Bitcoin is a decentralised electronic payment system and an open source digital currency (cryptocurrency) created in 2009 by Satoshi Nakamoto. Bitcoin (BTC) was created to ensure the protection of investments and the free financing of business, without resorting to financial institutions and outside any constraints and regulations. The name Bitcoin also refers to the open source program for using these currencies, as well as the peer-to-peer network that it forms.
Unlike most currencies, Bitcoin is not based on trust in a central issuer. Bitcoin uses a peer-to-peer database to inventory transactions, and uses cryptography to provide basic security features such as ensuring that bitcoin cannot be compromised. spent only by the one who owns them and only once.
The construction of the Bitcoin currency allows the possession and anonymous transfer of value. Bitcoins can be saved on a personal computer as a wallet file or stored with a third-party wallet service, and in both cases the bitcoins can be sent over the Internet to anyone with a Bitcoin address. Peer-to-peer topology and the lack of a central administration make it unfeasible as an authority, a government, etc. manipulate the value of Bitcoin or introduce inflation by producing them.
Bitcoin is one of the first implementations of the so-called "cryptocurrency" concept, first described in 1998 by Wei Dai on the Cyperpunk mailing list. Thank you for staying until the end! Part 2 of this video will appear very soon, so don't forget to subscribe if you haven't already. Until next time, take care of your money.
Bitcoin is an implementation of b-money and Hashcash. The official monetary sign ₿ was accepted in 2015 according to Unicode. The corresponding acronyms used by the exchange platforms are BTC and XBT. Unofficial symbols used include ฿ and Ƀ.
Satoshi is the smallest subdivision of a BTC equivalent to 10-8 BTC (0.00000001 BTC). Other subdivisions are microbitcoin (μBTC) equivalent to 10-6 BTC (0.000001 BTC), millibitcoin or bitmil (mBTC) equivalent to 10-3 BTC (0.001 BTC) and centibicoin or bitcent (cBTC) equivalent to 10-2 BTC (0.01 BTC).
The Bitcoin system works on the basis of a peer-to-peer network and asymmetric cryptography. Asymmetric cryptography uses a pair of asymmetric keys (public and private). The term "asymmetric" comes from the use of different keys to perform two opposite functions (encryption and decryption), each inverse of the other. The transfer of funds between public accounts uses public cryptographic keys to confirm transactions and prevent double-spending.
The public key is used to encrypt a text, which can then be decrypted only using the appropriate private key. Public key encryption is used in Bitcoin transactions to ensure confidentiality. The private key is used to decrypt the encrypted text and create a digital signature. A message created with the sender's private key can be verified by anyone by accessing the appropriate public key, thus ensuring the authenticity of the message.
The principles of the system are described in Satoshi Nakamoto's 2008 paper. Bitcoin uses the SHA-256 algorithm as a proof-of-work protocol.
The chain of blocks
The blockchain is a common public registry on which the entire Bitcoin network is based. All confirmed transactions are included in the blockchain. In this way, Bitcoin wallets can calculate the balances that can be spent and new transactions can be verified to involve bitcoins that are actually owned by the payer. The integrity and chronological order of the blockchain are empowered by cryptography.
Anyone participating in the bitcoin network has a wallet that contains an arbitrary number of cryptographic key pairs. Public keys or bitcoin addresses act as the end point for receiving all payments. Addresses do not contain any information about their owner and are generally anonymous. Human readable addresses are strings of random numbers and letters about 33 characters long, always starting with the number 1, in the form 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W.
Bitcoin users can have multiple addresses, and in fact can generate new addresses without practical limits, because generating a new address requires relatively little computational power, the equivalent of generating a public / private key pair, and requires no contact with any node in network. Creating disposable addresses helps maintain user anonymity.
A transaction is a transfer of value between Bitcoin wallets that is included in the blockchain. Bitcoins contain the public key of the current holder (address). When user A transfers an amount to user B, A relinquishes ownership of the bitcoin sent by adding user B's public key and signing it with his own private key. It broadcasts these bitcoins with a suitable message, the transaction, in the bitcoin network. The rest of the nodes in the network validate the cryptographic signatures and transaction amounts before accepting it.
Transactions are made through a "Bitcoin wallet", an application or service that connects to the Bitcoin network and allows you to store and trade the currency with any other user. Bitcoin wallets keep a secret piece of data called a private key, which is used to sign transactions, providing mathematical proof that it comes from the wallet holder. The signature also prevents someone else from altering the transaction after it has been issued. All transactions are issued between users and usually begin to be confirmed by the network within the next 10 minutes, through a process called mining.
Bitcoin transactions can also be made through various sites and businesses that mediate transactions. Among the largest sites that mediate transactions with Bitcoin are: BitStamp, Bitfinex, Kraken and bitcoin.de. Another site, LocalBitcoins, mediates direct transactions between users in the same locality or geographic area.
ATMs for Bitcoin transactions are similar to those commonly used for banking transactions, but in addition, they are connected to the Internet and have an electronic reader for official user documents, such as a driver's license or passport. confirm identity. These ATMs allow you to exchange Bitcoin for cash or deposit cash for the purchase of digital currency by transferring it to various electronic devices that support these operations, such as smartphones. According to coinatmradar.com, it has been estimated that there are over 900 ATMs operating in 55 countries, the majority (500+) being in the U.S.
The mining process
Mining is a consensual distributed system used to confirm pending transactions by including them in the blockchain. Mining imposes a chronological order in the blockchain, protects the neutrality of the network and also allows the various computers in the network to agree on the condition of the system. In order to be confirmed, the transactions must be included in a block that respects very strict cryptographic rules that will be verified by the Bitcoin network.
These rules prevent previous blocks from being modified, as this would invalidate all subsequent blocks. Mining also prevents a case in which an individual can easily add new blocks consecutively to the block chain. In this way, no individual can control what is included in the blockchain or replace parts of the blockchain to withdraw their own transactions.
A standard part of the new Bitcoins is added to the sum of the transaction fees included in the next block. The total amount as a reward is received by the person who added the next block to the transaction database. After the formation of each 210,000 blocks (approximately once every 4 years), the size of the reward with the new Bitcoin is scheduled to halve, ie this value is a decreasing geometric progression (the size of the reward is 50 → 25 → 12.5 →…).
The total issue of Bitcoin is limited, as it is equal to the sum of the members of a decreasing geometric progression and will not exceed 21 million. In May 2014 there were 12.7 million Bitcoin in circulation, in July 2021 there were 18.77 million Bitcoin in circulation.
In the first versions of the client program there was the button "Generate new bitcoins". Since 2013, mining without specialised processors (on video cards or on the central processor) has become unprofitable: the cost of electricity consumed has exceeded the average result.
In 2017, cloud mining service appeared using leased power. Equipment maintenance, configuration, and Internet connection are performed by the company providing this service. In most cases, the tenant can choose a mining cryptocurrency and a pool is mining next to it.
Altcoin is the name of the cryptocurrencies that are used as alternatives to bitcoin. There are about 344 such cryptocurrencies that have appeared to compete with Bitcoin, of which only 34 are worth more than a million dollars. The most common altcoins are Ethereum, Litecoin, Novacoin, Peercoin, Namecoin.
According to CoinMarketCap, altcoins accounted for over 40% of the total cryptocurrency market in March 2021. The vast majority of alternative currencies come from the bitcoin source code, also known as "forks". Some are implemented from scratch based on the blockchain model, but without using the Bitcoin source code.
The first altcoin to appear as a bitcoin fork was IXCoin in August 2011. IXCoin changed some of the bitcoin parameters, specifically accelerating coin creation by increasing the reward to 96 coins per block. In September 2011, Tenebrix was launched, the first cryptocurrency to implement an alternative proof-of-work algorithm, namely scrypt. Tenebrix was the basis of Litecoin, which enjoyed great success and in turn generated hundreds of clones. As they evolved, several distinct categories emerged:
Most use Proof-of-Work (PoW), a method by which systems generate new coins to create blocks. Examples of other mining-based coins are Litecoin, Monero and Zcash. Most of the major currencies since the beginning of 2020 have fallen into this category.
Cryptocurrencies whose value is linked to that of another (active) instrument, thus guaranteeing stability. The goal of stablecoin is to create a less volatile digital currency. The most common stablecoin is Tether which is related to the USD exchange rate, so a stablecoin unit is equal to $ 1. There are also cryptocurrency-based stablecoins, or commodities such as silver or gold, but they do not comply with the 1: 1 hedging ratio due to price fluctuations. Other examples of stablecoins are USD Coin, Paxos Standard, TrueUSD, Dai, and Diem, backed by Facebook.
Security tokens are similar to securities (financial securities) traded on the stock markets, except that they have a digital origin, which is why they are commonly referred to as digital securities. These tokens are issued in the form of digital tokens.
Security tokens resemble traditional stocks and often promise equity, in the form of property (real estate, equity or any real-time assets), or a dividend payment to holders. The prospect of appreciating the price for such chips is a major attraction for investors to invest. Security tokens are offered to investors through Security Token Offering (STO).
Utility tokens are used to provide services within a blockchain network. They are used to purchase services or to capitalise on rewards. Many cryptocurrency trading platforms have launched their own cryptocurrency to help users reduce trading fees. Unlike security chips, utility chips do not pay dividends or shares with a property stake. Utility tokens are offered to investors through ICO (Initial Coin Offering).
Filecoin, which is used to purchase storage on a blockchain network, is an example of a utility token. ERC20 (ethereum) and TRC20 (throne) are the most preferred standards for creating utility tokens. Examples of utility tokens are Siacoin, Civic, Basic Attention Token, Golem.
In February 2014, there were over 12,000,000 bitcoins. At current prices, the cumulative value of Bitcoin coins issued (an indicator equivalent to market capitalization) exceeds $ 7 billion.  More and more companies are beginning to accept this cryptocurrency as a means of payment, in exchange for goods and services. Globally, in 2015, the number of traders accepting Bitcoin exceeded 100,000.
Services include e-commerce, hotels and properties, bars and restaurants, web / tech services, gambling and sports betting sites, advertising, etc. Many of them are online sites, but a large number of physical stores now support this cryptocurrency.
Big companies that accept Bitcoin payments include Microsoft, Dell, Newegg, Virgin Galactic, Overstock, Showroomprive, TigerDirect, BTCTrip.
The Bitcoin economy is still small compared to the savings established a long time ago and the program is still in the beta stage of development. But real goods and services, such as used cars and independent software development contracts, are now traded. Bitcoins are accepted for both online services and tangible goods. The Free Software Foundation and Singularity Institute, Electronic Frontier Foundation, Greenpeace, Mozilla Foundation, Wikimedia, University of Nicosia, accept donations in Bitcoin. Traders exchange various currencies such as US Dollars (USD), Russian Rubles (RUB) and Japanese Yen (JPY), etc. on Bitcoin but vice versa. These transactions take place through exchange sites. Anyone can see the blockchain and observe the transactions in real time. Various services facilitate such monitoring.
Monetary differences Compared to conventional currencies, Bitcoin differs in that there is no supervisor who can control the value, due to their decentralised nature, mitigating possible instabilities caused by central banks. Inflation is limited and controlled, programmed into the Bitcoin program, but it is predictable and known to all parties from the beginning. Therefore, inflation cannot be manipulated centrally to affect the redistribution of value from ordinary users. Instead of the incentive to create new bitcoins to record block transactions, nodes in this period are expected to depend on their ability to compete freely in the collection of transaction processing fees.
Transfers are facilitated directly without the help of a payment processor between nodes. These types of transactions make it impossible to cancel the transaction. The Bitcoin client transmits the transaction to nearby nodes which in turn propagates the transaction over the network. Corrupt or invalid transactions are rejected by honest nodes. Transactions are free, but a fee may be paid to other nodes to prioritise transaction processing.
The total number of bitcoins tends to be 21 million over time. The money supply increases like geometric series every 21,000 blocks (approximately every 4 years); by 2013, half of the total money supply will be generated, and by 2017, 3/4 will be generated. As this number approaches, the value of bitcoin will feel a period of price deflation (increase in the value of bitcoin) due to the lack of new introductions of money supply.
Bitcoin is, however, divisible to 8 decimal places (allowing 2.1 * 1015 total units), eliminating the practical limitations of downward price adjustment in a deflationary environment. Instead of relying on the incentive to create new bitcoins to record block transactions, nodes during this period are expected to depend on their ability to compete in collecting fees for processing transactions.
The alleged scenarios of bitcoin's failure include a currency devaluation, a declining number of users or a crackdown by the world government on the program. Succession to another cryptocurrency system is also possible if a new currency were created and considered more legitimate (for example, to be supported by a large technology company or institution). It may not be possible for all cryptocurrencies like bitcoin to be banned.
The decentralisation and anonymity embodied by bitcoin appear to be a reaction to the persecution of the U.S. government. of digital currencies like e-gold and Liberty Dollar. In an investigative article in the Irish Times, Danny O'Brien reports: "When I show people this bitcoin economy, they ask, 'Is it legal?' Is this a scam? ” I imagine there are lawyers and economists struggling to answer these questions. I think you will soon be able to add politicians to this list. "
A number of American states led by Delware and Arizona are preparing to do the same. Japan has recognised Bitcoin as an asset (accounting) and certain payments can be made, so there are over 20,000 businesses that accept payments in Bitcoin. Moreover, starting with April 2018, there are companies that have proposed to employees to be paid in Bitcoin, the government offering them the opportunity to use the term bitcoin in the payroll states.
As an investment
Winklevoss twins bought bitcoin. In 2013, The Washington Post reported that they owned 1% of all existing bitcoin at the time.
Other investment methods are bitcoin funds. The first regulated bitcoin fund was established in Jersey in July 2014 and approved by the Jersey Financial Services Commission.
Forbes named bitcoin the best investment of 2013. In 2014, Bloomberg named bitcoin one of the worst investments of the year. In 2015, bitcoin ranked first in Bloomberg's currency charts.
According to bitinfocharts.com, in 2017, there were 9,272 bitcoin wallets with bitcoins worth over $1 million. The exact number of bitcoin millionaires is uncertain, as a single person can have more than one bitcoin wallet.
In August 2020, MicroStrategy invested in Bitcoin.
In May 2021, the market share of Bitcoin on the stock exchanges decreased from 70% to 45%, as investors followed altcoins.
The evolution of the Bitcoin price against the US dollar
The evolution of the bitcoin exchange rate against the US dollar since January 2009, based on data provided by blockchain.info
From the first transactions in 2009, Bitcoin had a relatively stable evolution until 2011, the exchange rate against the US dollar rising from $ 0.30 for a Bitcoin (BTC) to about $ 17. In early 2011, a series of problems with dollar-denominated entities led to a rapid decline in the $ 5 / BTC exchange rate. The years 2011 and 2012 were periods of consolidation, the exchange rate varying quite a bit and reaching about $ 14 / BTC.
In 2013, the price of a Bitcoin exploded from $ 14 / BTC in January to an all-time high of over $ 1,000 between November and December 2013. An important role in this rise was played by the economic crisis in Cyprus that led to the blocking of depositors' accounts. from several banks. Another growth factor was the massive investment in infrastructure and the involvement of some Wall Street investors, among the most famous being the Winklevoss twins. If until 2013 the Bitcoin network was dominated by small “producers” of currency, the involvement of some companies and investors led the process of “mining” in the professional area, more and more powerful equipment being connected to the network.
The dramatic rise in the exchange rate against the dollar has attracted the attention of the authorities, in many states the Bitcoin currency is not recognised as a legal means of payment. In December, the announcement by the Central Bank of China to ban Bitcoin transactions marked the beginning of the decline of Bitcoin. The exchange rate has been steadily declining and has reached between $ 550 and $ 650 / BTC in a few months. At the end of March 2014, the Chinese government banned banks and payment processors from trading Bitcoin, with the price against the US dollar falling to about $ 400 / BTC.
There are arguments to support the idea that Bitcoin is a huge reliable experiment, "pump and dump", or worse, a Pyramid Game.
Countless scandals have taken place over time, from the bankruptcy of the largest exchange office (Mt. Gox) to the theft of 120,000 Bitcoins destroying the myth of security and transparency. Due to the exponentially increasing costs and need for "hardware" capabilities, a small number of "miners" control a significant number of transactions in the Bitcoin network.
Since its creation until 2017, the result has been a growing centralisation, with the largest "miners" controlling 75% of the network and the first two over 50%, destroying the myth for the time being. sustainability / decentralisation. In 2018 there was no change, but even more centralised. The myth of anonymity and the certainty that bitcoin cannot be confiscated has been "demolished" since the beginning, for example Ross Ulbricht, the "creator" of the Silk Road site, was sentenced to 6 years for drug trafficking, and even more so. 144,336 bitcoins were confiscated. Crypto-currency transactions are not anonymous and they (cryptocurrencies) can be confiscated by court order.
The myth of use in transactions. Due to the huge volatility (eg decreases / increases by hundreds / thousands of USD in 24 hours) and the concept of "Legal Tender", where the payment of financial obligations and debts are legally recognised / validated only in the currency issued by the central bank, Cryptocurrencies cannot be widely used in transactions, especially in micro-transactions below $ 20.
In Japan Bitcoin is not a "Legal Tender" but only the foundations have been laid for regulating "transactions" in cryptocurrencies where Bitcoin is considered an asset (accounting) with which certain payments can be made.
Like any other cryptocurrency, Bitcoin can be multiplied / competed by hundreds, thousands, tens of thousands of other currencies. There are currently over 1600 cryptocurrencies.
Bitcoin is trying to mimic gold. Unlike a binary code that exists on a hard drive, gold is a metal with an intrinsic value, universally accepted and used in transactions for thousands of years, anonymous, which can not be created out of nothing (such as fiat currency) and devalued by a centralised economic planning institution (central bank). The carbon dioxide production of Bitcoin miners exceeds that of New Zealand.
Bitcoin faucet (English: bitcoin faucet) are sites that offer rewards to users in the form of small fractions of bitcoin. These rewards are given at certain intervals for free. The first site, the Bitcoin Faucet, was operated by Gavin Andresen in 2010. Faucets exist for many types of cryptocurrencies, not just bitcoin.
Bitcoin faucets are like taps dripping cryptocurrency units instead of water. Users have to wait a while before they can collect the accumulated coins.
To accumulate these fractions of cryptocurrency, a bitcoin wallet address is required. The reward is credited immediately or in the form of a weekly wallet payment. Faucets have a minimum time interval between each visitor's reward requests. Its duration varies between 5 minutes and 24 hours, depending on each jaw.