What Is a Cryptoasset — An Overview of Bitcoin and Blockchain

A cryptoasset is a digital asset created and traded on top of a technology called blockchain. It is also commonly called a 'virtual currency' or 'coin.'

Blockchain is, simply put, 'a ledger that everyone shares together.' Transaction records are stored identically and shared not by one company's central server but by countless computers around the world. So it's hard for any single person to secretly alter the records.

The core of this structure is 'decentralization.' Without a central manager like a bank or government, participants verify whether a transaction is genuine through rules they set and computer calculations.

Bitcoin is the first cryptoasset. In October 2008, a person (or group) under the pseudonym 'Satoshi Nakamoto' published the Bitcoin white paper, and on January 3, 2009, the first block (the genesis block) was created and it actually began operating.

Interestingly, this first block has engraved in it that day's newspaper headline, 'a second bailout for banks is imminent.' It is interpreted as embodying the problem awareness of creating 'money that doesn't rely on central institutions' amid the 2008 financial crisis.

Bitcoin has no issuing authority. Rather than someone issuing it at will the way the Bank of Korea prints the won, new coins are created according to fixed rules (code).

New Bitcoin is created through 'mining.' Computers around the world competitively solve complex calculation problems to verify transactions and record them in the ledger; this method is called 'Proof of Work (PoW).' The participant who solves the problem first receives new coins as a reward.

One of Bitcoin's biggest characteristics is that its issuance is fixed at 21 million. This cap was engraved into the code from the start, and through a 'halving' in which the mining reward is cut in half about every 4 years, the issuance pace gradually slows.

Because supply is limited this way, Bitcoin is sometimes likened to 'digital gold.' That said, this is merely one narrative, not a guarantee that its value will rise.

Cryptoassets are technically interesting and have already established themselves as an asset class. But from the perspective this service emphasizes—'a good asset, held long and steadily'—cryptoassets have a few fundamental differences.

First, with no cash flow like dividends or interest, they lean solely on price movement. Second, their history is short and their volatility is incomparably larger than stocks. Third, there are no safeguards like an issuing authority or depositor protection.

So this encyclopedia treats cryptoassets not as 'buy/it will rise' but as something to understand—by what principle they run and what risks exist. In particular, we recommend you be sure to check together the history of severe drawdowns covered in the next article.