Bitcoin is the first-ever cryptocurrency – a new kind of internet money and speculative asset with no central authority running it. It was launched in 2008 by someone using the pseudonym of Satoshi Nakamoto. It runs on a peer-to-peer network, incentivised to settle transactions and issue new bitcoin, with a record of this maintained in something called the Bitcoin blockchain.
Bitcoin is increasingly popular as a speculative investment because of its ability to function as an independent and incorruptible form of money — separate from government — and because it achieves digital scarcity, with a fixed supply of 21 million bitcoin. For this reason, it is often described as digital gold.
Though Bitcoin derives value from its unique design, and proven function, it also benefited hugely from its creator’s anonymity and decision to relinquish any connection with it in 2011. By disappearing after the creation of Bitcoin, Satoshi removed the first and only central point of failure from the network. Instead of belonging to Nakamoto, Bitcoin belongs to its users. It is truly decentralised and therefore robust. For more on this see our articles Bitcoin, scarcity and trust in money and How Bitcoin works.
By using cryptography and economic incentives Bitcoin creates a secure network that essentially manages itself and ensures that no single party can control it, or exert influence.
In order to ensure that transactions recorded in the blockchain are accurate, Bitcoin uses something called a Proof of Work consensus mechanism. Proof of work only regards new transactions as accurate if a certain amount of energy has been expended by whoever submits them. This process is known as mining, and enables new blocks of transaction data to be created and added to the historical record – the blockchain.
Despite its continued growth, Bitcoin is far from perfect. Though the coin has successfully provided a decentralised and secure cryptocurrency, it has had trouble scaling. As more users use the Bitcoin network, transaction fees become higher and the network slows down.
Currently, the Bitcoin network can only support around 7 transactions per second, compare this with VISA that facilitates 65,000 per second and you can see Bitcoins scaling limitations. This is known as the Bitcoin trilemma and you can read more about it in our article Bitcoin’s Limitations.
Who is using Bitcoin?
Bitcoin recorded over 1 million active Bitcoin addresses with daily transactions as recently as December 2021. March 2023 statistics, as per Glassnode, show over 920,000 active addresses. Active users tend to peak during a rally — which last happened at the end of 2021 — and peters off to a more regular level such as at time of writing, in March 2023.
Addresses that have a non-zero balance are much more, over 44 million unique addresses in early 2023. This suggests that most users who own Bitcoin don’t use it actively or on a daily basis, but as a means of savings or long-term investment.
Bitcoin continues to see a high total of daily transactions. The daily average has been over 300,000 since at least 2020, which is very close to the full capacity of Bitcoin, although there are many thousands more that aren’t easily visible — as these happen “off-chain” on another layer on top of Bitcoin called the Lightning Network.
This is, by a large margin, the biggest crypto network in the world.
Google trends indicate the predominant amount of interest in Bitcoin is from the United States although Europe, also shows a strong interest. Recently, African nations Nigeria and South Africa have ranked very highly on searches for Bitcoin indicating that the continent may be the next frontier for Bitcoin’s popularity. Peak interest on Google Trends for BTC came in 2017 when Bitcoin’s price surged and crypto was in an ICO craze. Since then interest has had a second peak more recently in 2021 as Bitcoin continues to reach ATH prices.
As the coin’s value has grown over time, BTC has become an attractive investment for institutions. With companies like Tesla investing billions and advocates such as Michael Saylor encouraging more companies to hold BTC on their balance sheets, it seems like a matter of time until this is common practice.
As of January 2021, it was estimated that miners and exchanges own just over 20% of the available Bitcoin supply. The rest is distributed amongst users with large accounts (known as Whales and generally considered as any account with 1000+ BTC) making up just over 30% of the supply. This leaves the other 50% distributed across smaller accounts.
This has changed slowly over the years since, with distribution spreading out more evenly towards both ends of the spectrum accounts. As of March 2023, Bitinfo suggests that accounts holding 1,000 BTC now make up 39% of total supply. 97% of all Bitcoin addresses only hold 7% of total Bitcoin supply.
What is the size of the Bitcoin network?
Around 19.3 million bitcoins (March 2023) have been mined so far, with the total supply capped at 21 million. This may seem like Bitcoin mining will soon be completed however the timeline is a bit more complex than that. Bitcoin supply increases when miners get rewarded with new BTC for validating transactions.
Over time, this reward has decreased from 50 BTC per block mined to now 6.25 BTC. The reward halves every year meaning that Bitcoin mining isn’t likely to reach the 21 million supply cap until around 2140.
There are an estimated 1,000,000 individual Bitcoin miners that are currently active. In January 2021, these miners earned over $1 billion worth of BTC. The Bitcoin hash rate (amount of computing power in the network) has grown to an average of around 170 terahashes per second. As of March 2023, there were on average 47,000 active nodes in the Bitcoin network at any one time (Bitnodes data). Of these, at least 11,000 are reachable or fully functional.
What is the size of the Bitcoin community?
The Bitcoin community is really a proxy for the wider crypto community as anyone involved in crypto knows about Bitcoin.
The Bitcoin official Twitter account has over 5.7 million followers (up from 2 million followers in 2021) and there are over 4.9 million members of the r/bitcoin page on Reddit. There are also hundreds of developers that work on Bitcoin and have active community forums such as Bitcoin StackExchange and BitcoinTalk Development & Technical Discussion Forum
How much Bitcoin is traded?
Bitcoin has the largest transaction volume with a current daily average of over $30 billion. The current Bitcoin market cap stands at over $547 billion with the coin ranking number one on Coinmarketcap.
The largest Bitcoin exchanges are Binance, Huobi and Coinbase. Coinbase is based in the US, Huobi in China, while Binance has multiple headquarters. The most popular trading pairs are based on Bitcoin and the US dollar which include pure BTC/USD and also BTC/USDT (US Dollar/Tether — a stablecoin tied to the value of the US dollar).