Blockchains 101: Bitcoin
All you need to know about the #1 Blockchain network
Bitcoin is the first successful application of the concept of blockchain (A dynamically time-dependent, highly secure and decentralized Database/Network).
The Bitcoin’s network is currently exclusively applied to the specific purpose of being a “peer-to-peer electronic cash system ”, powered by the Bitcoin cryptocurrency (Ticker: BTC).
On Oct. 31, 2008 a person (or group of people) under the pseudonym “Satoshi Nakamoto” published the now-world famous Bitcoin whitepaper.
Bitcoin’s network launched on Jan 3, 2009.
Bitcoin operates in a peer-to-peer network allowing anyone in the world to send and receive it, without any middleman (like a bank, financial institution, broker, central bank or payment processor).
Bitcoin works by sharing the account’s balances and transactions of each users across the globe in a pseudonymous form through a decentralized (no central authority in charge of the bookkeeping) and shared database called the blockchain’s Ledger. This means that anyone can download and run the free and open-source software required to participate in the Bitcoin protocol.
Mining (Proof of Work):
“Mining” refers to the process of verifying transactions, maintaining the database updated and verifying the validity of new blocks before adding them to the blockchain. Bitcoin miners (powerful and often specialized computers) dedicate significant amounts of computing power to solve a complex cryptographic problem.
Every 10 min, miners have to start computing a new block which is containing all transactions that are happening within the network during that timeframe, while all previous blocks containing past transactions have already been validated by the network and included in the blockchain (can’t be modified anymore).
The miner solving the current block’s problem (hashing) before the others broadcast the results (hash value) to other miners through the p2p network for them to verify it and include it in the current block.
Once 51% of the network agrees on its validity (consensus), the block’s hash value is included in the current block, and the successful machine (miner) receives a “block reward”, which is an allocation of a predetermined number of Bitcoin.
The Bitcoin network is set to increase the difficulty of solving the block’s cryptographic problem when more computing power is added to the network.
This adjustment is made automatically by an algorithm in order to maintain the blocktime (= transaction time) always stable at 10 minutes.
Halving and Supply Model:
Bitcoin operates over a predetermined supply model where the reward given to miners for mining each block (every 10min) is cut by half every 210,000 blocks (~4 years).
The initial reward at launch was 50 BTC per block.
Previous halvings since inception:
- 2012: Block reward reduced to 25 BTC per block
- 2016: Block reward reduced to 12.5 BTC per block
- 2020: Block reward reduced to 6.25 BTC per block
As adoption increases progressively (demand) and supply decreases simultaneously with each halvings, the price of Bitcoin tends to periodically jump up after network and mining adjustments.
Bitcoin’s supply will progressively tend to zero until the 23th halving (2132), after which the bitcoin network will exclusively rely on transaction fees, creating scarcity and eventually, increasing the value of the asset over time.
Storage and wallets:
There a plenty of way to store Bitcoin. The safest being to store it in a cold wallet (offline wallets such as paper wallet or hardware wallets) or hot wallet (such as mobile or desktop wallets) or by using a custody service that will store it on their own cold wallet/vault (thus limits the benefit of decentralization by involving a third party).
Keeping cryptocurrencies on centralized crypto exchanges and other selling platforms being considered the riskiest since the large volumes of bitcoin stored may attract hackers’ interest.
- Type: Native Coin
- Total Supply: 21,000,000
- Subunit: 10–9 (Sats)
- Consensus: Proof of Work (PoW)
- Encryption: SHA-256
- Privacy: Pseudonymous (Low)
- Blocktime: 10 minutes
- Coding languages: C++ / Go (Java, Python)
- Open source: Yes
- Current version: Core 0.20.1 (01/08/20)
- Previous versions: Core 0.20. 0 (03/06/20)
- Whitepaper: https://bitcoin.org/bitcoin.pdf
- Github code: https://github.com/bitcoin
- Official website: https://bitcoin.org/
- Explorer: https://www.blockchain.com/explorer
- Twitter account: https://twitter.com/bitcoin; 2:@Bitcoin
- Reddit: https://www.reddit.com/r/Bitcoin/
- Wiki: https://en.bitcoinwiki.org/wiki/Bitcoin
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