Lesson 2: Introduction to Bitcoin
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Introduction
Bitcoin is the first and most important cryptocurrency in the world. Created to solve the problems of traditional banking systems, Bitcoin introduced a new way of transferring value digitally without relying on banks or governments. In this lesson, you will learn what Bitcoin is, how it works, why it was created, and why it plays a critical role in crypto trading and investing.
What Is Bitcoin?
Bitcoin is a decentralized digital currency that allows people to send and receive money over the internet without intermediaries. Unlike traditional currencies such as USD or EUR, Bitcoin is not printed by a government or controlled by a central bank. Instead, it operates on a peer-to-peer network powered by blockchain technology.
Bitcoin transactions are verified by network participants called miners, and all transactions are recorded on a public ledger known as the blockchain. This ensures transparency, security, and trust without needing a central authority.
Why Was Bitcoin Created?
Bitcoin was created in 2008 by an anonymous person or group using the name Satoshi Nakamoto. The motivation behind Bitcoin was to create a financial system that is independent of banks, especially after the global financial crisis of 2008.
Traditional banking systems rely heavily on trust, intermediaries, and centralized control. Bitcoin aimed to remove these dependencies by allowing users to control their own money directly, reducing corruption, manipulation, and excessive fees.
How Bitcoin Works
Bitcoin works through a decentralized network of computers called nodes. When someone sends Bitcoin, the transaction is broadcast to the network. Miners verify the transaction using cryptographic algorithms and add it to a block.
Each block is linked to the previous one, forming a blockchain. Once a transaction is confirmed and added to the blockchain, it becomes extremely difficult to alter, making Bitcoin highly secure.
Bitcoin Supply and Scarcity
One of Bitcoin’s most important features is its limited supply. Only 21 million Bitcoins will ever exist. This scarcity makes Bitcoin similar to gold, which is why it is often called “digital gold.”
New Bitcoins are created through a process called mining, and the reward for mining is reduced over time through events called Bitcoin halvings. This controlled supply plays a major role in Bitcoin’s long-term value.
Bitcoin as Digital Gold
Bitcoin is widely considered a store of value. Many investors hold Bitcoin as a hedge against inflation, currency devaluation, and economic instability. Unlike fiat money, Bitcoin cannot be printed endlessly.
Because of its scarcity, security, and global acceptance, Bitcoin has become the foundation of the entire cryptocurrency market.
Why Bitcoin Matters in Crypto Trading
Bitcoin dominates the crypto market. Most cryptocurrencies move in correlation with Bitcoin’s price. When Bitcoin rises, altcoins often follow. When Bitcoin falls, the entire market can decline.
Understanding Bitcoin is essential for any crypto trader. Bitcoin pairs such as BTC/USD and BTC/USDT are among the most traded assets in the world.
Advantages of Bitcoin
- Decentralized and censorship-resistant
- Limited supply and deflationary design
- High security through blockchain technology
- Global accessibility and borderless transfers
- Strong liquidity and market dominance
Risks of Bitcoin
- High price volatility
- Regulatory uncertainty in some countries
- Security risks if private keys are lost
- Market manipulation by large holders
Conclusion
Bitcoin is the foundation of the cryptocurrency ecosystem. It introduced a revolutionary financial system that empowers individuals and removes reliance on centralized institutions. Before learning advanced trading strategies, understanding Bitcoin is absolutely essential.
In the next lesson, you will learn how Bitcoin is traded against the US Dollar and how to read BTC/USD price charts.
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