Put simply, this means that, for every stablecoin issued, there’s going to be some sort of an established asset to back it up <em>(most often, this would be the actual US dollar)</em>.</p>\n<p>So, think about it like this - imagine that you’ve decided to sell concert tickets. A person can come up to you, and purchase a ticket for $1. Now, for the sake of this example, let’s just say that, due to some unforeseen event, half of the ticket buyers decided not to go to the concert, and are asking for a refund.</p>\n<p>If you have all of the money that they’ve paid you for the ticket, and have used it to “back” the ticket purchases, you are able to issue refunds, no problem - if not, then suddenly, there’s no money for the customers to get back, and you start running into all sorts of problems!</p>\n<p><strong>In a very particular sense, the same sentiment is true with stablecoins.</strong> That is why all stablecoins need to be backed by governmental money, or some sort of a valuable, established asset. It’s also why there’s so much controversy in the world of crypto, regarding unbacked assets, and why people are questioning are stablecoins safe, to begin with.</p>\n<p>It’s worth mentioning here that stablecoins are also segmented into a few different categories, as well - the most well-known of which these days is <strong>“algo-”, or</strong> <strong>algorithmic stablecoins. </strong>It’s a complex topic that deserves a section of its own, but essentially, to put it short and simple, algo-stablecoins make use of special algorithms in order to keep their price stable. As you might have heard with the widespread news of the Terra Luna events, this type of stablecoins is yet to be widely successful.</p>\n<p>So, altcoins are all cryptocurrencies that are not Bitcoin, while stablecoins are special crypto assets that have their price pegged to a traditional currency, often the US dollar. <strong>What are wrapped coins, though?</strong></p>\n<p>To tell you the truth, wrapped coins are probably the most difficult to understand, if you’re just starting out with crypto! I’ll break things down as simple as possible, but do make sure to <strong>check out other sections in this Crypto 101 Handbook</strong>, so that you could get a better understanding of the topic, as a whole!</p>\n<p>Now, imagine that you want to send a couple of packages to two of your friends - one who lives in another city, and another who lives in a different country. You want to send two of them the same thing - say, custom-made cups that you’ve handcrafted yourself!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: An example with a tea cup.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_03.o.jpg/" alt=\"What are stablecoins: An example with a tea cup.\" width=\"1000\" height=\"727\" /></p>\n<p>When it comes to your friend from another city, the process of packing the cup is pretty simple - you place it in a box, stuff it with cushioning, wrap everything up, stick on a shipment sticker, and send it from the post office. <em>Simple!</em></p>\n<p>However, when it comes to your friend from the other country, <strong>things are a bit more complicated. </strong>Perhaps there are specific methods of how the cup needs to be wrapped and packaged? Maybe there are some very particular ways of how you need to write the address on the package? Also, what about the box itself - perhaps you need to use a very specific type of a box, too?</p>\n<p>All of that is to say - while you’re shipping the same item, to both of your friends, the packaging and transportation methods are going to be very different. In a way, this is kind of how wrapped coins work, too!</p>\n<p>Wrapped coins allow you to transact with some specific cryptocurrencies on platforms that would otherwise not support the original coins. <strong>A wrapped cryptocurrency is like a written IOU</strong> - it has the same qualities as the original crypto asset, follows the same price fluctuations, and can be exchanged for the original at any point in time.</p>\n<p>The simplest example here would be that of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, and the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/trust-wallet/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Trust cryptocurrency wallet</strong></a><strong>.</strong> Ethereum has a network of its own, while the Trust Wallet is based on a different network. So, in order to be able to keep ETH in your Trust Wallet, you need an equivalent - this is where <strong>WETH, or</strong> <strong>Wrapped Ethereum</strong> comes in!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: WETH.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_04.o.jpg/" alt=\"What are stablecoins: WETH.\" width=\"1000\" height=\"747\" /></p>\n<p>Admittedly, all of this isn’t all that easy to wrap your head around, no pun intended! That being said, as you start interacting with the cryptocurrency world, and encounter all of these aforementioned asset types, it will all start falling into place, surely!</p>\n<h2>Where are Altcoins, Stablecoins, and Wrapped Coins Used?</h2>\n<p>Up to this point, we’ve covered what are altcoins, stablecoins, and wrapped coins. Now, we definitely need to talk about <strong>where are all of these assets used</strong>, and why do they even exist, in the first place!</p>\n<p>Continuing with the same order of things, <strong>let’s start with altcoins.</strong> In all honesty, altcoins are really self-explanatory - it’s like asking <em>“what’s the point of all other cryptocurrencies, except for Bitcoin?”</em></p>\n<p>The best altcoins relate to the different crypto-powered projects, various investment strategies, and are the fundamental element of decentralized finance and the cryptocurrency industry, as a whole! If altcoins didn’t exist, you probably wouldn’t be reading this section, in the first place!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_05.o.jpg/" alt=\"What are stablecoins: Stablecoins.\" width=\"1000\" height=\"355\" /></p>\n<p><strong>Stablecoins are a bit more tricky.</strong> They are mostly used for three different purposes - providing liquidity to cryptocurrency projects, representing traditional assets on the blockchain, and being used as a tool to acquire other cryptocurrencies <em>(Bitcoin and altcoins)</em> quickly.</p>\n<p>All three of these use cases are super-important, and come with different pros and cons. For now, suffice to say that <strong>stablecoins help keep the cryptocurrency industry stable and liquid</strong>, and allow traders to invest in the market in a much simpler and more-straightforward manner.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Wrapped coins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_06.o.jpg/" alt=\"What are stablecoins: Wrapped coins.\" width=\"1000\" height=\"800\" /></p>\n<p>Now, as far as <strong>wrapped coins</strong> are concerned, I’ve kind of hinted towards their use case already, earlier in this section. These peculiar cryptocurrencies are used when you want to transact or store a specific crypto asset on a network or wallet that does not support that crypto. Thus, you “wrap” your coins, in a way that is supported by the network, and then are able to transact with it there.</p>\n<p>So, I’ve told you about altcoins, stablecoins, and wrapped coins. By now, you should have a pretty solid understanding of what each of these three terms mean, and where they are used, in general. However, don't hesitate to read other sections in this <strong>Crypto 101 Handbook</strong> to get more in-depth knowledge about the whole crypto world.</p>","meta_title":"What are Stablecoins, Altcoins, and Wrapped Coins?","meta_description":"Wondering what are stablecoins, altcoins, wrapped coins, or other types of coins? Figure out all differences and similarities right here!","meta_keywords":"what are stablecoins, what are altcoins, how do stablecoins work, altcoins to buy, stablecoins list, best altcoins\nwhere to buy altcoins, buying altcoins, altcoins with most potential, are stablecoins safe, altcoins definition, stablecoins explained, how many altcoins are there, crypto altcoins, where can i buy altcoins, what are wrapped coins","order":5,"language":"en","created_at":"2022-08-30T10:59:26.000000Z","updated_at":"2022-10-05T10:34:01.000000Z","modified_content":"<p>In this section, we’re going to talk about what are <strong>stablecoins, altcoins, and wrapped coins,</strong> and the differences between all of them!</p>\n<p>The cryptocurrency world is full of industry-specific jargon. There’s a huge number of different terms for you to figure out and understand, when you’re just starting out with your crypto journey!</p>\n<p>Many of these terms can get really confusing, and clamp up into one, huge mess. This is especially true when you consider all of the different cryptocurrency-related expressions and names! Well, today, <strong>I’m going to clear up some of that confusion for you.</strong></p>\n<p>In this section, we are going to talk about altcoins, stablecoins, and wrapped coins. First, I’ll tell you what each of these are, and give you some examples. Then, we’ll also discuss where are these crypto assets mainly used.</p>\n<p><em>So, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\"\n title=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: What are Stablecoins, Altcoins & Wrapped Coins?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"What are Stablecoins, Altcoins & Wrapped Coins?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"WPBXOviUIls\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What are Stablecoins, Altcoins & Wrapped Coins Explained!</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/WPBXOviUIls/hq720.jpg/"/n alt=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\"\n title=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What are Stablecoins, Altcoins & Wrapped Coins Explained!\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"WPBXOviUIls\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What are Altcoins, Stablecoins, and Wrapped Coins?</h2>\n<p>To start things off, in order to understand these concepts better, we need to break down each of the terms, individually.</p>\n<p>The <strong>altcoin</strong> definition is, honestly, the simplest of the three, as far as understanding it goes. However, it’s also a term that has a lot of history, and has changed a bit, over the years.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Altcoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_01.o.jpg/" alt=\"What are stablecoins: Altcoins.\" width=\"1000\" height=\"277\" /></p>\n<p>From the very origin of the term, “crypto altcoins” referred to <strong>all other cryptocurrencies that aren’t <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. So, whether it be Ethereum, Cardano, or Shiba Inu, all of these would be called “altcoins”, since they are NOT Bitcoin. <em>Simple!</em></p>\n<p>With time, however, the cryptocurrency market EXPLODED - there are new coins and tokens coming into the market seemingly every single day! This is why, at some point in time, people started using the terms “altcoins”, “best altcoins”, and looking at “where can I buy altcoins?”, in reference to <strong>all of the different cryptocurrencies that are</strong> <strong>not the top-10 assets</strong> - Bitcoin, Ethereum, Ripple, and so on. So, in other words, if a coin or token isn’t in the top-10 list, it’s considered an “altcoin”.</p>\n<p>Not sure what’s the difference between crypto coins and tokens? Well, I have <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/coin-vs-token/">a dedicated section on this topic</strong></a> - make sure to check it out, and learn all of the essential differences!</p>\n<p>Going back to what are altcoins, you can look at it like this: imagine that a candy shop stocks a single chocolate bar brand. It’s the most popular brand, and has been around forever. With time, there are new brands of chocolate coming into the shop, and gaining popularity - some become super-popular, while others come and go. So, at some point, everyone will know all of the main, most popular brands - the first one, and then a few others, that have managed to gain popularity over the years -, while the rest of the chocolate bars will be viewed as “alternatives”.</p>\n<p>If you want to keep it simple, though, you may also view altcoins as <strong>“alternatives to Bitcoin”.</strong> So, whenever your friends say that they’re thinking about “investing in altcoins”, you will now know what they mean!</p>\n<p>Moving on, <strong>what are stablecoins?</strong> Well, they’re a really interesting concept. While they have been subject to a lot of controversy, as of late, it’s worth stating that the premise behind stablecoins is quite complicated, and can be tricky to truly comprehend!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoin pegged to fiat.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_02.o.jpg/" alt=\"What are stablecoins: Stablecoin pegged to fiat.\" width=\"1000\" height=\"772\" /></p>\n<p>So, how do stablecoins work? Well, a stablecoin is a cryptocurrency asset that is <strong>pegged to a fiat (or, governmental) currency</strong> - in most cases, this will be the Unites States dollar. Here, “pegged” means that the value of a single stablecoin is “tied” to the dollar - one stablecoin will <em>(theoretically) </em>always be worth one dollar <em>(or one unit of the currency that it’s pegged to)</em>.</p>\n<p>Following that, the term <strong>“backed”</strong> will always come up when talking about stablecoins, too. Put simply, this means that, for every stablecoin issued, there’s going to be some sort of an established asset to back it up <em>(most often, this would be the actual US dollar)</em>.</p>\n<p>So, think about it like this - imagine that you’ve decided to sell concert tickets. A person can come up to you, and purchase a ticket for $1. Now, for the sake of this example, let’s just say that, due to some unforeseen event, half of the ticket buyers decided not to go to the concert, and are asking for a refund.</p>\n<p>If you have all of the money that they’ve paid you for the ticket, and have used it to “back” the ticket purchases, you are able to issue refunds, no problem - if not, then suddenly, there’s no money for the customers to get back, and you start running into all sorts of problems!</p>\n<p><strong>In a very particular sense, the same sentiment is true with stablecoins.</strong> That is why all stablecoins need to be backed by governmental money, or some sort of a valuable, established asset. It’s also why there’s so much controversy in the world of crypto, regarding unbacked assets, and why people are questioning are stablecoins safe, to begin with.</p>\n<p>It’s worth mentioning here that stablecoins are also segmented into a few different categories, as well - the most well-known of which these days is <strong>“algo-”, or</strong> <strong>algorithmic stablecoins. </strong>It’s a complex topic that deserves a section of its own, but essentially, to put it short and simple, algo-stablecoins make use of special algorithms in order to keep their price stable. As you might have heard with the widespread news of the Terra Luna events, this type of stablecoins is yet to be widely successful.</p>\n<p>So, altcoins are all cryptocurrencies that are not Bitcoin, while stablecoins are special crypto assets that have their price pegged to a traditional currency, often the US dollar. <strong>What are wrapped coins, though?</strong></p>\n<p>To tell you the truth, wrapped coins are probably the most difficult to understand, if you’re just starting out with crypto! I’ll break things down as simple as possible, but do make sure to <strong>check out other sections in this Crypto 101 Handbook</strong>, so that you could get a better understanding of the topic, as a whole!</p>\n<p>Now, imagine that you want to send a couple of packages to two of your friends - one who lives in another city, and another who lives in a different country. You want to send two of them the same thing - say, custom-made cups that you’ve handcrafted yourself!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: An example with a tea cup.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_03.o.jpg/" alt=\"What are stablecoins: An example with a tea cup.\" width=\"1000\" height=\"727\" /></p>\n<p>When it comes to your friend from another city, the process of packing the cup is pretty simple - you place it in a box, stuff it with cushioning, wrap everything up, stick on a shipment sticker, and send it from the post office. <em>Simple!</em></p>\n<p>However, when it comes to your friend from the other country, <strong>things are a bit more complicated. </strong>Perhaps there are specific methods of how the cup needs to be wrapped and packaged? Maybe there are some very particular ways of how you need to write the address on the package? Also, what about the box itself - perhaps you need to use a very specific type of a box, too?</p>\n<p>All of that is to say - while you’re shipping the same item, to both of your friends, the packaging and transportation methods are going to be very different. In a way, this is kind of how wrapped coins work, too!</p>\n<p>Wrapped coins allow you to transact with some specific cryptocurrencies on platforms that would otherwise not support the original coins. <strong>A wrapped cryptocurrency is like a written IOU</strong> - it has the same qualities as the original crypto asset, follows the same price fluctuations, and can be exchanged for the original at any point in time.</p>\n<p>The simplest example here would be that of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, and the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/trust-wallet/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Trust cryptocurrency wallet</strong></a><strong>.</strong> Ethereum has a network of its own, while the Trust Wallet is based on a different network. So, in order to be able to keep ETH in your Trust Wallet, you need an equivalent - this is where <strong>WETH, or</strong> <strong>Wrapped Ethereum</strong> comes in!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: WETH.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_04.o.jpg/" alt=\"What are stablecoins: WETH.\" width=\"1000\" height=\"747\" /></p>\n<p>Admittedly, all of this isn’t all that easy to wrap your head around, no pun intended! That being said, as you start interacting with the cryptocurrency world, and encounter all of these aforementioned asset types, it will all start falling into place, surely!</p>\n<h2>Where are Altcoins, Stablecoins, and Wrapped Coins Used?</h2>\n<p>Up to this point, we’ve covered what are altcoins, stablecoins, and wrapped coins. Now, we definitely need to talk about <strong>where are all of these assets used</strong>, and why do they even exist, in the first place!</p>\n<p>Continuing with the same order of things, <strong>let’s start with altcoins.</strong> In all honesty, altcoins are really self-explanatory - it’s like asking <em>“what’s the point of all other cryptocurrencies, except for Bitcoin?”</em></p>\n<p>The best altcoins relate to the different crypto-powered projects, various investment strategies, and are the fundamental element of decentralized finance and the cryptocurrency industry, as a whole! If altcoins didn’t exist, you probably wouldn’t be reading this section, in the first place!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Stablecoins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_05.o.jpg/" alt=\"What are stablecoins: Stablecoins.\" width=\"1000\" height=\"355\" /></p>\n<p><strong>Stablecoins are a bit more tricky.</strong> They are mostly used for three different purposes - providing liquidity to cryptocurrency projects, representing traditional assets on the blockchain, and being used as a tool to acquire other cryptocurrencies <em>(Bitcoin and altcoins)</em> quickly.</p>\n<p>All three of these use cases are super-important, and come with different pros and cons. For now, suffice to say that <strong>stablecoins help keep the cryptocurrency industry stable and liquid</strong>, and allow traders to invest in the market in a much simpler and more-straightforward manner.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What are stablecoins: Wrapped coins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_are_altcoins_stablecoins_wrapped_coins_06.o.jpg/" alt=\"What are stablecoins: Wrapped coins.\" width=\"1000\" height=\"800\" /></p>\n<p>Now, as far as <strong>wrapped coins</strong> are concerned, I’ve kind of hinted towards their use case already, earlier in this section. These peculiar cryptocurrencies are used when you want to transact or store a specific crypto asset on a network or wallet that does not support that crypto. Thus, you “wrap” your coins, in a way that is supported by the network, and then are able to transact with it there.</p>\n<p>So, I’ve told you about altcoins, stablecoins, and wrapped coins. By now, you should have a pretty solid understanding of what each of these three terms mean, and where they are used, in general. However, don't hesitate to read other sections in this <strong>Crypto 101 Handbook</strong> to get more in-depth knowledge about the whole crypto world.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-are-stablecoins","youtube_video":{"id":125,"channel_id":1,"sort":25,"video_title":"What are Stablecoins, Altcoins & Wrapped Coins Explained!","description":"What are altcoins, stablecoins, and wrapped coins in crypto?\n\nThere are multiple cryptocurrency asset types out there, on the market. All of these types have their own names, as well as some specific use cases where they can prove to be beneficial, or even essential. However, it’s very simple to get lost among the different types of assets - it can be overwhelming! \n\nIn this video, I will tell you about some of the main types of cryptocurrencies that you’ll likely encounter - altcoins, stablecoins, and wrapped coins. I will explain each of these types independently, and will also tell you about their main use cases, too.\n\nAre you a fan of altcoins? Perhaps you’ve already transacted with wrapped coins before? Share your experiences, in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What are Stablecoins, Altcoins, and Wrapped Coins\n0:56 What are Altcoins?\n2:38 What are Stablecoins?\n4:42 What are Wrapped Coins?\n6:52 Where are Altcoins, Stablecoins, and Wrapped Coins Used?\n8:12 Wrap-Up: What are Stablecoins, Altcoins, and Wrapped Coins?\n\nMore Related Videos:\n\n? Is Cryptocurrency a Good Investment?\nhttps://www.youtube.com/watch?v=cqVkgcEa5NI&t\n? How Does Cryptocurrency Work?\nhttps://www.youtube.com/watch?v=rAtJ7Lw90KA&t\n? What is Cryptocurrency?\nhttps://www.youtube.com/watch?v=eVLUrZtKhBk&t\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatAreStablecoins #WhatAreAltcoins #WhatAreWrappedCoins","video_id":"WPBXOviUIls","duration":535,"view_count":386,"thumbnail_url":"https://i.ytimg.com/vi/WPBXOviUIls/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-09-15 14:22:49","created_at":"2022-09-15T23:00:03.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"chapterTitle":"Cryptocurrencies","cryptoBookSection":{"id":37,"featured_image_id":8074,"original_id":null,"youtube_video_id":126,"author_id":42,"translator_id":null,"chapter_id":2,"title":"Bitcoin: the Pioneer of the Crypto World","slug":"what-is-a-bitcoin","definition":"Did you know that in 2010 two Papa John’s pizzas were purchased for 10,000 Bitcoin?","status":"published","content":"<p>In this section, I’m going to answer the question what is a Bitcoin, as well as look into how does it work!</p>\n<p>Cryptocurrencies have exploded in popularity, over the last decade or so. These days, everyone, and even their pets, have seemingly heard about crypto, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-is-defi/">DeFi, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-nfts/">NFTs, and so on. As time goes on, however, the popularity of the space is only growing and increasing - <strong>there are more and more talks about</strong> <strong>mass adoption, and</strong> <strong>the integration of crypto into our everyday lives!</strong></p>\n<p>Do you know where it all started, though? Well, most people do - with <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. However, what do you <em>*really*</em> know about Bitcoin? I mean, do you know who owns the most Bitcoin, or when was Bitcoin created, in the first place? Those are just a couple of the questions that you'll find answers to after reading this section!</p>\n<p>So, in this section, we’re going to look into what is a Bitcoin. Specifically, I’ll tell you about the history of this legendary cryptocurrency, what makes it special, and how it became a staple for a trillion-dollar industry!</p>\n<p><em>Without further ado, let’s get to it!</em></p>\n<h2>The History of Bitcoin</h2>\n<p>In order to start figuring out what is Bitcoin and how does it work, <strong>we need to go back in time, to 2009.</strong> This is the year when Bitcoin was created, and launched to the general public.</p>\n<p>Before Bitcoin came to be, however, there was first something called a “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-whitepaper/">White paper</strong></a>”. This is a term that describes a document containing all of the philosophy behind a specific crypto project - these days, most-all decentralized finance platforms and tokens have White papers written about them, and <strong>Bitcoin was no exception</strong>, either.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_01.o.jpg/" alt=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" width=\"1000\" height=\"876\" /></p>\n<p>How is this White paper so important, you might ask? Well, it can tell us a lot about two big topics - who started (or, created) Bitcoin, and what’s the purpose of this project, in the first place.</p>\n<p>If you love internet mysteries, you’ve probably heard the name “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-satoshi-nakamoto/">Satoshi Nakamoto</strong></a>” before. This is actually a pseudonym of the creator of Bitcoin, and not their real name - truth be told, to this very day, <strong>NO ONE KNOWS who created Bitcoin! </strong>Even after all these years, the creator <em>(or creators?)</em> has remained anonymous. For simplicity’s sake, I’ll be referring to Satoshi as a “he” - it could, however, be a woman, a group of people, or an entire organization!</p>\n<p>You'll find more information about Satoshi below, so, for now, let’s focus on the second question - <strong>WHY was Bitcoin created? </strong>Well, the answer might lie in the date of its creation.</p>\n<p>2009 wasn’t really a special year, globally speaking. However, Bitcoin was launched on January 3rd, 2009 - so, at the very beginning of the year. What this means is that the actual project was created a year prior. And, I have a feeling that I don’t even really need to tell you what happened in 2008.</p>\n<p>That’s right - <strong>the global financial crisis.</strong> In a very specific sense, Bitcoin was the result of this crisis.</p>\n<p>When a cryptocurrency is created, the very first block of its blockchain is called “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-genesis-block/">the Genesis block</strong></a>”. If you’d like to learn more about blockchains and how they work, there are a few dedicated sections concerning the topic in our Crypto 101 Handbook - make sure to check them out! Focusing on what is Bitcoin and how does it work, however, all that you need to know for now is that the creators of a cryptocurrency - such as Bitcoin - can leave<strong> a human-readable message </strong>within that Genesis block. Satoshi Nakamoto did just that - his message read:</p>\n<p><em>The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.</em></p>\n<p>It’s a reference to an article title of The Times newspaper, from the day when BTC was launched. As you might be able to tell, the title talks about the Chancellor of the United Kingdom bailing out banks, after the global financial crisis - since it’s widely accepted that banking institutions were a major element of the crisis, in the first place, you can probably see where this is going.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The history of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_02.o.jpg/" alt=\"What is a Bitcoin: The history of Bitcoin.\" width=\"1000\" height=\"300\" /></p>\n<p>To circle back to the questions of what is Bitcoin used for, and why it was created, the answer seems to be pretty simple - <strong>to take some economic power away from banks and governmental institutions, and hand it back to your common, everyday people.</strong> Bitcoin was initially meant to be a form of digital money that is both completely private, as well as transparent, and not belonging to any one entity - in other words, 100% decentralized.</p>\n<p>It is widely accepted that, whoever Satoshi Nakamoto was, he was very concerned with the state of the global economy, and how huge financial institutions could weasel their way out of a major financial crisis that they’ve caused, shifting all of the economic burdens that came with it onto the masses of innocent people. Bitcoin was the answer to this - a way for those masses of people to, for the first time, truly own their own money, and not have it tied to the state or government.</p>\n<p>Of course, when talking about these things, you could also question <strong>what is Bitcoin backed by, or how it tackles problems such as <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-inflation/">inflation and regulations.</strong> These are topics for other sections, though - in this section, our goal is to look at the basics of what is Bitcoin, and how it became the global phenomenon it is today.</p>\n<p>Going back to the creation of Bitcoin, after it was launched, Satoshi Nakamoto would still show up in various forums online. He was an avid fan of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-cryptography/">cryptography, and would constantly hang out in related online forums and discussion boards, talking with other like-minded individuals, and trying to come up with what would eventually become Bitcoin. In fact, <strong>Bitcoin wasn’t even the first attempt at creating a form of digital currency</strong> - it was simply the attempt that was successful.</p>\n<p>Pretty soon, however, <strong>Satoshi disappeared </strong>- today, not only does no one know who he is, it’s impossible to say whether or not he’s still alive, or active among crypto circles around the world. I mean, who knows - perhaps he’s a very active member of the Bitcoin community, but no one could ever tell?</p>\n<p>Going back to the launch of BTC, you might ask - how much was Bitcoin in 2009? Well, the truth is - <strong>fractions of a penny! </strong>BTC only started gaining price traction around 2011, two years after its inception. Even then, you could purchase multiple Bitcoins with a single $1.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Bitcoin Pizza day.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_03.o.jpg/" alt=\"What is a Bitcoin: Bitcoin Pizza day.\" width=\"1000\" height=\"330\" /></p>\n<p>You’ve probably heard about the legendary story of a guy who purchased two Papa John’s pizzas for 10,000 Bitcoin, back in 2010. While it was quirky and cool, it was also a very significant moment for Bitcoin, this being one of the very first major events where BTC was used to purchase actual, tangible real-world items. This event has become so notable, that there’s now even a <strong>Bitcoin Pizza day</strong> being held, every year.</p>\n<p>That’s no wonder, really - today, those pizzas would be worth over $200 million. It’s absolutely incredible to think about!</p>\n<p>Hearing all of these numbers being thrown around, you might also ponder - <strong>who owns the most Bitcoin?</strong> Well, there are actually two notable parties that need to be mentioned here.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_04.o.jpg/" alt=\"What is a Bitcoin: the largest BTC holders.\" width=\"1000\" height=\"389\" /></p>\n<p>As far as the public is concerned, a US-based software company called <strong>Microstrategy is the largest BTC whale</strong>, holding nearly 130k BTC. When you learn about what is a Bitcoin, this number really does appear to be mind-boggling!</p>\n<p>However, there’s another answer, too. It’s widely speculated that none other than <strong>Satoshi Nakamoto himself is the largest holder of BTC</strong> - if the calculations are true, Satoshi still holds over 1,1 million Bitcoin, spread throughout his wallets.</p>\n<p>Going back to the history of Bitcoin, and skipping through some minor events, the popularity - and, consequently, price - of BTC grew over the years. The first major crypto boom happened in 2017, and was followed by what we now call <strong>the Crypto Winter</strong> - a sudden price crash, and then a few years of stagnation.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Crypto winter.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_05.o.jpg/" alt=\"What is a Bitcoin: Crypto winter.\" width=\"1000\" height=\"490\" /></p>\n<p>Today, Bitcoin alone is worth nearly $400 billion (market cap-wise), and that's not to mention the rest of the cryptocurrency industry. <strong>BTC paved the way for decentralized finance, NFTs, crypto gaming, and a new form of finance, as a whole</strong> - the importance of all of these things can’t be understated!</p>\n<h2>The Future of Bitcoin</h2>\n<p>Now that we’ve covered the general history and background of Bitcoin, we should also talk about the potential future of this cryptocurrency. In order to do that, though, we need to go back to the question of how does Bitcoin work, to begin with.</p>\n<p>As mentioned before, BTC is <strong>completely decentralized and anonymity-preserving.</strong> Meaning, the cryptocurrency can be traded between two parties, and while all trades will be public and visible on the blockchain, the actual participants will remain anonymous.</p>\n<p>This is done with the help of Bitcoin wallets. If you’re wondering what is a Bitcoin address, well, that’s just it - the term references a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-address/">wallet address</strong></a>. It’s like a special string of numbers and letters, used to identify you on the blockchain. When you perform trades, or send BTC to your friends, <strong>only your wallet addresses will be visible</strong> - unless you tell the whole world that THIS wallet address belongs to YOU, no one will know! Well, generally speaking, that is.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The future of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_06.o.jpg/" alt=\"What is a Bitcoin: The future of Bitcoin.\" width=\"1000\" height=\"1141\" /></p>\n<p>Naturally, decentralization is another key factor. <strong>Bitcoin doesn’t belong to any single private or governmental entity. </strong>This means that there’s no single point of failure, either - in theory, this results in a fairer, more transparent financial system.</p>\n<p>If you’d like to learn more about the specifics of decentralization and anonymity, there's <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/decentralized-blockchain/">a section covering both of these topics</strong></a> - check it out!</p>\n<p>Having said all of that, and now that you know what is Bitcoin, how does it work, and what it’s used for, what’s next for this cryptocurrency - in other words, <strong>what is Bitcoin’s future?</strong></p>\n<p>Well, as you might expect, no one knows for sure! However, if we were to take a look at the history of Bitcoin, it seems that this cryptocurrency isn’t going anywhere.</p>\n<p>Throughout the years, thousands of new crypto projects have emerged and grown to become notable names in the industry. During all this time, though, <strong>Bitcoin has always remained the No. 1 crypto asset</strong>, market-wise, as well as in many people’s minds, too. There’s even a term for that - it’s called “Bitcoin maximalism”.</p>\n<p>As time goes on, <strong>Bitcoin is also getting progressively more difficult to mine.</strong> Combine that with the fact that this crypto asset has a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-cap/">hard cap</strong></a> of 21 million (that’s the total number of Bitcoin that will ever exist), and you have an asset that’s becoming more and more scarce, yet seemingly also increasingly more sought-after, as well.</p>\n<p>Whatever challenges Bitcoin might face in the future, one thing’s for sure - if not for this cryptocurrency, I wouldn’t be writing this, and you wouldn’t be reading it. Chances are that there wouldn’t be any DeFi or other cryptos, either, at least not in the form that we know them now! With this industry constantly growing and reaching new milestones, many enthusiasts believe that this is just the beginning of a long and adventure-filled journey.</p>","meta_title":"What is a Bitcoin and How Does It Work?","meta_description":"What is a Bitcoin? If you want to find an answer to this question, you're in luck! Find all there is to know about Bitcoin right here.","meta_keywords":"what is a bitcoin, what is bitcoin and how does it work, what is bitcoin used for, who started bitcoin, who owns bitcoin, bitcoins future, what can you buy with bitcoin, what is bitcoin backed by, what happens when the bitcoin block reward is gone, what is the highest bitcoin has ever been, what is bitcoin address, bitcoin white paper, when was bitcoin created, how much was bitcoin in 2009, who owns the most bit coin.","order":6,"language":"en","created_at":"2022-09-12T08:04:54.000000Z","updated_at":"2023-05-16T11:45:56.000000Z","modified_content":"<p>In this section, I’m going to answer the question what is a Bitcoin, as well as look into how does it work!</p>\n<p>Cryptocurrencies have exploded in popularity, over the last decade or so. These days, everyone, and even their pets, have seemingly heard about crypto, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-is-defi/">DeFi, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/what-are-nfts/">NFTs, and so on. As time goes on, however, the popularity of the space is only growing and increasing - <strong>there are more and more talks about</strong> <strong>mass adoption, and</strong> <strong>the integration of crypto into our everyday lives!</strong></p>\n<p>Do you know where it all started, though? Well, most people do - with <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin. However, what do you <em>*really*</em> know about Bitcoin? I mean, do you know who owns the most Bitcoin, or when was Bitcoin created, in the first place? Those are just a couple of the questions that you'll find answers to after reading this section!</p>\n<p>So, in this section, we’re going to look into what is a Bitcoin. Specifically, I’ll tell you about the history of this legendary cryptocurrency, what makes it special, and how it became a staple for a trillion-dollar industry!</p>\n<p><em>Without further ado, let’s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is a Bitcoin & How Does it work? (Animated Explainer)\"\n title=\"What is a Bitcoin & How Does it work? (Animated Explainer)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Bitcoin: the Pioneer of the Crypto World</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Bitcoin: the Pioneer of the Crypto World\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"DeREwrPVlDg\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is a Bitcoin & How Does it work? (Animated Explainer)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/DeREwrPVlDg/hq720.jpg/"/n alt=\"What is a Bitcoin & How Does it work? (Animated Explainer)\"\n title=\"What is a Bitcoin & How Does it work? (Animated Explainer)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is a Bitcoin & How Does it work? (Animated Explainer)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"DeREwrPVlDg\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>The History of Bitcoin</h2>\n<p>In order to start figuring out what is Bitcoin and how does it work, <strong>we need to go back in time, to 2009.</strong> This is the year when Bitcoin was created, and launched to the general public.</p>\n<p>Before Bitcoin came to be, however, there was first something called a “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-whitepaper/">White paper</strong></a>”. This is a term that describes a document containing all of the philosophy behind a specific crypto project - these days, most-all decentralized finance platforms and tokens have White papers written about them, and <strong>Bitcoin was no exception</strong>, either.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_01.o.jpg/" alt=\"What is a Bitcoin: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.\" width=\"1000\" height=\"876\" /></p>\n<p>How is this White paper so important, you might ask? Well, it can tell us a lot about two big topics - who started (or, created) Bitcoin, and what’s the purpose of this project, in the first place.</p>\n<p>If you love internet mysteries, you’ve probably heard the name “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/who-is-satoshi-nakamoto/">Satoshi Nakamoto</strong></a>” before. This is actually a pseudonym of the creator of Bitcoin, and not their real name - truth be told, to this very day, <strong>NO ONE KNOWS who created Bitcoin! </strong>Even after all these years, the creator <em>(or creators?)</em> has remained anonymous. For simplicity’s sake, I’ll be referring to Satoshi as a “he” - it could, however, be a woman, a group of people, or an entire organization!</p>\n<p>You'll find more information about Satoshi below, so, for now, let’s focus on the second question - <strong>WHY was Bitcoin created? </strong>Well, the answer might lie in the date of its creation.</p>\n<p>2009 wasn’t really a special year, globally speaking. However, Bitcoin was launched on January 3rd, 2009 - so, at the very beginning of the year. What this means is that the actual project was created a year prior. And, I have a feeling that I don’t even really need to tell you what happened in 2008.</p>\n<p>That’s right - <strong>the global financial crisis.</strong> In a very specific sense, Bitcoin was the result of this crisis.</p>\n<p>When a cryptocurrency is created, the very first block of its blockchain is called “<a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-genesis-block/">the Genesis block</strong></a>”. If you’d like to learn more about blockchains and how they work, there are a few dedicated sections concerning the topic in our Crypto 101 Handbook - make sure to check them out! Focusing on what is Bitcoin and how does it work, however, all that you need to know for now is that the creators of a cryptocurrency - such as Bitcoin - can leave<strong> a human-readable message </strong>within that Genesis block. Satoshi Nakamoto did just that - his message read:</p>\n<p><em>The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.</em></p>\n<p>It’s a reference to an article title of The Times newspaper, from the day when BTC was launched. As you might be able to tell, the title talks about the Chancellor of the United Kingdom bailing out banks, after the global financial crisis - since it’s widely accepted that banking institutions were a major element of the crisis, in the first place, you can probably see where this is going.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The history of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_02.o.jpg/" alt=\"What is a Bitcoin: The history of Bitcoin.\" width=\"1000\" height=\"300\" /></p>\n<p>To circle back to the questions of what is Bitcoin used for, and why it was created, the answer seems to be pretty simple - <strong>to take some economic power away from banks and governmental institutions, and hand it back to your common, everyday people.</strong> Bitcoin was initially meant to be a form of digital money that is both completely private, as well as transparent, and not belonging to any one entity - in other words, 100% decentralized.</p>\n<p>It is widely accepted that, whoever Satoshi Nakamoto was, he was very concerned with the state of the global economy, and how huge financial institutions could weasel their way out of a major financial crisis that they’ve caused, shifting all of the economic burdens that came with it onto the masses of innocent people. Bitcoin was the answer to this - a way for those masses of people to, for the first time, truly own their own money, and not have it tied to the state or government.</p>\n<p>Of course, when talking about these things, you could also question <strong>what is Bitcoin backed by, or how it tackles problems such as <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-inflation/">inflation and regulations.</strong> These are topics for other sections, though - in this section, our goal is to look at the basics of what is Bitcoin, and how it became the global phenomenon it is today.</p>\n<p>Going back to the creation of Bitcoin, after it was launched, Satoshi Nakamoto would still show up in various forums online. He was an avid fan of <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-cryptography/">cryptography, and would constantly hang out in related online forums and discussion boards, talking with other like-minded individuals, and trying to come up with what would eventually become Bitcoin. In fact, <strong>Bitcoin wasn’t even the first attempt at creating a form of digital currency</strong> - it was simply the attempt that was successful.</p>\n<p>Pretty soon, however, <strong>Satoshi disappeared </strong>- today, not only does no one know who he is, it’s impossible to say whether or not he’s still alive, or active among crypto circles around the world. I mean, who knows - perhaps he’s a very active member of the Bitcoin community, but no one could ever tell?</p>\n<p>Going back to the launch of BTC, you might ask - how much was Bitcoin in 2009? Well, the truth is - <strong>fractions of a penny! </strong>BTC only started gaining price traction around 2011, two years after its inception. Even then, you could purchase multiple Bitcoins with a single $1.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Bitcoin Pizza day.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_03.o.jpg/" alt=\"What is a Bitcoin: Bitcoin Pizza day.\" width=\"1000\" height=\"330\" /></p>\n<p>You’ve probably heard about the legendary story of a guy who purchased two Papa John’s pizzas for 10,000 Bitcoin, back in 2010. While it was quirky and cool, it was also a very significant moment for Bitcoin, this being one of the very first major events where BTC was used to purchase actual, tangible real-world items. This event has become so notable, that there’s now even a <strong>Bitcoin Pizza day</strong> being held, every year.</p>\n<p>That’s no wonder, really - today, those pizzas would be worth over $200 million. It’s absolutely incredible to think about!</p>\n<p>Hearing all of these numbers being thrown around, you might also ponder - <strong>who owns the most Bitcoin?</strong> Well, there are actually two notable parties that need to be mentioned here.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_04.o.jpg/" alt=\"What is a Bitcoin: the largest BTC holders.\" width=\"1000\" height=\"389\" /></p>\n<p>As far as the public is concerned, a US-based software company called <strong>Microstrategy is the largest BTC whale</strong>, holding nearly 130k BTC. When you learn about what is a Bitcoin, this number really does appear to be mind-boggling!</p>\n<p>However, there’s another answer, too. It’s widely speculated that none other than <strong>Satoshi Nakamoto himself is the largest holder of BTC</strong> - if the calculations are true, Satoshi still holds over 1,1 million Bitcoin, spread throughout his wallets.</p>\n<p>Going back to the history of Bitcoin, and skipping through some minor events, the popularity - and, consequently, price - of BTC grew over the years. The first major crypto boom happened in 2017, and was followed by what we now call <strong>the Crypto Winter</strong> - a sudden price crash, and then a few years of stagnation.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: Crypto winter.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_05.o.jpg/" alt=\"What is a Bitcoin: Crypto winter.\" width=\"1000\" height=\"490\" /></p>\n<p>Today, Bitcoin alone is worth nearly $400 billion (market cap-wise), and that's not to mention the rest of the cryptocurrency industry. <strong>BTC paved the way for decentralized finance, NFTs, crypto gaming, and a new form of finance, as a whole</strong> - the importance of all of these things can’t be understated!</p>\n<h2>The Future of Bitcoin</h2>\n<p>Now that we’ve covered the general history and background of Bitcoin, we should also talk about the potential future of this cryptocurrency. In order to do that, though, we need to go back to the question of how does Bitcoin work, to begin with.</p>\n<p>As mentioned before, BTC is <strong>completely decentralized and anonymity-preserving.</strong> Meaning, the cryptocurrency can be traded between two parties, and while all trades will be public and visible on the blockchain, the actual participants will remain anonymous.</p>\n<p>This is done with the help of Bitcoin wallets. If you’re wondering what is a Bitcoin address, well, that’s just it - the term references a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-address/">wallet address</strong></a>. It’s like a special string of numbers and letters, used to identify you on the blockchain. When you perform trades, or send BTC to your friends, <strong>only your wallet addresses will be visible</strong> - unless you tell the whole world that THIS wallet address belongs to YOU, no one will know! Well, generally speaking, that is.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is a Bitcoin: The future of Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_a_bitcoin_06.o.jpg/" alt=\"What is a Bitcoin: The future of Bitcoin.\" width=\"1000\" height=\"1141\" /></p>\n<p>Naturally, decentralization is another key factor. <strong>Bitcoin doesn’t belong to any single private or governmental entity. </strong>This means that there’s no single point of failure, either - in theory, this results in a fairer, more transparent financial system.</p>\n<p>If you’d like to learn more about the specifics of decentralization and anonymity, there's <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/decentralized-blockchain/">a section covering both of these topics</strong></a> - check it out!</p>\n<p>Having said all of that, and now that you know what is Bitcoin, how does it work, and what it’s used for, what’s next for this cryptocurrency - in other words, <strong>what is Bitcoin’s future?</strong></p>\n<p>Well, as you might expect, no one knows for sure! However, if we were to take a look at the history of Bitcoin, it seems that this cryptocurrency isn’t going anywhere.</p>\n<p>Throughout the years, thousands of new crypto projects have emerged and grown to become notable names in the industry. During all this time, though, <strong>Bitcoin has always remained the No. 1 crypto asset</strong>, market-wise, as well as in many people’s minds, too. There’s even a term for that - it’s called “Bitcoin maximalism”.</p>\n<p>As time goes on, <strong>Bitcoin is also getting progressively more difficult to mine.</strong> Combine that with the fact that this crypto asset has a <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-hard-cap/">hard cap</strong></a> of 21 million (that’s the total number of Bitcoin that will ever exist), and you have an asset that’s becoming more and more scarce, yet seemingly also increasingly more sought-after, as well.</p>\n<p>Whatever challenges Bitcoin might face in the future, one thing’s for sure - if not for this cryptocurrency, I wouldn’t be writing this, and you wouldn’t be reading it. Chances are that there wouldn’t be any DeFi or other cryptos, either, at least not in the form that we know them now! With this industry constantly growing and reaching new milestones, many enthusiasts believe that this is just the beginning of a long and adventure-filled journey.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-a-bitcoin","youtube_video":{"id":126,"channel_id":1,"sort":24,"video_title":"What is a Bitcoin & How Does it work? (Animated Explainer)","description":"What is a Bitcoin, and how does it work?\n\nWith cryptocurrencies becoming more and more popular, as time goes on, people are getting used to cracking difficult subjects, such as DeFi, NFTs, the metaverse, and so on. However, before jumping into those difficult concepts, have you ever asked yourself if you really know what is Bitcoin, and how does it work?\n\nIn this video, I’ll be telling you all about that. We will cover the history of Bitcoin (how it came to be, who created it, and so on), its purpose, as well as what the future might hold for this particular cryptocurrency, and the entirety of the crypto space, as a whole.\n\nHow did you hear about Bitcoin, for the very first time? Share your experiences in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What is a Bitcoin\n1:06 The history of Bitcoin\n7:28 The Future of Bitcoin\n9:32 Wrap-up: What is a Bitcoin & How Does it work?\n\nMore Related Videos:\n\n? What is a Cryptocurrency?\nhttps://www.youtube.com/watch?v=eVLUrZtKhBk&t=0s\n? How Does Cryptocurrency Work?\nhttps://www.youtube.com/watch?v=rAtJ7Lw90KA\n? Crypto Token VS Coin\nhttps://www.youtube.com/watch?v=kNAC7CXFOTw&t=119s\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisaBitcoin #WhatisBitcoinAndHowDoesitWork #WhatisBitcoinUsedFor","video_id":"DeREwrPVlDg","duration":618,"view_count":470,"thumbnail_url":"https://i.ytimg.com/vi/DeREwrPVlDg/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-09-21 14:04:28","created_at":"2022-09-21T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}},"featured_image":{"id":8074,"uuid":"46e1226b-b72e-4c63-86f3-00b36865dc24","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-a-bitcoin-featured-image.o.jpg","path":"crypto/storage/media/what-is-a-bitcoin-featured-image.o.jpg","original_path":"crypto/storage/media/what-is-a-bitcoin-featured-image.jpg","name":"what-is-a-bitcoin-featured-image.o.jpg","original_name":"what-is-a-bitcoin-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"117.78KB"}},"chapterList":[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-blockchain.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/blockchain-101.jpg","rating":100,"sections":[{"slug":"what-is-blockchain","title":"What is the Blockchain?","featured_image_id":6412,"status":"published","chapter_id":1,"language":"en","order":1,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-blockchain","featured_image":{"id":6412,"uuid":"152ba579-ce8d-488a-9e06-bcd99e976b7d","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","original_path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.jpg","name":"what-is-blockchain-626fbe085a0cd.o.jpg","original_name":"what-is-blockchain.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"93.86KB"},"youtube_video":null},{"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","featured_image_id":7205,"status":"published","chapter_id":1,"language":"en","order":2,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/decentralized-blockchain","featured_image":{"id":7205,"uuid":"c5d6f6a7-4914-4d6b-9fdd-e94dfb0bae82","public_url":"https://assets.bitdegree.org/crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","path":"crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","original_path":"crypto/storage/media/decentralized-blockchain-featured-image.jpg","name":"decentralized-blockchain-featured-image.o.jpg","original_name":"decentralized-blockchain-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"136.00KB"},"youtube_video":null},{"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","featured_image_id":7397,"status":"published","chapter_id":1,"language":"en","order":3,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/blockchain-transaction","featured_image":{"id":7397,"uuid":"e60dff45-4c5d-4b44-a2c1-a27e49f700e7","public_url":"https://assets.bitdegree.org/crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","path":"crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","original_path":"crypto/storage/media/blockchain-transaction-featured-mage.jpg","name":"blockchain-transaction-featured-mage.o.jpg","original_name":"blockchain-transaction-featured-mage.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"85.83KB"},"youtube_video":null},{"slug":"crypto-fees","title":"The Different Types of Crypto Fees Explained","featured_image_id":7442,"status":"published","chapter_id":1,"language":"en","order":4,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/crypto-fees","featured_image":{"id":7442,"uuid":"f554012e-7fe1-4636-9718-81abd3499361","public_url":"https://assets.bitdegree.org/crypto/storage/media/crypto-fees-featured-image.o.jpg","path":"crypto/storage/media/crypto-fees-featured-image.o.jpg","original_path":"crypto/storage/media/crypto-fees-featured-image.jpg","name":"crypto-fees-featured-image.o.jpg","original_name":"crypto-fees-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"78.90KB"},"youtube_video":null},{"slug":"what-is-bridging-in-crypto","title":"The Key Notion Behind the Concept of Bridging in Crypto","featured_image_id":7662,"status":"published","chapter_id":1,"language":"en","order":5,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-bridging-in-crypto","featured_image":{"id":7662,"uuid":"67564127-d9df-451e-8767-c28930039dc8","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-crypto-bridging-featured-image.o.jpg","path":"crypto/storage/media/what-is-crypto-bridging-featured-image.o.jpg","original_path":"crypto/storage/media/what-is-crypto-bridging-featured-image.jpg","name":"what-is-crypto-bridging-featured-image.o.jpg","original_name":"what-is-crypto-bridging-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"106.21KB"},"youtube_video":null},{"slug":"types-of-blockchains","title":"Different Types of Blockchains: What to Look Out For?","featured_image_id":7272,"status":"published","chapter_id":1,"language":"en","order":6,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/types-of-blockchains","featured_image":{"id":7272,"uuid":"6ad01272-67ac-4719-8e88-7f01752a0628","public_url":"https://assets.bitdegree.org/crypto/storage/media/types-of-blockchains-featured-image.o.jpg","path":"crypto/storage/media/types-of-blockchains-featured-image.o.jpg","original_path":"crypto/storage/media/types-of-blockchains-featured-image.jpg","name":"types-of-blockchains-featured-image.o.jpg","original_name":"types-of-blockchains-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"110.34KB"},"youtube_video":null}]},{"id":2,"title":"Cryptocurrencies","slug":"cryptocurrencies","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-cryptocurrencies.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/cryptocurrencies-101.jpg","rating":100,"sections":[{"slug":"what-is-a-cryptocurrency","title":"What 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Analysis","slug":"crypto-analysis","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-crypto-analysis.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-analysis-101.jpg","rating":100,"sections":[{"slug":"what-is-bullish-and-bearish","title":"Bearish and Bullish Markets: Do They Matter?","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":1,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-bullish-and-bearish","featured_image":null,"youtube_video":null},{"slug":"best-technical-analysis-indicators-for-crypto","title":"5 Best Crypto Technical Analysis Indicators You Must Know About","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":2,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/best-technical-analysis-indicators-for-crypto","featured_image":null,"youtube_video":null},{"slug":"what-is-candlesticks","title":"Technical Analysis: What are Candlesticks, Trendlines, and Patterns?","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":3,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-candlesticks","featured_image":null,"youtube_video":null},{"slug":"how-to-track-new-crypto-coins","title":"Crypto Tracking: How to Track Your Favorite Coins & Tokens?","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":4,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/how-to-track-new-crypto-coins","featured_image":null,"youtube_video":null},{"slug":"how-to-research-crypto","title":"Crypto Research Fundamentals & Social Signals: Your Daily Trading Strategy","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":5,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/how-to-research-crypto","featured_image":null,"youtube_video":null}]},{"id":9,"title":"Mining","slug":"mining","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-crypto-mining.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-mining-101.jpg","rating":80,"sections":[]},{"id":10,"title":"Crypto Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"currentChapter":"cryptocurrencies","currentSection":"what-is-a-bitcoin","readingTime":9,"readingLevel":"easy"},"url":"/crypto/learn/what-is-a-bitcoin","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0"> Chapter 2: Cryptocurrencies
Bitcoin: the Pioneer of the Crypto World
Did you know that in 2010 two Papa John’s pizzas were purchased for 10,000 Bitcoin?
In this section, I’m going to answer the question what is a Bitcoin, as well as look into how does it work!
Cryptocurrencies have exploded in popularity, over the last decade or so. These days, everyone, and even their pets, have seemingly heard about crypto, DeFi, NFTs, and so on. As time goes on, however, the popularity of the space is only growing and increasing - there are more and more talks about mass adoption, and the integration of crypto into our everyday lives!
Do you know where it all started, though? Well, most people do - with Bitcoin. However, what do you *really* know about Bitcoin? I mean, do you know who owns the most Bitcoin, or when was Bitcoin created, in the first place? Those are just a couple of the questions that you'll find answers to after reading this section!
So, in this section, we’re going to look into what is a Bitcoin. Specifically, I’ll tell you about the history of this legendary cryptocurrency, what makes it special, and how it became a staple for a trillion-dollar industry!
Without further ado, let’s get to it!
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Video Explainer: Bitcoin: the Pioneer of the Crypto World
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The History of Bitcoin
In order to start figuring out what is Bitcoin and how does it work, we need to go back in time, to 2009. This is the year when Bitcoin was created, and launched to the general public.
Before Bitcoin came to be, however, there was first something called a “White paper”. This is a term that describes a document containing all of the philosophy behind a specific crypto project - these days, most-all decentralized finance platforms and tokens have White papers written about them, and Bitcoin was no exception, either.
How is this White paper so important, you might ask? Well, it can tell us a lot about two big topics - who started (or, created) Bitcoin, and what’s the purpose of this project, in the first place.
If you love internet mysteries, you’ve probably heard the name “Satoshi Nakamoto” before. This is actually a pseudonym of the creator of Bitcoin, and not their real name - truth be told, to this very day, NO ONE KNOWS who created Bitcoin! Even after all these years, the creator (or creators?) has remained anonymous. For simplicity’s sake, I’ll be referring to Satoshi as a “he” - it could, however, be a woman, a group of people, or an entire organization!
You'll find more information about Satoshi below, so, for now, let’s focus on the second question - WHY was Bitcoin created? Well, the answer might lie in the date of its creation.
2009 wasn’t really a special year, globally speaking. However, Bitcoin was launched on January 3rd, 2009 - so, at the very beginning of the year. What this means is that the actual project was created a year prior. And, I have a feeling that I don’t even really need to tell you what happened in 2008.
That’s right - the global financial crisis. In a very specific sense, Bitcoin was the result of this crisis.
When a cryptocurrency is created, the very first block of its blockchain is called “the Genesis block”. If you’d like to learn more about blockchains and how they work, there are a few dedicated sections concerning the topic in our Crypto 101 Handbook - make sure to check them out! Focusing on what is Bitcoin and how does it work, however, all that you need to know for now is that the creators of a cryptocurrency - such as Bitcoin - can leave a human-readable message within that Genesis block. Satoshi Nakamoto did just that - his message read:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
It’s a reference to an article title of The Times newspaper, from the day when BTC was launched. As you might be able to tell, the title talks about the Chancellor of the United Kingdom bailing out banks, after the global financial crisis - since it’s widely accepted that banking institutions were a major element of the crisis, in the first place, you can probably see where this is going.
To circle back to the questions of what is Bitcoin used for, and why it was created, the answer seems to be pretty simple - to take some economic power away from banks and governmental institutions, and hand it back to your common, everyday people. Bitcoin was initially meant to be a form of digital money that is both completely private, as well as transparent, and not belonging to any one entity - in other words, 100% decentralized.
It is widely accepted that, whoever Satoshi Nakamoto was, he was very concerned with the state of the global economy, and how huge financial institutions could weasel their way out of a major financial crisis that they’ve caused, shifting all of the economic burdens that came with it onto the masses of innocent people. Bitcoin was the answer to this - a way for those masses of people to, for the first time, truly own their own money, and not have it tied to the state or government.
Of course, when talking about these things, you could also question what is Bitcoin backed by, or how it tackles problems such as inflation and regulations. These are topics for other sections, though - in this section, our goal is to look at the basics of what is Bitcoin, and how it became the global phenomenon it is today.
Going back to the creation of Bitcoin, after it was launched, Satoshi Nakamoto would still show up in various forums online. He was an avid fan of cryptography, and would constantly hang out in related online forums and discussion boards, talking with other like-minded individuals, and trying to come up with what would eventually become Bitcoin. In fact, Bitcoin wasn’t even the first attempt at creating a form of digital currency - it was simply the attempt that was successful.
Pretty soon, however, Satoshi disappeared - today, not only does no one know who he is, it’s impossible to say whether or not he’s still alive, or active among crypto circles around the world. I mean, who knows - perhaps he’s a very active member of the Bitcoin community, but no one could ever tell?
Going back to the launch of BTC, you might ask - how much was Bitcoin in 2009? Well, the truth is - fractions of a penny! BTC only started gaining price traction around 2011, two years after its inception. Even then, you could purchase multiple Bitcoins with a single $1.
You’ve probably heard about the legendary story of a guy who purchased two Papa John’s pizzas for 10,000 Bitcoin, back in 2010. While it was quirky and cool, it was also a very significant moment for Bitcoin, this being one of the very first major events where BTC was used to purchase actual, tangible real-world items. This event has become so notable, that there’s now even a Bitcoin Pizza day being held, every year.
That’s no wonder, really - today, those pizzas would be worth over $200 million. It’s absolutely incredible to think about!
Hearing all of these numbers being thrown around, you might also ponder - who owns the most Bitcoin? Well, there are actually two notable parties that need to be mentioned here.
As far as the public is concerned, a US-based software company called Microstrategy is the largest BTC whale, holding nearly 130k BTC. When you learn about what is a Bitcoin, this number really does appear to be mind-boggling!
However, there’s another answer, too. It’s widely speculated that none other than Satoshi Nakamoto himself is the largest holder of BTC - if the calculations are true, Satoshi still holds over 1,1 million Bitcoin, spread throughout his wallets.
Going back to the history of Bitcoin, and skipping through some minor events, the popularity - and, consequently, price - of BTC grew over the years. The first major crypto boom happened in 2017, and was followed by what we now call the Crypto Winter - a sudden price crash, and then a few years of stagnation.
Today, Bitcoin alone is worth nearly $400 billion (market cap-wise), and that's not to mention the rest of the cryptocurrency industry. BTC paved the way for decentralized finance, NFTs, crypto gaming, and a new form of finance, as a whole - the importance of all of these things can’t be understated!
The Future of Bitcoin
Now that we’ve covered the general history and background of Bitcoin, we should also talk about the potential future of this cryptocurrency. In order to do that, though, we need to go back to the question of how does Bitcoin work, to begin with.
As mentioned before, BTC is completely decentralized and anonymity-preserving. Meaning, the cryptocurrency can be traded between two parties, and while all trades will be public and visible on the blockchain, the actual participants will remain anonymous.
This is done with the help of Bitcoin wallets. If you’re wondering what is a Bitcoin address, well, that’s just it - the term references a wallet address. It’s like a special string of numbers and letters, used to identify you on the blockchain. When you perform trades, or send BTC to your friends, only your wallet addresses will be visible - unless you tell the whole world that THIS wallet address belongs to YOU, no one will know! Well, generally speaking, that is.
Naturally, decentralization is another key factor. Bitcoin doesn’t belong to any single private or governmental entity. This means that there’s no single point of failure, either - in theory, this results in a fairer, more transparent financial system.
If you’d like to learn more about the specifics of decentralization and anonymity, there's a section covering both of these topics - check it out!
Having said all of that, and now that you know what is Bitcoin, how does it work, and what it’s used for, what’s next for this cryptocurrency - in other words, what is Bitcoin’s future?
Well, as you might expect, no one knows for sure! However, if we were to take a look at the history of Bitcoin, it seems that this cryptocurrency isn’t going anywhere.
Throughout the years, thousands of new crypto projects have emerged and grown to become notable names in the industry. During all this time, though, Bitcoin has always remained the No. 1 crypto asset, market-wise, as well as in many people’s minds, too. There’s even a term for that - it’s called “Bitcoin maximalism”.
As time goes on, Bitcoin is also getting progressively more difficult to mine. Combine that with the fact that this crypto asset has a hard cap of 21 million (that’s the total number of Bitcoin that will ever exist), and you have an asset that’s becoming more and more scarce, yet seemingly also increasingly more sought-after, as well.
Whatever challenges Bitcoin might face in the future, one thing’s for sure - if not for this cryptocurrency, I wouldn’t be writing this, and you wouldn’t be reading it. Chances are that there wouldn’t be any DeFi or other cryptos, either, at least not in the form that we know them now! With this industry constantly growing and reaching new milestones, many enthusiasts believe that this is just the beginning of a long and adventure-filled journey.
