Bitcoin (BTC) is the world’s first cryptocurrency, the genesis of this technology and the most used and strongest cryptocurrency today. Learn everything you need to know about this cryptocurrency and start browsing the crypto world at Bit2Me Academy.
Bitcoin (BTC) is the first functional crypto-based currency that has opened up a world of possibilities. The idea of this cryptocurrency was born from other already existing and less known elements, such as HashCash and DigiCash, combined with a peer-to-peer or P2P payment network.
I would be surprised if in 10 years we will not use electronic currency in some way, now that we know a way to do it that inevitably is not going to fall apart when the trusted third party.Satoshi Nakamoto, January 17, 2009
The initial proposal of Bitcoin
With the creation of Bitcoin, Nakamoto sought to correct different problems of DigiCash, a project created by David Chaum. One of those problems was double spending or using the same amount of tokens twice with no record on the first use. The problem had been featured in other decentralized coin proposals and could not be solved in any way. As a result, most of the digital currency options were centralized.
However, Nakamoto devised a plan to solve this. His plan was to use proof of work (PoW) and blocks that encompass a certain number of transactions. With these two pieces, he seeks to create a chain of blocks that are related to each other. The concept gave rise to blockchain technology or chain of blocks.
In the first instance, Nakamoto’s idea was the use of Bitcoin in small niches. Especially in adult content web pages where privacy is intended, in reward systems, for making donations or even as a means of payment in different games.
You could start in a narrow niche like reward points, donation tokens, currency for a game, or micro-payments for adult sites.Satoshi Nakamoto, 17 de enero de 2009.
Bitcoin security and mining
To offer security, Bitcoin is based on the SHA-256 cryptographic algorithm for the encryption of information (or transactions in this case). The information is verified by working with processors called mining.
The Bitcoin mining process seeks to perform a series of complex mathematical calculations that are used for the validation of transactions. These calculations require enormous computing power that has evolved over time. In principle, a simple computer could perform them without problems, but today specialized equipment is necessary for the task. This is because the difficulty of mining Bitcoin has increased exponentially since its inception until today.
Due to the complexity of the work, miners are rewarded for validating and creating each block. This is delivered in the form of bitcoins depending on the amount of work contributed.
Issuance of new bitcoins and units of account
Another particular of Bitcoin is its issuance. The maximum issue of Bitcoin cannot exceed 21 million bitcoins (BTC). In addition, Bitcoin has the ability to subdivide to eight decimal places. In this way, a unit (1 bitcoin) can be divided into up to 100,000,000 smaller units. These units are called “satoshis”, which is equivalent to 0.00000001 BTC.
But the issuance of coins in Bitcoin is handled by a delicate algorithm. First of all, each block in Bitcoin is generated every 10 minutes or so. That is, every 10 minutes the miners have to include a series of transactions, solve the cryptographic puzzle of the block and transmit it to the network. The miner who manages to solve the puzzle receives a reward that is the one that allows to introduce new coins in the market.
Initially, Bitcoin did this at a rate of 50 BTC per validated block, but currently it does it at 12.5 BTC per block. This is because the reward decreases by half every 210,000 blocks, due to a process known as halving. The task of the halving is to control the inflation of the Bitcoin and turn it into a deflationary issue.
The birth of Bitcoin
The first reference to Bitcoin was submitted on October 31, 2008 on the Crypto Mailing List. Satoshi Nakamoto defined the idea of Bitcoin (BTC) as a cryptocurrency that had the ability to prevent double spending on a peer-to-peer network, there will be no central bank or other trusted parties, participants can be anonymous and it would be based on the HashCash style proof of work. The proof-of-work is used to prevent double spending and to enter the market of new coins that will be progressively released as compensation for the work done.
On January 9, 2009, the first version of the Bitcoin software appears: version 0.1.0. According to Nakamoto himself, it is a version in alpha format and completely experimental.
The first Bitcoin software updates
Version 0.1.3 was released on December 1, 2009 and is a simple update that fixes the communication problems of the nodes, which after a while disappear from the network.
The update of version 0.2 of Bitcoin, published on December 16, 2009, added important improvements to the software, allowing, among others, the automatic start of boot so that the software can run in the background automatically. In addition, a compatible client for Windows is launched and a client for Linux is added. Additionally, Nakamoto implements for this software multiprocessor support for the generation of new currencies and proxy support for use in the Tor network.
Although it is not a software update or an implementation, May 17, 2010 is very important for Bitcoin (BTC)
This is the date that Laszlo Hayneck made the first bitcoin payment for a good or service. Hayneck bought two pizzas at the popular US chain Papa John’s and paid 10,000 BTC for them (then they were worth $ 0.003). Since then every year the event is commemorated as Bitcoin Pizza Day.
Follow the development of Bitcoin
Version 0.3 was released on June 6, 2010 and implemented some important new features such as transaction filtering, hashing speed up by 20%, a mining power performance viewer and a Mac OS X version developed by Laszlo Hayneck.
These are the most prominent updates from the early days, but there have been many more. We are currently on version 0.16.1 of the Bitcoin Core client, the base software for Bitcoin.
Among the recent Bitcoin updates, the one on August 24, 2017, when the activation of Segregated Witness, also known as SegWit, was approved. It is a solution for the scalability of Bitcoin and its full implementation within the Bitcoin Core software has been in version 0.16.0, offering full SegWit support for wallets and user interfaces.
During the early days of Bitcoin, a thread was established on the Bitcointalk forum that referred to this new cryptocurrency as the majority of stocks. Nakamoto responded on August 27, 2010 about it quite forcefully:
“Bitcoins have no dividends or potential future dividends, so they are not like stocks. They are more like a collectible or product “
Since then, the evolution of BTC has continued to rise as the flagship project of blockchain technology, transforming the world and fighting against a host of myths and FUDs from those who do not understand this technology.
The future of Bitcoin
Depending on who you ask, they will define it as a digital asset, since we have a digital asset that we can have at our disposal. At the same time it is also digital money, since it does not exist in a physical form and allows us to acquire goods, services and debt settlement. Finally, it can also be considered a token, since it is a representation of a fiat money value.
As a result, we must bear in mind that we are in previous versions of this tool and that it has only recently existed, therefore it is still being investigated and experimented with. The biggest challenge Bitcoin faces is scalability. In addition, a single Bitcoin transaction can make dozens of shipments to dozens of different addresses, currently the network only supports around 7 transaction validations per second, which can become a problem since other altcoins offer a greater volume of transactions . The main challenge of Bitcoin since its inception is precisely that: increasing the network’s capacity to support a greater volume of transactions.
Among the solutions provided in the Bitcoin (BTC) improvement roadmap, a so-called Lightning Network has been devised. This consists of a payment gateway with low commissions and designed for payments of less than $ 100. It is not yet implemented because it is in the development and testing phase, but it is expected to be a reality in the near future.