Whether you are ready to invest in cryptocurrency or not, it’s important to understand the history of Bitcoin and how it came to be. For those who are new to cryptocurrency and hear the term, “Bitcoin”, it’s easy to make the mistake that it’s simply a type of money. There are several definitions for Bitcoin, many of which cannot be found on sites that are dedicated to Bitcoin. (We’ll list some below).
In the early part of the 2000s, Bitcoin was first created as a pseudo-anonymous digital currency with no central bank (aka cash). A group of developers including the pseudonymous Satoshi Nakamoto came together, attempting to create a digital currency that would allow users to be anonymous and have a greater degree of control of funds than traditional currencies. At the time, the paper that was created for the anonymous currency was given the name “Bitcoin”.
Bitcoin also acts as a replacement for physical currencies because it is digital. For example, if a merchant received 50 dollars worth of goods, he or she could calculate the dollar value of the coins on the tip of the scales. Then they subtract the value of the cash and add the cost of Bitcoin exchange fees and obtain the real amount of cash he or she was offered.
Since this stage of Bitcoin’s development, several countries, led by Japan, made regulations regarding bitcoin. The first large step was in July 2013, when the Japanese Ministry of Finance and the Japanese Financial Services Agency made a combined announcement to make Bitcoin legal tender.
The statement that was made by the Japanese Finance Ministry reads as follows:
“The official position is to treat virtual currencies such as Bitcoin as currencies.”
They go on to say that the new position will allow them to regulate and limit transfers to and from Bitcoin. We’ll review this statement more thoroughly below.
Bitcoin is issued by the Bitcoin exchange and to a lesser extent the members of the Bitcoin exchange who allow transactions to take place. These exchanges have their own set of rules that are in place to uphold their systems.
The bitcoin system was designed to be a decentralized economy. This means that the bitcoin exchanges are in control of their own transactions. The fact that they are a part of this system does allow for regulation and reporting to take place.
Bitcoin has come a long way since Satoshi’s anonymous project first began in 2009.