Everything you wanted to know about Bitcoin

Throughout 2024, the value of Bitcoin has more than doubled. Analysts predict that its growth will continue this year. Mind explores the phenomenon of the world’s most famous cryptocurrency, its advantages, and its drawbacks.

What is Bitcoin?

Bitcoin is a form of digital money that is tied to the internet network. Digital assets do not require regulation by central authorities or intermediaries such as banks. Transactions occur directly between users, which speeds up operations and gives cryptocurrency owners maximum control over their assets.

Bitcoin emerged in 2009 and became the world’s first cryptocurrency. The creation is attributed to Satoshi Nakamoto, who aimed to develop an alternative to traditional money. However, the identity of Satoshi – or even the fact of their existence – has never been confirmed. It is possible that Bitcoin was the result of collaboration among a group of scientists.

Since Bitcoin’s inception, thousands of new cryptocurrencies have been launched, but Bitcoin (BTC) remains the largest by market capitalization and trading volume.

Its total value is nearly $2 trillion. The second-largest cryptocurrency in the world is Ethereum, valued at approximately $430 billion.

Bitcoin functions as both an investment tool and a unit of exchange. However, unlike fiat money, it exists only in digital form.

New bitcoins are created through a process called "mining." Miners use powerful computers to solve complex mathematical problems and maintain the system's functionality. However, the system produces fewer bitcoins each year, and the creation of new blocks becomes increasingly difficult.

The total number of bitcoins is limited to 21 million. According to crypto market analysts, the last BTC will be mined in 2140.

Despite Bitcoin existing for 16 years, most people still do not fully understand what it is or why it exists. Users continue searching for answers on Google and GPT chat. Read about the most popular cryptocurrency-related search queries of 2024 at the link below.

How does Bitcoin work?

At the core of cryptocurrency lies blockchain technology. This is a decentralized database distributed across computers worldwide. It consists of blocks that store transaction information. The chain of cryptographically linked blocks is virtually impossible to alter or delete. Essentially, it is open-source software where all elements are interconnected.

Transactions take place through a digital wallet – software that enables the transfer of bitcoins between users. A wallet can be created using online services such as Coinbase, Binance, or OKX.

A digital wallet is protected by a password, and if lost, access to the cryptocurrency stored in the wallet will also be lost. Losing a password is a fairly common occurrence. According to research by Fortune and the analytics firm Chainalysis, there are approximately 1.8 million "lost" bitcoins worldwide.

How to make money with Bitcoin

There are several options. Bitcoins can be:

• Mined. In the past, mining required a lot of equipment, but now specialized systems like ASIC (Application-Specific Integrated Circuits) are available, optimized for mining. They provide high computational power and energy efficiency.
• Bought. Bitcoin is a profitable investment tool. People buy it expecting the price to rise. Storing funds in Bitcoin reduces the risk of inflation.
• Traded. Cryptocurrency owners also engage in trading. This allows them to profit from currency fluctuations and reinvest their earnings.

How to buy Bitcoin and where to store it

Bitcoins and other cryptocurrencies are stored in wallets. They can be:

• Hot wallets – online wallets created on cryptocurrency exchanges. Transactions in hot wallets are faster. However, exchanges are occasionally targeted by hackers, so it is recommended to store only part of your funds in these wallets.
• Cold (hardware) wallets – devices that are not permanently connected to the internet. Experts advise using hardware wallets for secure storage of funds.

Once you have registered a wallet, you can start transactions with cryptocurrency. Buying Bitcoin or other crypto is as simple as purchasing dollars or euros through a bank.

The easiest method is P2P (person-to-person) trading, which allows buying or selling cryptocurrency directly on an exchange without intermediaries. Another option is using an online cryptocurrency exchanger, which converts fiat money into digital currency.

Advantages of Bitcoin:

• Reduced inflation risks. This is why Bitcoin is often called "digital gold."
• Decentralization. Bitcoin is the most decentralized cryptocurrency, making it impossible for any organization or government to control the blockchain.
• 24/7 availability. Bitcoin can be traded 24/7, 365 days a year. Transactions are faster than bank transfers, allowing funds to be sent anywhere in the world within 10 minutes with minimal fees.
• Security. Thanks to cryptographic protection, transaction data cannot be altered or deleted.
• Stability. Governments cannot print Bitcoins, unlike fiat currencies. The system is limited to 21 million, ensuring that Bitcoin’s value will continue to rise.
• Microtransaction capability. Each Bitcoin is divisible into 100,000,000 satoshis, making it possible to use for payments of goods and services.
• Liquidity. Bitcoin is extremely popular, making it easily convertible into fiat money.

Read more about other cryptocurrencies and their features at the link below.

Does Bitcoin have drawbacks?

Despite its growing popularity, Bitcoin is still an experimental currency with its own risks, namely:

Volatility. BTC is highly volatile compared to other assets. Within a week, its price can rise or fall multiple times.

On December 31, 2019, Bitcoin was worth $7,170, and a year later, its price had increased to $29,000, a 300% rise. In November 2021, Bitcoin peaked at $69,000, then dropped to $40,000, only to surge to $100,000 in 2024. As of January 2025, Bitcoin’s price fluctuated between $92,000 and $101,000. Analysts predict that in 2025, its value could drop to $74,000 or rise to $200,000.

By 2027, experts expect Bitcoin to be worth $280,000, and by 2032, $968,000.

Competition. Although Bitcoin dominates the cryptocurrency market, new coins are constantly emerging, competing for market share. These new competitors develop innovative ways to attract users and rapidly expand into new markets.

Regulatory restrictions. Digital currency is completely banned in Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, and Bangladesh.

In China, the government actively blocks Bitcoin’s development, considering it an unregulated financial product. Since 2021, China has banned Bitcoin trading and mining.

Need for specialized knowledge. Successfully investing in digital currencies requires specialized skills. Without them, financial losses are inevitable.

Low transaction speed. Other blockchain networks like Solana or Avalanche process far more transactions per second than Bitcoin. While Bitcoin remains the dominant store of value in crypto, other blockchains are better suited to modern challenges.

Limited presence in Web3 and DeFi. Web3 is a decentralized internet where services can be paid for with cryptocurrency. In this space, Bitcoin has been largely overtaken by other crypto projects.

In the DeFi (decentralized finance) ecosystem, which is actively expanding, Bitcoin is not the dominant player.

Fraud. According to Chainalysis, in 2023, over $1.7 billion worth of cryptocurrency was stolen.

To avoid fraud, keep your digital wallet password secure and ignore investment offers from unknown sources.

Bitcoin payments are irreversible. Transactions cannot be canceled. Funds can only be refunded by the recipient.

Lack of a legal framework. The European Commission’s legislation on cryptocurrency markets came into effect in 2023.

In Ukraine, on March 15, 2022, the president signed the Law of Ukraine "On Virtual Assets" No. 2074-IX (adopted on 17.02.2022).
This law will take effect only after amendments to the Tax Code of Ukraine regarding the taxation of virtual assets come into force.
As of January 2025, the law has not yet come into effect.

Interesting facts about Bitcoin

• When Bitcoin was first mined in 2009, the reward for mining one block was 50 BTC. In 2012, it dropped to 25 BTC. By 2016, the reward decreased to 12.5 BTC. On May 11, 2020, it was reduced to 6.25 BTC. Currently, the reward for mining one block is 3.125 BTC. This amount is distributed among hundreds of thousands of miners.
• Mining requires a lot of electricity. To put it in perspective, a standard refrigerator consumes about 400–600 watts per hour. A high-end mining rig consumes as much power as ten refrigerators.
• In 2013, James Howell, an Englishman from Newport, accidentally threw away the hard drive of his computer, which contained about 7,500 BTC. His attempts to retrieve it from a landfill were unsuccessful.
• The largest amount of Bitcoin ever moved in a single transaction was 500,000 BTC. The largest sum of money ever transferred through the blockchain was $1 billion, with a transaction fee of $700.
• In 2013, the world’s first Bitcoin ATM was installed in Vancouver, Canada.
• A user who earned 127 BTC as a child recently found his old computer and private keys. After restoring access to his wallet, he became $4.2 million richer.
• As of today, less than 2% of the world’s population owns Bitcoin.