Hey you!
Welcome back to “that’s what she said”, the newsletter which is like your fun crypto aunt who keeps you in the loop of the web3 news and fundamentals. Last time, we covered the topic of blockchain oracles — those magical little bridges that feed real-world data to smart contracts (if you've missed that piece, go and read it now!).
Today, we're gossiping about the granddaddy of them all: Bitcoin. You've definitely heard the hype, seen the price charts, and watched your friend either get rich or lose their shirt. Beyond the headlines and the memes, what actually is Bitcoin? How does this digital money thing work? And why does everyone lose their minds every four years over something called "the halving"?
It's a rebel of an entirely new monetary system, the one that challenged centuries of assumptions about who controls money and how it moves. Love it or hate it, Bitcoin fundamentally changed the conversation about value, trust, and financial freedom.
Let's explore the original cryptocurrency that started it all. Ready?
🧠 Definition
Bitcoin (BTC) is the world's first decentralised digital currency: a peer-to-peer electronic payment system that lets you send money directly to anyone, anywhere, without needing a bank, PayPal, or any other middleman. Created by the mysterious Satoshi Nakamoto, Bitcoin remains the most recognised and valuable cryptocurrency in existence.
Here's what makes Bitcoin unique: it's entirely digital, running on blockchain technology and designed to be scarce. Unlike government-issued currencies that central banks can print at will, Bitcoin has a hard cap built into its code. Only 21 million Bitcoins will ever exist. This fixed supply makes Bitcoin fundamentally deflationary, meaning that as demand increases and supply remains constant, basic economics suggests the value should rise.
You can think of Bitcoin as digital gold. Like gold, it's scarce. Like gold, people view it as a store of value. Still, unlike gold, you can send it across the world in minutes, divide it into tiny fractions (the smallest unit, 0.00000001 BTC, is called a satoshi), and verify its authenticity instantly through the blockchain.
Bitcoin operates on a decentralised network of computers (nodes) spread across the globe. No single entity controls it. No company can shut it down. No government can print more of it. This decentralisation is Bitcoin's superpower: it's money that exists outside traditional financial systems, relatively immune to the whims of central banks and political interference.
📜 History Behind
Every revolution has an origin story. Bitcoin's story begins with a mystery that remains unsolved to this day.
Mysterious Creator
In October 2008, someone using the pseudonym Satoshi Nakamoto published a whitepaper titled "Bitcoin: A Peer-to-Peer Electronic Cash System". Nine pages written in simple language with evolutionary implications. This document outlined a solution to a problem that had stumped computer scientists for decades: how to create digital money that couldn't be copied or spent twice.
To this day, nobody knows who Satoshi Nakamoto really is. The anonymity is fitting: Bitcoin was designed to be trustless, requiring faith in mathematics rather than individuals. Satoshi disappeared from public view in 2011, leaving Bitcoin to evolve without its creator.
Genesis Block
On January 3, 2009, at exactly 18:15:05 UTC, Satoshi mined the first Bitcoin block, known as the genesis block or block zero. This moment marked the birth of cryptocurrency as we know it. Embedded in that first block was a cryptic message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". This headline was a timestamp proving when Bitcoin began and a philosophical statement about why it needed to exist as an alternative to a failing traditional financial system.
Bitcoin Pizza Day
Fast forward to May 22, 2010. A programmer named Laszlo Hanyecz was hungry and wanted to test Bitcoin's utility as actual currency. He offered 10,000 BTC to anyone who would order him two pizzas. A British student called Jeremy Sturdivant took him up on it. Those pizzas cost about $41 at the time. Today? That same 10,000 BTC would be worth more than a billion dollars. Every May 22, the crypto community celebrates Bitcoin Pizza Day, commemorating the first real-world Bitcoin transaction and good-naturedly roasting Laszlo for what became the most expensive pizza order in history. By the way, Jeremy converted the Bitcoin he received back into dollars to pay for travelling expenses on a trip around the US (probably the most expensive "gap year” funding in hindsight).
💡 Double-Spending Problem
Bitcoin's true breakthrough was solving the double-spending problem that had plagued every previous attempt at digital currency. The issue is simple but devastating: if money is just data, what prevents someone from copying that data and spending the same digital dollar twice?
Traditional digital payments solve this through central authorities: banks verify that you have the money and haven't already spent it. Bitcoin needed to work without any central authority, which created a paradox. Satoshi's solution combined several technologies into something entirely new.
Every Bitcoin transaction is recorded on a public blockchain that thousands of computers maintain simultaneously. The system is designed with what's called Byzantine Fault Tolerance: it keeps functioning correctly even if some participants are malicious or dishonest. Through blockchain technology and cryptographic protocols, everyone can see all transactions that have already occurred. If someone tries to spend the same Bitcoin twice, the network immediately recognises the fraud because the transaction history is transparent and immutable. The decentralised consensus mechanism ensures that even if individual nodes fail or lie, the network as a whole maintains truth.
So, for the first time in history, digital scarcity was possible without a trusted third party. That's what Bitcoin changed everything.
⛏️ Mining
If Bitcoin has no central authority minting coins, where do new Bitcoins come from? The answer is mining: the process that simultaneously secures the network, validates transactions, and creates new Bitcoin.
Miners are individuals or companies running specialised computers that compete to validate transactions and create new blocks on the blockchain. Think of them as both accountants and security guards: they verify that transactions are legitimate while making the network virtually impossible to hack.
Here's the crucial thing to understand: mining isn't just people arbitrarily creating Bitcoin out of thin air. It's computational proof that real energy was expended to secure the network.
How Mining Works
Every ten minutes or so, pending Bitcoin transactions get bundled into a block. Miners then compete to solve a complex mathematical puzzle unique to that block. The puzzle requires massive computational power but is easy to verify once solved. Whichever miner solves it first gets to add the block to the blockchain and receives a reward in newly minted Bitcoin. The other miners verify the solution is correct, everyone agrees on the new state of the blockchain, and the process starts again with the next block.
Each block contains information from the previous block, creating an unbreakable chain. If anyone tried to alter past transactions, they'd have to recalculate every subsequent block, which is practically impossible given the computing power distributed across the network. This is how Bitcoin achieves immutability without central control.
Proof-of-Work
Remember Proof-of-Work from our earlier discussions? Mining is Bitcoin's implementation of this consensus mechanism. The work in Proof-of-Work is the enormous computational energy required to find the solution to each block's mathematical puzzle. Miners must prove they expended real-world energy (running computers that consume electricity and generate heat) to participate in the consensus process.
This energy expenditure is the security model. Want to attack Bitcoin and alter transactions? You'd need to control at least 51% of the network's total computing power and sustain that control while recalculating all subsequent blocks. The cost of such an attack would be astronomical, far exceeding any potential gain.
Block Rewards
Why would anyone spend money on expensive hardware and electricity to mine Bitcoin? Because the rewards are substantial. When a miner successfully adds a block to the blockchain, they receive two forms of payment: newly minted Bitcoin (the block reward) and transaction fees from all the transactions in that block.
The block reward is what creates new Bitcoin. When Bitcoin launched in 2009, miners received 50 BTC per block. This reward decreases over time through an event we'll explore shortly. Currently, the block reward is 3.125 BTC per block. As the block reward continues decreasing, transaction fees will eventually become miners' primary income source.
This incentive structure is brilliant in its simplicity. It gives everyone a reason to participate honestly.
Mining Difficulty
Bitcoin doesn't maintain its ten-minute block time by magic. The network automatically adjusts mining difficulty every 2,016 blocks (roughly every two weeks) based on how much computing power is active. If more miners join and blocks start being found too quickly, the difficulty increases. If miners leave and blocks slow down, the difficulty decreases.
This self-adjusting mechanism is crucial. It ensures Bitcoin's predictable supply schedule regardless of how many miners are active. It doesn't matter if one person is mining on a laptop or if a million industrial operations are running warehouses full of specialised equipment; the average block time remains around ten minutes, and the rate of new Bitcoin creation stays on schedule.
✂️ Halving
Every four years, something remarkable happens in the Bitcoin ecosystem. The rate at which new Bitcoin enters circulation gets cut in half. This event, known as the halving, is arguably the most anticipated and analysed occurrence in web3.
Halving is an automatic, pre-programmed event where the block reward that miners receive is reduced by 50%. This isn't a decision made by developers or a vote by the community. It's written into Bitcoin's code and executes automatically every 210,000 blocks, which works out to approximately every four years.
When Bitcoin launched, miners received 50 BTC per block. In November 2012, the first halving reduced this to 25 BTC. The second halving in July 2016 brought it down to 12.5 BTC. The third halving in May 2020 reduced it to 6.25 BTC. And most recently, in April 2024, the fourth halving slashed the reward to 3.125 BTC per block.
This will continue until around the year 2140, when the final satoshi is mined and the block reward reaches zero. After that, miners will earn income solely from transaction fees. The halving schedule ensures that Bitcoin's 21 million coin limit is approached gradually over more than a century.
Why Halving Happens
The halving exists for one fundamental reason: to control inflation and enforce scarcity. Satoshi Nakamoto designed Bitcoin as hard money: currency with a predictable, unchangeable supply schedule. Unlike fiat currencies, where central banks can print unlimited amounts, Bitcoin's supply is mathematically capped.
The halving schedule creates programmatic deflation. Every four years, fewer new bitcoins enter circulation. This mimics the extraction curve of precious metals like gold: they become harder to mine over time as the easily accessible deposits are exhausted. But unlike gold, where new deposits might be discovered or mining technology might improve, Bitcoin's schedule is absolutely fixed and transparent. Everyone knows exactly how many bitcoins will exist at any point in the future.
This predictability is powerful. It makes Bitcoin different from every currency humans have used before.
Price Influence
Economic theory suggests that reducing supply while demand remains constant or increases should drive prices up. The halving reduces the rate of new Bitcoin entering the market, creating additional scarcity. Historically, Bitcoin's price has increased dramatically following halving events, though not immediately.
Looking at past patterns: after the 2012 halving, Bitcoin's price increased by over 8,000% in the following year. After the 2016 halving, the price rose approximately 284% in twelve months. The 2020 halving preceded Bitcoin's run to new all-time highs above $60,000. These historical precedents have created massive anticipation around each halving event, with investors, traders, and analysts obsessively tracking the countdown.
It's important to remember that Bitcoin's price is influenced by countless factors beyond the halving: global economic conditions, regulatory developments, institutional adoption, technological improvements, and broader market sentiment. The COVID-19 pandemic, the war in Ukraine, and even tweets from high-profile individuals have all significantly impacted Bitcoin's price.
Next Halving
Want to see exactly when the next halving will occur? The Bitcoin community maintains live countdowns tracking the blocks remaining until the reward drops to 1.5625 BTC. You can follow the countdown here.
The anticipation surrounding halvings has become a cultural phenomenon in crypto. It's part celebration, part speculation, and part ritual: a predictable event in an unpredictable market that reminds everyone of Bitcoin's fundamental design principles.
Key Takeaways
- Bitcoin is the first and most valuable cryptocurrency. Decentralised, scarce, and globally accessible. For the first time in history, we have a digital asset with a fixed, unchangeable supply. Only 21 million Bitcoin will ever exist, creating programmatic scarcity that mimics precious metals but with the advantages of digital transmission.
- Decentralisation is Bitcoin's superpower. No company controls it, no government can shut it down, and no central authority can print more of it. This makes Bitcoin resistant to censorship, confiscation, and monetary manipulation.
- The double-spending solution was Bitcoin's true innovation. Satoshi didn't just create digital money; he solved a fundamental computer science problem through blockchain technology and Byzantine Fault Tolerance, proving that digital scarcity could exist without central authority.
- Mining secures the network through economic incentives. Through Proof-of-Work, miners turn electricity into security, making Bitcoin practically impossible to attack while simultaneously validating transactions and minting new coins.
- The halving enforces long-term scarcity. Every four years, the creation rate of new Bitcoin drops by half, reducing inflation and creating supply shocks.
- Bitcoin changed the conversation about money. Whether it succeeds as currency, store of value, or something else entirely, Bitcoin proved that decentralised digital assets are possible and sparked an entire industry of blockchain innovation.
Final Thought
Bitcoin asks a fundamental question: can money exist without authority? For thousands of years, the answer was no. Bitcoin answers that mathematics and incentives can replace trust in institutions. Whether you believe in this vision or remain skeptical, Bitcoin has already proven that decentralised digital currency works. It's been running continuously for years without anyone in charge, surviving crashes and attacks.
More than 15 years ago, on a BitcoinTalk forum, Satoshi Nakamoto replied to the skeptics with his legendary phrase: "If you don't believe me or don't get it, I don't have time to try to convince you, sorry". I guess it perfectly sums this article up.
If you learnt something new today, pass it on. Share it with your community. Let's spread the knowledge and level up together.
That's a wrap, normies. Next time, we'll continue our topic of Bitcoin and discuss in more detail what defines the price of Bitcoin and whether it can ever cost $0. Get ready ✨
Cookies She Left Behind
If you'd love to dig deeper into the topic, I'd also recommend reviewing the below:
- Bitcoin Halving Explained by Whiteboard Crypto
- Bitcoin Mining by Bitpanda Academy