Bitcoin for beginners
So there are 2 things I am certain of. The first is, Cryptocurrency is the future and the second we are still early!
If you are in the Cryptocurrency space, or considering getting into it, then you would have definitely heard of the B -word, Bitcoin. Bitcoin is everywhere, but should you invest? The advent of cryptocurrency, with Bitcoin (BTC) at its core, is one of the most fascinating and disruptive techno-social events in recent history.
There are hundreds of online publications that go into great detail about Bitcoin, however, the majority of them fall short. The easiest way to understand is to read the document written by Dr. Craig S. Wright under the pseudonym Satoshi Nakomoto. He published the whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System on October 31st, 2008. Its goal is to use economics to describe the decentralized electronic payment system.
The term “Bitcoin” appears only twice in the original whitepaper (in the title and as a link to a web domain), and it is then used to describe a system for electronic transactions that is not based on trust. Governing the system are fixed protocols that utilize a perpetual blockchain. A digital coin serves as the system’s means of exchange. Bitcoin is a three-part term that includes established protocols, a digital coin, and a decentralized blockchain, all of which combine to form an Electronic Cash System that functions as a Peer-to-Peer Exchange. To put it another way, anyone can review and use Bitcoin’s open- source code.
Why Is Bitcoin Revolutionary?
In its early days, the asset was more of a currency, but it grew in popularity and utility over time. Bitcoin’s price climbed over time, eventually reaching more than $50,000 per coin, despite the fact that it began off absolutely worthless in US currency terms. In the crypto business, the asset is now frequently considered as a wealth storage vehicle rather than a currency.
While some online anarchists will lead readers to believe that Bitcoin will dethrone fiat currency, others will assume that Bitcoin is a censorship-resistant, anonymous digital currency that is immune to seizure. Bitcoin is not anonymous; it is a private cryptocurrency with an open, unchangeable ledger. It provides privacy because only the address is visible to the public, but it also implies that activity on the address can be monitored to deter unlawful activities. Dr. Wright put it this way:
“Bitcoin needs to work within the law to be valid.”
The true genius of Bitcoin lies in its economic architecture rather than any technical innovation. The fixed protocol allows for decentralization. Bitcoin establishes a currency system in which users do not need to rely on a third party to facilitate transactions (such as a bank or payment processor).
The protocols were also created to prevent a coin from being “double-spent.” Each coin is one-of-a-kind and cannot be duplicated or destroyed. The system is built on top of a globally distributed immutable network that is maintained by thousands of incentive miners.
What Is Bitcoin For General Public?
In layman’s terms, a Bitcoin is a unit of the Bitcoin digital currency, often known as a cryptocurrency. Some people may mistakenly use the terms Bitcoin and blockchain technology interchangeably. Unlike
traditional fiat currency, Bitcoin is not governed by a local government or central bank. The supply of Bitcoin that is steadily created is restricted to control inflation, implying that only 21 million coins will ever exist.
The general public has yet to adopt or comprehend Bitcoin’s full potential. Bitcoin is much more than just a digital currency for global transactions. It’s also a global, immutable public data ledger that businesses may utilize to fuel blockchain applications that revolutionize their operations in innovative and interesting ways.
What Makes Bitcoin A Good Medium Of Exchange?
The blockchain technology that underpins it is supposed to keep data and transactions secure. Through a process known as mining, the blockchain keeps track of confirmed transactions indefinitely. Cryptographic techniques are used to digitally sign and authenticate each transaction, ensuring that the funds cannot be spent over and over again.
Double spending is also avoided due to the miner’s economic interests. Because there is a chance that other miners would reject their block, miners will not contain double-spent transactions. As a result, they will lose out on possible earnings. People will not leave an irreversible evidentiary trail of their attempted theft if they double-spend.
Bitcoin mining is also the process by which new coins are produced. Cryptographic hash functions and the Proof of Work (PoW) consensus mechanism are used in mining. Because each block contains the hash of the previous block, changing the Bitcoin blockchain entails unraveling the entire structure record by record. To accomplish so, the perpetrator would have to invest a large amount of money and resources.
Data is distributed globally via a system of network miner nodes. A copy of the blockchain ledger is kept on each miner node. If data is changed on one node, the other network participants will perceive it as corrupted since the additional copies do not align.
A timestamp server also collects a hash of a block of transactions and broadcasts it publicly. The data’s existence is confirmed by the timestamp. Each timestamp hash includes the preceding timestamp, so each new timestamp strengthens the previous ones.
Because it does not rely on a single, specific data source, a distributed system is more resilient to failures and cyber-attacks than traditional centralized systems. The blockchain is a decentralized ledger that keeps track of all transactions. Because it is disseminated, it is particularly resistant to change and fraud. The database records are immutable, and only a massive amount of processing power can be used to alter them.
How Can You Make A Transaction With Bitcoin (BSV)?
There are no middlemen in the transactions, so anyone with an Internet connection can send coins to anyone else on the planet. Users must first have a Bitcoin wallet in order to receive or send Bitcoins. Consider the following example to understand how a transaction works.
Alex would give John his Bitcoin address, which is akin to a bank account number. John sends a transaction to Alex’s address from his wallet and then signs it with a digital signature. When John hits the send option, his transaction is broadcast to the network’s nodes. Miners collect pending transactions
from a mempool and organize them into new “blocks.” Miners check that John has the necessary bitcoins and that his signature is genuine. The miner confirms and appends the block to previously verified blocks once he or she has found a way to add it.
The majority of miners agree to add new blocks of transactions to the ledger based on a set of principles specified in the original Bitcoin White Paper. Every ten minutes, a new block is added to the blockchain. The miner has now officially updated the blockchain’s records, allowing Alex to see John’s transfer in his wallet as soon as John sends it and spend it without waiting for confirmation.
Unless the fund transfers are big, such as buying a car, house, or major contract, confirmations do not need to be important to the user. Miners relay these transactions to one another for two reasons: to potentially get the transaction fee and to guarantee that other miners are aware of the transaction, reducing the danger of their block being rejected. It is as good as confirmed because all miners have it and there is a greater than a 99 percent possibility of this transaction being included in the next block (on BSV only) once it is broadcasted.
Why Should You Use Bitcoin?
Since Bitcoin transactions are immutable once they are uploaded to the blockchain, they cannot be reversed once they have been validated and recorded. Bitcoin is great for people who desire fast settlements and low costs because it can be used by anybody with an internet connection. People can send coins directly to anyone else (peer to peer) across a secure, distributed network, bypassing traditional financial intermediaries.
Moreover, anyone can view the entire Bitcoin transaction history.
So there we have a bit of a beginners intro to Bitcoin. If you want to learn more, please don’t hesitate to follow — here and if you have any comments, please do let me know below — I am still eager to learn more myself.
Thank you for reading.