What is the functionality of Bitcoin

What is bitcoin


Symbol: BTC

Released: 2009

Maximum stock: 21 million

Divisibility: 8 decimal places

Official website: https://bitcoin.org

Bitcoin is the most popular and well-known decentralized virtual currency in the world. Bitcoin uses blockchain technology in which all money transfers and Bitcoin addresses can be read from the "Public Ledger". Bitcoin was released in October 2008 by an unknown person or group using the pseudonym Satoshi Nakamoto. However, the first block was created on January 3rd, 2009, which is widely accepted as Bitcoin's birthday.

Bitcoin uses a Proof of Work consensus-based method. This entails the physical maintenance of the blockchain with mining machines. The miners contribute the computing power of their computers to the Bitcoin network. Mining is essential for the functionality of the Bitcoin network. Without miners, there would be no Bitcoin network. The main tasks of mining consist of verifying transactions and creating new bitcoins. In return, the miners are rewarded. In practice, the rewards mean the creation of new bitcoins.

Miners are currently rewarded with 6.5 new bitcoins per block. The number of Bitcoins per block is halved approximately every four years (every 210,000 blocks). In the case of Bitcoin, this means a drop in the number of new Bitcoins coming onto the market every four years. Halving the Bitcoin is a feature programmed into the blockchain. Avoiding inflation and stabilizing the number of Bitcoin is the purpose of halving it. The maximum number of Bitcoin is 21 million. A bitcoin can be divided into eight decimals. Therefore, 0.00000001 BTC is the smallest possible transferable amount.

The history of bitcoin

Bitcoin is the oldest cryptocurrency in the world. The first block of Bitcoin was processed in January 2009. Bitcoin did not appear out of nowhere. It was the result of decades of research. Satoshi Nakamoto's Bitcoin was the first of its kind. For the first time, people had access to a digital currency with a truly decentralized administration and much-needed scarcity. In the case of Bitcoin, scarcity means the predetermined number of Bitcoin.

Bitcoin is a decentralized financial system. Satoshi Nakamoto created Bitcoin at the best possible time. Bitcoin is a statement about the previous unforeseen economic crisis. This financial crisis was the result of ruthless central bank monetary policies. In the course of the economic collapse, confidence in traditional banking systems also collapsed, but the demand for a new monetary system rose rapidly.

There was real demand for a new monetary system, which is why the demand for Bitcoins rose in parallel, especially in the first half of the 2010s. With the release of Bitcoins, a lot of new offers emerged from the service sector.

During the history of Bitcoin, the cryptocurrency has also received a number of upgrades. The SegWit Update from 2017 is the best known of its kind. The SegWit Update improved capacity by changing the way the network was secured.

The technology behind Bitcoin

The Bitcoin protocol is built on the blockchain. The term blockchain comes from English and literally means block in a chain. A blockchain is a constantly growing list of blocks linked with the help of cryptography. Each block contains the cryptographic hash of the previous block, a time stamp and the transaction data. The Bitcoin Blockchain is also a public ledger that reveals the visibility of every transaction.

The Bitcoin blockchain is completely decentralized. In a decentralized system, information is stored in several modules. There is no central information that enables hackers to corrupt it. In a conventional model, the information is stored in a central database. In this case, all information is in one and the same place. A great example of centralized systems are banks. They store all of our money and the only way to pay someone is through the same bank.

People's distrust of centralized systems is one of the main reasons for Bitcoin's existence. The financial crisis of 2008 demonstrated the enormous need for a completely decentralized and digital money system. The Bitcoins blockchain is completely decentralized, i.e. under no control of a single party.

Thanks to the many miners and their enormous computing power, the Bitcoin blockchain is extremely secure and reliable. The data on the Bitcoin blockchain is scattered across the globe and is therefore completely safe from hack attacks. In addition, the crash of the blockchain Bitcoins, due to the accumulated computing power of one party, is completely excluded.

Bitcoin as an investment

In the past few years, Bitcoin has attracted more and more investors from around the world. Bitcoin can be seen as a payment system as well as a digital currency. Everyone should consider the inevitable inflation and the resulting depreciation of traditional currencies such as the dollar or the euro.

In contrast to conventional currencies, the number of Bitcoins is fixed in advance. It is not possible to generate more than 21 million bitcoins. Bitcoin should therefore not be confused with a conventional currency. Limiting the maximum number of Bitcoins leads to a constant deflation of demand and thus to an increase in value against conventional currencies, provided that the popularity continues. First and foremost, Bitcoin is also a value that many experts compare with gold.

Unlike other cryptocurrencies, Bitcoin has one defining feature on its side. Bitcoin was the first cryptocurrency and thus has the pioneering advantage. Most of the news about cryptocurrencies is related to Bitcoin because of its huge market value. Even today, almost all new crypto investors start with Bitcoin.

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