Bitcoin BTC
The cryptocurrency that started it all
What is Bitcoin?
Bitcoin is digital money, or as seen more recently, a great store of value.
It has the advantage of being decentralized, meaning no one entity can
control it.
It is unstoppable and uncensorable, as long as the Internet is up and running
and somebody out there has a copy of the Bitcoin software running and copy of
the Bitcoin blockchain.
It is unchangeable. Once something has been recorded onto the blockchain,
there is no way to change it. Technically, you can change it in your local
copy, but your changes will be ignored by everyone else, making them pointless.
For your version of the changes to be accepted as valid, you would require
consensus from at least 51% of all instances of Bitcoin software currently
connected to the Internet.
Bitcoin is basically a distributed ledger of transactions. Everybody has a
copy of the ledger and it is constantly verified with other people’s copy of
the ledger. As people make Bitcoin transactions, they are added to the
ledger in the form of “blocks”. Each block has a reference to the one that
came before it and it just keeps building, with each new block added to the
end, hence the name “blockchain”. The beauty of this system is that no
one central authority determines what transaction data goes into each
successive block. That is determined by miners, who calculate “hashes” of
the next block of data to see who can find the smallest one. A hash is a
one-way calculation based on elliptical curve mathematics and may look
something like this...
0000000000000000000a21dd95a707cf9e4b9d513f10fd5a52cb10ef03e75a74
The system distributes the next block data to all the miners and they will
take that data, add a changing random element called a nonce, and perform
the hash calculation. They will continue to generate these hashes until a
suitably small one is found and send it back for other miners to verify.
Once a miner has found a sufficiently small hash, it will get added to the
blockchain and a reward of Bitcoin (as well as any transaction fees) is given
to the miner. The rewards started at 50 Bitcoin for each winning hash and
slowly reduce over time. Every 210,000 blocks that are added to the
blockchain, the reward halves. At the time of this writing, there have
been 2 halvings and the reward is 12.5 Bitcoin. This halving happens
approximately every 4 years, depending on how fast the blockchain has been
growing. This has the effect that there will only ever be close to 21
million Bitcoins created. The idea is that even though the reward keeps
halving, miners will continue to want to mine because the value of a single
Bitcoin will continue to go up as scarcity sets in. The final mined block
that gets a reward is estimated to happen around the year 2140 at which point
the technical world will have already moved on to the next thing or will
continue to mine just to get transaction fees. Bitcoin has a target of 1
block being added to its blockchain every 10 minutes. That target is just
that, a target, and not a hard rule. A block could theoretically be found
much faster or much slower. It is all dependent on random chance of which
miner will can brute force a winning hash the quickest. The “difficulty”
factor of finding the smallest hash adjusts every 2016 blocks, dependent on
how fast the last blocks have been found. So if on average, the speed of new
blocks being added to the blockchain is happening every 9 minutes, the
system will increase the difficulty and the next blocks will need to find
an even smaller hash to be eligible for being the winning hash.
The difficulty adjusts up and down dependent on how many miners are mining.
The computing power currently required to compete in this mining race is
insane. Where in 2010 a person could have used their home computer CPU to
successfully mine, today companies have warehouses full of dedicated ASIC
mining hardware working together in pools. To compete, you would need a
similar setup which is only feasible if you have a lot of money to invest
in the hardware, a cold warehouse to run all that hardware in, and cheap
electricity (as you will need a lot of it).
The proof-of-work hashing algorithm that Bitcoin utilizes is called SHA256.
Proof-of-work (or POW for short) is a consensus mechanism. It is the way
that the miners calculate hashes and it stops anyone from cheating because
the work to calculate a hash has to be done and then verified by other
miners before that miner is declared the winner.
As Bitcoin has a tremedous first-mover advantage, it has ended up being the
most common base trading pair on virtually every exchange. Until this changes,
it is unlikely that Bitcoin will lose much value.
Gotchas
Beware of Bitcoin forks! There are forks of Bitcoin out there claiming to
be the original, namely Bitcoin Cash (BCH) and Bitcoin SV (BSV). Bitcoin
Cash owns bitcoin.com and has tricked many new people coming into the
cryptocurrency scene. While these forks as valid projects on their own, they
are far from the same valuation as Bitcoin (BTC). Know what you are buying!
Use buybitcoinworldwide.com to
find trusted and valid crypto sellers in your country. I would recommend
Shakepay
(referral link) or
NetCoins
(referral link)
if you're in Canada like me.
The cryptocurrency that started it all
What is Bitcoin?
Bitcoin is digital money, or as seen more recently, a great store of value.
It has the advantage of being decentralized, meaning no one entity can
control it.
It is unstoppable and uncensorable, as long as the Internet is up and running
and somebody out there has a copy of the Bitcoin software running and copy of
the Bitcoin blockchain.
It is unchangeable. Once something has been recorded onto the blockchain,
there is no way to change it. Technically, you can change it in your local
copy, but your changes will be ignored by everyone else, making them pointless.
For your version of the changes to be accepted as valid, you would require
consensus from at least 51% of all instances of Bitcoin software currently
connected to the Internet.
Bitcoin is basically a distributed ledger of transactions. Everybody has a
copy of the ledger and it is constantly verified with other people’s copy of
the ledger. As people make Bitcoin transactions, they are added to the
ledger in the form of “blocks”. Each block has a reference to the one that
came before it and it just keeps building, with each new block added to the
end, hence the name “blockchain”. The beauty of this system is that no
one central authority determines what transaction data goes into each
successive block. That is determined by miners, who calculate “hashes” of
the next block of data to see who can find the smallest one. A hash is a
one-way calculation based on elliptical curve mathematics and may look
something like this...
0000000000000000000a21dd95a707cf9e4b9d513f10fd5a52cb10ef03e75a74
The system distributes the next block data to all the miners and they will
take that data, add a changing random element called a nonce, and perform
the hash calculation. They will continue to generate these hashes until a
suitably small one is found and send it back for other miners to verify.
Once a miner has found a sufficiently small hash, it will get added to the
blockchain and a reward of Bitcoin (as well as any transaction fees) is given
to the miner. The rewards started at 50 Bitcoin for each winning hash and
slowly reduce over time. Every 210,000 blocks that are added to the
blockchain, the reward halves. At the time of this writing, there have
been 2 halvings and the reward is 12.5 Bitcoin. This halving happens
approximately every 4 years, depending on how fast the blockchain has been
growing. This has the effect that there will only ever be close to 21
million Bitcoins created. The idea is that even though the reward keeps
halving, miners will continue to want to mine because the value of a single
Bitcoin will continue to go up as scarcity sets in. The final mined block
that gets a reward is estimated to happen around the year 2140 at which point
the technical world will have already moved on to the next thing or will
continue to mine just to get transaction fees. Bitcoin has a target of 1
block being added to its blockchain every 10 minutes. That target is just
that, a target, and not a hard rule. A block could theoretically be found
much faster or much slower. It is all dependent on random chance of which
miner will can brute force a winning hash the quickest. The “difficulty”
factor of finding the smallest hash adjusts every 2016 blocks, dependent on
how fast the last blocks have been found. So if on average, the speed of new
blocks being added to the blockchain is happening every 9 minutes, the
system will increase the difficulty and the next blocks will need to find
an even smaller hash to be eligible for being the winning hash.
The difficulty adjusts up and down dependent on how many miners are mining.
The computing power currently required to compete in this mining race is
insane. Where in 2010 a person could have used their home computer CPU to
successfully mine, today companies have warehouses full of dedicated ASIC
mining hardware working together in pools. To compete, you would need a
similar setup which is only feasible if you have a lot of money to invest
in the hardware, a cold warehouse to run all that hardware in, and cheap
electricity (as you will need a lot of it).
The proof-of-work hashing algorithm that Bitcoin utilizes is called SHA256.
Proof-of-work (or POW for short) is a consensus mechanism. It is the way
that the miners calculate hashes and it stops anyone from cheating because
the work to calculate a hash has to be done and then verified by other
miners before that miner is declared the winner.
As Bitcoin has a tremedous first-mover advantage, it has ended up being the
most common base trading pair on virtually every exchange. Until this changes,
it is unlikely that Bitcoin will lose much value.
Gotchas
Beware of Bitcoin forks! There are forks of Bitcoin out there claiming to
be the original, namely Bitcoin Cash (BCH) and Bitcoin SV (BSV). Bitcoin
Cash owns bitcoin.com and has tricked many new people coming into the
cryptocurrency scene. While these forks as valid projects on their own, they
are far from the same valuation as Bitcoin (BTC). Know what you are buying!
Use buybitcoinworldwide.com to
find trusted and valid crypto sellers in your country. I would recommend
Shakepay
(referral link) or
NetCoins
(referral link)
if you're in Canada like me.