Everything About Bitcoin
| — Bitcoin was launched in 2008 and is the world’s first decentralized digital currency – its network runs and maintains value autonomously, no state or central bank is involved|
— Bitcoin is powered by blockchain, a digital ledger that is available for anyone to read, and which cannot be changed – this allows the network to function without any central entity
— The consensus protocol for Bitcoin network is proof-of-work; this is the mechanism by which the nodes in the network validate transactions
— Because Bitcoin exists on a trustless blockchain network that does not need a central authority to reliably keep track of transactions, it revolutionized the way we transfer value by enabling peer-to-peer transactions
Want to learn everything about Bitcoin? It’s time to get into the deep! First outlined in Satoshi Nakamoto’s white paper in October of 2008, Bitcoin is the first successful cryptocurrency ever created. And to this day, it’s still by far the market leader. That’s what makes it worth a closer look. In the following, you’ll learn what Bitcoin is, how it works and some of its popular use cases. Let’s get facted!
Bitcoin in words: the whats and wows
As desired by its mysterious creator Satoshi Nakamoto, Bitcoin aims at decentralization. But it brings so much more. Bitcoin possesses a unique combination of key attributes which makes it stand out against traditional money or other assets. There are many things to say about it. As well as many approaches to explain it. Here is a simple and memorable way to go about it: the old-good yet effective acronym. Ta-da!
Be your own bank
Bitcoin is the first financial system to successfully use a fully peer-to-peer network. Thanks to blockchain technology, it was the first cryptocurrency which overcame the yet-insolvable double spending problem. It means that with BTC – and crypto in general – you don’t have to trust banks or other institutions with your money. You can freely and directly transact with anyone around the globe.
Impossible to hack
Decentralization also increases the security of the network. In a centralized environment, if a computer is hacked it’s game over. In a decentralized network like blockchain, users would need to attack so many different computers. In Bitcoin’s case it becomes a herculean task! As all the transactions are validated by the community network, there is no possible fraud. If there is a false transaction, it would be rejected.
Thick & fast
Bitcoin transactions can be sent near-instantaneously from anywhere in the world to any country, regardless of borders. National and international transactions take the same amount of time and fees. Plus, while traditional international transactions take between 1 to 4 working days, a BTC transaction takes about 10 minutes to be completed.
Bitcoin leverages transparency, by being completely open-source. This means that everyone can take a closer look at its code and verify how it works. All transactions are also publicly available on the blockchain, meaning you can verify all the data relating to your Bitcoin accounts and balances.
Own your money
With Bitcoin, there is no central authority that could tell you what you can and cannot do with your own money. Unlike the money you’ve left in the care of a financial institution, with Bitcoin you can be completely in control of your own funds while retaining complete ownership of your money. No abuse of authority. No breach of trust.
While Bitcoins’ transactions are fully public, you can still remain anonymous at the same time. The addresses used in Bitcoin are strings of data which on their own cannot point to a single individual.
Not only for speculation
Bitcoin is not just a speculative asset. It has been designed first as a means of payment, like “digital cash”. Its popularity has led to more and more acceptance and use cases. Including the purchase of goods and services, from pizzas to Lamborghinis. The first-ever purchase using Bitcoin was for two pizzas! At the time, these two cost roughly $40. Today, they are worth over US$200,000,000.
Later on, a peak in few cryptocurrencies’ value and prices took place in 2017. A growing topic became “Bitcoin Lambo”: people were wondering when they would be able to buy a Lamborghini with their Bitcoin. And few have made this dream come true. This gave birth to the famous crypto slang “When Lambo”.
Going even further, it is possible to buy luxury houses or tickets to space with Bitcoin today. This shows how it has become an acceptable means of settling large transactions and investments. Although it’s not for everyone yet, the future sure is looking bright.
Bitcoin in action: how it works
Remember, we previously explained how blockchain transactions work. Allowing for transparent, secure and anonymous peer-to-peer exchange of value, free from the control of external parties. Well, Bitcoin – or BTC – works the same. Let’s review the steps:
Nothing new so far. But mastering Bitcoin requires understanding 2 specific notions: mining and proof of work. They are directly related to steps 3 and 4 of the transaction, i.e. the process – or protocol – used by the Bitcoin network to verify and validate a transaction. Knowing that this protocol can differ from one cryptocurrency to another, according to its blockchain rules.
Bitcoin makes use of a system for verifying transactions known as Proof of Work (PoW). In which, there are miners that compete to solve complex puzzles – like a giant Sudoku – to verify blocks before adding them to the blockchain. This execution is called mining. The miner who succeeds is awarded with an amount of BTC. In turn, all miners combined give their computing power to the Bitcoin network which gives it stability, security and decentralization. Indeed, if one miner is acting maliciously or is compromised, all other participants in the network will still verify the correctness of the transactions.
Here we are, mastering Bitcoin! Sure, we did not cover everything, but enough to get you on track. The rest will follow. And now you are in good shape to pursue your crypto journey with… the others cryptocurrencies! Right, Bitcoin is crypto Number One, and the entire crypto market is following it. But you have thousands of cryptocurrencies which are still waiting for you!
Knowledge is power – so keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video Get Rich Quickly In Crypto