Skip to main content

Bitcoin 1.0

Bitcoin is first cryptocurrency to go mainstream and hit $100,000 as of 2025. In 2009, an online figure named "Satoshi Nakamoto" released the Bitcoin "whitepaper" and launched Bitcoin. Since then, it has created a $3 trillion industry (technical and non-technical) called "Web3," introduced thousands of jobs globally, and challenged the traditional financial system.

In this lesson, we'll get a good understanding of what Bitcoin is and some of its main attributes. Topics such as the 4-year crypto cycle, Bitcoin mining, the finite supply that Bitcoin has of only 21 million, and what the term blockchain means. We'll conclude with a few short assignments, such as looking over an article and a couple of videos for you to watch.

Lesson Overview​

  • Evolution of Bitcoin and How Bitcoin works
  • Finite supply in the Bitcoin ecosystem
  • The $1.1 Billion dollar pizza purchase

The Financial Crisis of 2008​

Bitcoin's launch happened around the same time as the 08' financial crisis, with speculation that Bitcoin was a revolt against the government and centralized banks. While the first trace of Bitcoin on the internet was three weeks after the Lehman Brothers collapse (~October 2008) by Satoshi Nakamoto, we're able to assume that Bitcoin was already in the works for quite some time; therefore, we can't say the financial crisis led to the invention of Bitcoin (unless it was built in 3 weeks). Bitcoin's invention sparked a new evolution of digital currency, as now it allows peer-to-peer (person-to-person) payments without the need for a bank or any third party (we'll get into why this is important later).

A brief overview of the 2008 financial crisis: The collapse of major institutions like Lehman Brothers was driven by greed and a false promise to the working class. The government allowed institutions to sell on the false promise that housing prices would always continue to rise in the future, and so institutions were allowed to sell houses to essentially everyone; no good financial history or even income was needed to purchase a house in 2007.

This eventually led to a housing bubble that burst around 2007-2008; people could not pay their monthly mortgage bills, leading to many defaults and an oversupply of houses that the banks couldn't sell, which led to the houses being less valuable. The result put a dent in the global economy, and many people lost their jobs. This not only put a lot of distrust in governments and banks, but it also signified that there were major improvements needed to the current financial system.

On January 3, 2009, Bitcoin was launched by an entity using the name Satoshi Nakamoto; the Bitcoin protocol was in the works in 2007, with a release of the whitepaper in 2008, and the first Bitcoin block mined on January 3, 2009. It was perfect timing as it paved the way for a new financial system, promoting fewer central authorities to control everything, more transparency, and better security.

Fun Fact: If we were to look back at the very first message that was mined on Bitcoin, a decrypted message says this, "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." Hinting towards the 2008 financial crisis and that a new system is needed.

Fun Fact #2: To this day, Satoshi Nakamoto's identity is unknown. People speculate that it could be one person, a group of people, an organization/government, or even the CIA that is responsible. But the truth still is and will most likely remain unknown to the general public indefinitely.

Bitcoin What and Why​

Another major innovation that came with Bitcoin was preventing double-spending, a problem in the digital currency space. For example:

  • If you have 100 dollars online, you shouldn't be allowed to send $100 to your friend Alice and then send the same $100 to your friend Bob.

  • It would be easy to prevent this in person since you would give the money to whoever, and that's that, but on the digital side (online) it's harder to prevent since there's no one to verify duplicates.

But that's where Bitcoin comes in; it introduced preventing double-spending without the need of a bank or third-party software by using a consensus mechanism. Consensus mechanism is another fancy term for agreement upon different parties. It allows everyone who's participating in the Bitcoin network to agree on which transactions are valid and which are not, i.e., to help prevent double-spending.

A great way to visualize how Bitcoin works and what a consensus mechanism is is to pretend in a room of students, Alice and Bob are at the front of the room. Alice hands money to Bob, and everyone in the room sees this; each student then writes the transaction onto their notepad, agreeing that Alice indeed paid Bob. The original students then go around the school and tell everyone that this transaction happened, and then everyone in the school tells other schools, cities, and states. Time passes, and the entire world knows that Alice paid Bob. This is a "consensus" since everyone agrees Alice paid Bob $20 and the world moves on. Bitcoin is the underlying money but also technology is brought, allowing people like you and me to prove transactions, without the need for a bank.

Apps such as PayPal, Venmo, and centralized banks already do this, recording transactions and keeping everyone's money, but the problem arises when these centralized entities stop working or go bankrupt (2008 financial crisis). Bitcoin and decentralization is the solution to this!

To wrap up, Bitcoin solved the double-spending problem and allowed peer-to-peer (person-to-person) transactions without the need for a central entity or bank.

Only 21 Million Bitcoin will exist​

What's cool about Bitcoin is that there will only ever be 21 million in supply, meaning the amount of bitcoin to ever exist is fixed. It was made in the mind to combat inflation since bitcoin can also be used as a currency. There's about 20 million bitcoins in the public that people can trade with, and there's 1 million still left unmined and untouched.

This leads to the 4-year cycle of bitcoin as the supply of it gets harder and harder to mine. When talking about "mining," visualize a bunch of computers bundling up transactions and running a program to do a math computation. This math computation is tough and needs a lot of computing power, hence the energy argument of Bitcoin being non-eco-friendly. When bitcoin miners solve the problem, they get compensated with bitcoins, this is known as adding a block to the blockchain.

A "blockchain" is just a set of transactions. From the examples way above, we'd have Alice's transaction to Bob and many more from other people. Sets of these transactions are bundled up into a "block", then when new transactions occur, you bundle those transactions into a "block" and then connect the blocks together. Every new block is connected to the previous block, hence the word, "blockchain"; a bunch of blocks connected in a chain, each block containing a bunch of transactions.

Bitcoin mining gets harder overtime because of the predetermined code Satoshi wrote; after 210,000 blocks mined (approx. 4 years) the reward for bitcoin gets cut in half. The block reward for each block mined was 50 bitcoins, then after 210,000 blocks later, the reward gets slashed to 25 bitcoins for each block mined. Again, why any of this happens is because of Satoshi and the program Bitcoin that Satoshi wrote. It's all preset and is open-source for anyone to see.

The $1.1 Billion Pizza Purchase​

For funzies: On May 22, 2010, Laszlo Hanyecz paid 10,000 bitcoin for two Papa John's pizzas. At the time, it was worth about $41. There's now a Bitcoin Pizza Day to celebrate, and there's a group on Discord that hosts Bitcoin Pizza Day meetups across major cities around the world.

Assignment​

Find a quiet place, sit down and check out the assignments below.

Bonus: Bitcoin is both a blockchain: "Bitcoin" and cryptocurrency: "bitcoin". It's really just the capitalization of "b". (but for this curriculum I'm not following this syntax, unless specified otherwise)

  1. What is Bitcoin? (v1)
  2. What is Bitcoin? Explained in 3 Minutes | Tuttle Twins
  3. The Bitcoin Halving: How It Affects Crypto Prices
  4. Check out Bitcoin supply distribution

Knowledge Check​

Additional Resources​