It has been a little less than 13 years since Bitcoin first launched. In the midst of the 2009 financial crisis, the founding father, hiding under the pseudonym Satoshi Nakamoto, shared his invention with the world. It is a widespread belief that Mr. Nakamoto is not merely a person, but a group of tech-savvy developers who wanted to change the world.
You may be surprised to hear that decentralized money is not an entirely new concept. In his best-selling book The Basics of Bitcoins and Blockchains, Anthony Lewis tracked down the blockchain design ideas to some of the most prominent mathematicians in America. Also, do you remember Cyberpunks from the early ’90s? What started off as a small project, has now taken the world by storm.
What is Bitcoin?
The most simplistic way to describe Bitcoin is to say it is a decentralized digital cryptocurrency. It is not backed by any government but rather by a mining pool that verifies information in a much more efficient way than, for example, bankers. Satoshi Nakamoto left the project after two years and millions of dollars in profit. People then decided it was well worth their money and time.
Contrary to popular belief, transactions on the Bitcoin blockchain are not private. Anyone anytime can access information on the Bitcoin blockchain. While the blockchain is public, wallet algorithms serve to encrypt and decrypt data for individual users. All Bitcoin users have private keys to access their assets and public keys to interact with the blockchain.
Why Is Bitcoin so Popular?
What was truly revolutionary about Bitcoin was its ability to track transactions seamlessly. Let’s go back to the beginning and see how things used to work. Before cryptocurrencies, people had no other option but to trust third parties with their money. This means people must put full faith in their banking institution, while they cannot track the bank’s financials as such information is not public.
Since Bitcoin is verified on a blockchain network, it allows access to information transparently. We can see all dates, times, values, and pseudonymous buyers and sellers. Every Bitcoin user generates a unique string of numbers and letters that grants them access to their digital wallet.
Bitcoin wallets are ‘private ownership,’ which means that if you as a holder lose it, there is no way to retrieve it. You, too, must have heard the horror stories of people losing millions of dollars. While they can still see their wallet on the blockchain, they cannot access the funds as they’ve lost the encrypted key.
Bitcoin Mining Machine
Bitcoin is mined using a complex algorithm that enables both pseudonymity and transparency. As such, Bitcoin represents a store of value that generates price from people’s sentiments. It is built on an open-source blockchain where the users can access all the information at any time.
There is no central body that controls the processes. Unlike in centralized institutions, Bitcoin miners approve or reject transactions based on the nodes that verify blocks. Although there have been many attempts to hack the network, the system has proven to be much more reliable than a regular bank.
Miners use a combination of hardware and software to mine Bitcoin. Thousands of miners use significant computing power to increase their chances of approving a transaction. Once they solve the problem, the system creates a block in the network. Think of it as a digital record in a digital ledger where all the information is segregated in an elegant and organized way.
Miners then go on and convert these blocks into something called a hash. The first one to complete the task correctly gets the award. When writing this article (May 11, 2022), miners get 6.25 Bitcoin for successfully validating a new block in the chain. Back in the day, miners could earn a staggering amount of up to 50 BTC per block.
Written by Lidija Misic, Melissa Seksenbayeva, and Daniel McCabe
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