ByUmbrella Web 3 Team 9 July , 2019 4 minute read
Home » All Posts » What is Bitcoin?
Table of Contents
·
Why Bitcoin
Came into Being?
·
How to
Buy Bitcoin, and From Where?
· What is the
Future of Bitcoin?
Bitcoin has been a great topic of discussion
amongst investors, finance professionals, media outlets, investment
commentators, bloggers, etc. The cryptocurrency has been called by a lot of
names.
Some of them are ‘the next financial
revolution’, internet currency, decentralized money, digital gold, gold 2.0.
But what is it exactly?
Bitcoin primarily consists of two things. The
token and the protocol that powers the token. In 2009, anonymous creator(s)
Satoshi Nakamoto mentioned both, as a ‘Peer-to-Peer Electronic Cash System’ in
the white paper.
Represented by the symbol BTC,
bitcoin is a medium-of-exchange. By design, there is a cap on the total supply
of bitcoin. Only 21 million bitcoins will ever be available.
Bitcoin: Controlled supply timeline estimation,
Source: Bitcoin wiki
No individual or centralized authority controls
bitcoin’s creation and circulation. BTC leverages cryptography for supply,
issuance, and transaction verification. That’s why Bitcoin is a
cryptocurrency https://wazirx.com/blog/what-is-cryptocurrency/
On a protocol level, Bitcoin is a distributed
network of computers that maintains a record/ledger of all BTC transactions.
This network is called the Bitcoin blockchain.
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Every network participant has a copy of the
ledger, which makes it difficult for hackers and infiltrators to gain access
and alter the network data. To understand how this all happens visually, check
out the video below:
Why Bitcoin Came into
Being?
In the year 2008, The United States housing
market crashed. It was a reality check for people putting their complete faith
and ‘trust’ in legacy financial systems.
The Great Recession was a result of the failure
of trust-based systems. Trust is not bad but it creates inefficiencies and
fissures in operational models. It also significantly increases the cost to
operate such operational models.
2008’s economic slowdown illustrated the need to
democratize finance, to give users the control of their money, to let people be
their own banks.
Bitcoin’s idea took shape when Satoshi intended
to minimize trust, through the use of cryptographic proof, decentralized
network design, and open-source software.
He/She/They designed the protocol in such a way
so that bitcoin transactions
· Could happen without permissions and beyond
borders
· Are trustless, pseudonymous
· Can happen without anyone blocking or freezing a
transaction of any amount
· Takes place faster than usual banking
transactions and without being reversed
· Keep happening 24 hours a day, 365 days per
year.
When Bitcoin was finally revealed to the public,
erstwhile developer and one of Satoshi’s closest associates, Hal Finney posted
this tweet:
How Does Bitcoin Work?
Bitcoin leverages a public-key cryptography system,
peer-to-peer networking, and mining to process and verify payments.
Network participants or miners engage in a
competition to verify transactions using advanced computing hardware designed
to solve complex mathematical problems.
The miner who solves the problem verifies the
transaction and adds it to a block. This goes on for a while until the block is
full. The block then gets added to the longest chain. Miners win an appropriate
number of bitcoins generated by the protocol, for quickly adding blocks to the
chain. The reward system is called ‘proof-of-work’.
This is how new BTC is
created, and subsequently becomes a part of the Bitcoin economy as miners sell
these newly minted bitcoins to cover their operational costs.
The addition of transaction information to the
blockchain eliminates a ‘double spending’ scenario.
How to Buy Bitcoin, and
From Where?
Cryptocurrency exchanges can serve as the most
appropriate place to buy Bitcoin. At WazirX, we offer the safest and fastest
platform for you to start your Bitcoin journey.
What is the Future of
Bitcoin?
Bitcoin has come a long way, since its inception
in 2009. It is now supported by a multi-billion dollar BTC mining industry and
billions of dollars worth of spot and futures trades that have ballooned Bitcoin’s
value over the years. With a market cap of around $170 billion, it is no longer
a DIY project for hobbyists.
Just recently, famed billionaire hedge fund
investment heavyweight Paul Tudor Jones favored Bitcoin and said that he would
give a section of his portfolio to BTC. According to his market outlook, ‘The
Great Monetary Inflation’ Mr. Jones drew similarities between bitcoin and
the 1970’s gold market.
Comparing Gold and Bitcoin markets, Source –
Bloomberg
He said that the first cryptocurrency, just like
gold stands to gain a lot on the investment front.
Apart from investment, tremendous progress is
happening on the development front. Developers are working tooth and nail to
speed up bitcoin transactions. Bitcoin development firm, Blockstream, and
off-chain scaling solution Lightning Network deserve notable mentions in this
regard.
Bitcoin also stands to become a great smart
contract development platform. As per a CoinDesk report published
last year, prominent Bitcoin programmer Pieter Wuille, unveiled a new language
called ‘Miniscript’ that could find a use for programming Bitcoin-based smart
contracts and decentralized applications.