The Ultimate Guide To The King Crypto- Bitcoin

When you hear of Cryptocurrency, you think of Bitcoin, right?

Well, it is just because Bitcoin is continuing to gain mainstream popularity and is constantly discussed on the internet. But that does not mean that everyone knows what it is.

2022 survey shows that out of 320+ million global crypto users, there are about 106 million people who simply own bitcoin.

In the past, Bitcoin has encouraged thousands of different kinds of cryptocurrency based on its foundational technology. Most people don’t know the nature of the technology upon which Bitcoin is based & that is “Blockchain”.

Few people strongly believe and endorse the idea that Bitcoin and other digital currencies are the future for open-minded economies. However, some oppose the notion of describing Bitcoin as being a virtual object of unknown value.

This guide will provide you with an in-depth concept of Bitcoin, in an easy-to-understand way. You can better decide whether “Bitcoin is a Blessing or Curse” to the digit payment networking system. 

What is Bitcoin?

Bitcoin (BTC) is a form of digital cash that eliminates the need for central authorities such as banks, financial institutions, or governments. Ideally, it utilizes a Peer-to-Peer (P2P) network to ensure that the transaction is done successfully between two users.

Unlike traditional transactions, there is no need to have an account number, name, or other identifying features that link Bitcoins with their owner. Anyone can purchase or sell anything they want without getting traced to the person who bought it.

Okay,

To understand more in-depth about Bitcoin, it is more important to be aware of the technology behind it, why it was created & how bitcoin works, and its scope. Let’s dive deep into it to understand its working process of it.

Why was Bitcoin Created?

Eventually, the central economy is governed by the rules of the government and requires the citizens to be able to trust the central bank. The principal goal of the crypto-currency, which was decentralized, was to create an environment that would operate independently of central control.

Bitcoin is a digital currency that can be traded between two parties without the need for intermediaries such as banks and other financial institutions

Consider, you want to transfer money to your friend’s bank account. In the end, you are charged many charges, like fees for conversion of currencies as well as bank service charges and transaction or deposit fees to payment gateways such as PayPal, Payoneer, Stripe, etc. 

How else could these companies and financial institutions make money, by charging huge fees to users, like us? 

Don’t you think?

But, Bitcoin, on the other hand, can be transferred in a digital format, directly and completely anonymously. It puts control back in the hands of purchasers and sellers. These factors are thought to be the main reason for the creation of digital currency.

It also reduces charges that are not needed and makes it simple to transfer bitcoin money around the world.

Who was the Founder Of Bitcoin?

It’s not a coincidence that Bitcoin was created in one of the most chaotic financial markets in U.S. history. In the period of global financial trouble from 2007-2009, the lack of trust in the central government was at its highest.

Bitcoin was created in 2009 by a person or group of people using the name Satoshi Nakamoto, the name which appeared on the original 2008 Bitcoin white paper, which first described the blockchain system that would serve as the backbone of the entire cryptocurrency market. 

In the past years, numerous people have step-up by claiming to be the true Satoshi Nakamoto, however, no one has provided enough evidence to back their claims. 

The Bitcoin blockchain was created when the first Bitcoin block, called the Genesis block, was made in January. 3, 2009. In the first seven months following Bitcoin’s launch, Satoshi reportedly mined up to 1.1 million Bitcoins when the code was made open-source. 

 By August 2022 the prices of those 1.1 million coins would now be worth about $22 billion.

Wooh, Interesting…

But, what’s the technology on which this bitcoin operates?

What is the technology that drives Bitcoin?

More simply, the technology that underlies Bitcoin is known as blockchain technology.

Blockchains are unchangeable digital ledgers that keep records or transactions across multiple locations within a network of computers.

• The goal of blockchain technology is to demonstrate that transactions on the network are secure and to prevent duplicate spending on bitcoins.
• There are other applications for blockchain technology that could be used in a variety of other sectors and industries including the real estate industry to facilitate fractional ownership of property and the energy industry to facilitate peer-to-peer energy trading.
• Blockchain technology has opened up the possibility of a new generation of revolutionary initiatives that aim to revolutionize the way the world functions and works.

I’m sure until now, you might have got an idea about Bitcoin & how, when, & who created bitcoin. And even what technology drives bitcoin.

Now, it’s time to understand the working process through which the bitcoin transaction takes place.

How does Bitcoin Work?

A Bitcoin wallet functions similarly to a bank account, for storing funds as well as allowing one to exchange transactions through other accounts (called addresses) within the peer-to-peer system. These addresses permit funds to be transferred from one account to another.

Wait a minute!!!

What’s this Peer-to-Peer Network?

A peer-to-peer (P2P) system is formed when two or more computers are linked and share resources without needing to go through the server computer. 

• A P2P network may be an ad-hoc connection, a pair of computers that are connected through the Universal Serial Bus to transfer files.
•  A P2P network could also be a continuous infrastructure that connects a few computers in a small office via copper wires. 
• A P2P network can also be an internet-connected network that is on a larger scale, where special protocols and programs establish direct connections between users via the Internet.

Transaction Process of Bitcoin with an Example

To understand the working of Bitcoin, let’s take the example of bitcoin transactions happening between users, i.e. (Jack & Rose).

Jack is looking to transfer 1 BTC to Rose. 

To accomplish this transaction, Jack makes use of his private key to sign a message with specific details of the transaction. The sign message, which is required to be sent on the network, will include the following information (Input, Output & Amount details) 

Input:- This includes the information related to the bitcoin which was previously received in Jack’s account. Consider that Jack has formerly been receiving 0.7 BTC from Riz and 0.7 BTC from Alex. 

Now, to transmit 1 BTC to Rose it could require 1 BTC in his account, i.e. in (bitcoin wallet).

 But, how much BTC does he have now?

Well, 0.7 BTC previously from Riz and the other output of 0.7 BTC previously from Alex. Calculatedly Jack has, [ 0.7+0.7 = 1.4 BTC] in his wallet.

Amount:- In this case, the amount Jack would like to transfer is 1 BTC.

Outputs:-

 1:-  Jack through (his BTC wallet ) will transmit his proposed payment to the Bitcoin network. 

2:- A particular group of people within the Bitcoin network, referred to as “miners”, confirm that the keys of Jack can access the inputs (i.e. the address from which he received his bitcoin previously).

3:- The transaction record is then broadcast to all P2P (Peer to Peer network) participating computers on the particular blockchain network informing them that the number of Bitcoins in the account Jack should decrease by 1 BTC and the total amount in the Rose account should rise by 1 BTC.

4:- And later on each computer within the network will be notified and then apply the transaction record to their ledger copy and update the balances of the account. 

5:- Hence with these successful transaction data, a new block is then added to an existing chain and is not able to be altered in any way.

And in this way, a successful transaction will take place, which ensures the security, transparency, & reliability of money.

This may sound complicated, but it is designed to increase efficiency. The best part is that understanding the details behind Bitcoin transactions isn’t necessary to transfer or receive bitcoin. 

“The Bitcoin Wallet handles that!”

In contrast to traditional banking systems, Bitcoin is one of the most secure & reliable systems. The Bitcoin system is secure enough that it could require billions of years to break into a single Bitcoin address.

How Bitcoins Are Created?

Bitcoin mining is the simple process that runs the bitcoin network and a way to bring newly mined coins into existence.

Bitcoins aren’t printed as paper money, as to mine a new bitcoin, Bitcoin miners are expected to solve extremely difficult math issues that validate transactions made in the currency, i.e. (Bitcoin). The primary goal of mining is to validate and monitor Bitcoin transactions to ensure their legitimacy. 

Understand what is bitcoin mining and how it works.

If a miner manages to successfully solve those difficult mathematical problems on a blockchain, then they’ll be awarded 6.25 bitcoins in reward. In October 2022, Bitcoin traded at around $20,000. In today’s time, the value of 6.25 bitcoins is around $125,000.

Eventually, the difficulty of mining bitcoin increases with increasing numbers of miners signing up for the system. Because the mining of bitcoin is getting faster these days, the process of bitcoin halving is taking place rapidly. 

Wait, Wait, Wait!!!

Bitcoin Halving, What’s that?

Bitcoin halving affects its market value, as the fewer mined bitcoins are released into the network, the higher the price of bitcoin will go. 

Okay, 

Wait, let me help you understand these in brief, about bitcoin halving & the process of halving & why it takes place.

Detailed Concept behind the Bitcoin Halving Process

Bitcoin Halving is an occasion that occurs when the profit of mining blocks of Bitcoin is reduced after every 2 million blocks (around the time 4 months) until the limit of 21 million blocks is reached. 

Because Bitcoin’s supply is limited, it is expected to see a rise in the demand for Bitcoin after each halving. Actually, this is Bitcoin’s method of imposing a fake price until the bitcoins are all released.

This BTC mining reward system will run until the year 2140 at which point the planned limitation of 21 million bitcoin is reached. After that miners will be compensated by fees that network users pay to process transactions. The fees will guarantee that miners will be motivated to continue mining and keep the network running.

Bitcoin Halving Date

Let’s consider an example of Gold Mining:- 

Consider that the quantity of gold that was mined from the Earth was reduced by four times every 4 years. If gold’s prices are decided by its limited supply, the reduction (halving) of gold production every four years could indirectly increase the price of gold.

Similarly, the total bitcoin supply has reached 21 million. In late October 2022, there were around 19.17 million bitcoins in circulation, with about 1.8 million that are left to be released as mining rewards.

Bitcoin Events – The Timeline of Bitcoin’s Growth from 2008 until 2022

Bitcoin is a cryptocurrency with a longer track record when compared to other currencies although it’s at a relatively early stage when compared to the 200+ year time span that is the U.S. stock market.

Here’s a brief overview of bitcoin’s past that is filled with the same ups and downs as well as big swings we experienced throughout 2022.

2021 – El Salvador Became First Country to Accept BTC

On 20th September 2021, El Salvador became the first country to accept bitcoin as a legal currency & use it as a currency along with the US dollar.

In June 2021, Taproot’s update to the software for its network was approved. It added the ability to support Signatures of Schnorr and improved functionality of smart contracts as well as Lightning Network.

In February 2021, the Swiss Zug accepted tax payments made in bitcoin and other cryptocurrencies.

 2019 – BIPs Came into Existence

The two Bitcoin Improvement Protocols (BIPs) were proposed in the same year, to tackle one of the most pressing Bitcoin concerns, i.e. Security.

2018 – Born OF Bitcoin SV

On the 15th of November, 2018, the second Bitcoin Satoshi Vision (SV) fork took place in block 5576766. But for every Bitcoin Cash (BCH), the owner received one Bitcoin SV (BSV).

2017 –  Creation of  Bitcoin Cash

The first fork that was hard to split bitcoin took place on August 1, 2017, resulting in the creation of Bitcoin Cash.

It is interesting to note that Taproot is the most significant improvement to Bitcoin’s network since its Segregated Witness (SegWit) was upgraded in July 2017, which addressed scaling issues. 

The taproot will improve numerous aspects of the network, including privacy, efficiency, and cost-effective smart contracts and functions.

2016 – Upgradation in Speed of BTC Processing

The first time ever the bitcoin network reached one Exa Hash/s, which is roughly 10.8 ZettaFLOPS per second, according to bitcoinwatch.com’s aggregate metrics. 

This is approximately 3 lakh times more powerful than the world’s most powerful supercomputer.

 2015 – First  Ever Purchase Of Art using Bitcoin

In 2015, when the MAK (Museum of Arts and Applied Sciences, Vienna) bought van den Dorpel’s screen-saver 2015 and became the first museum in the world to purchase art using Bitcoin.

A plan to add code points to the Bitcoin symbol was submitted to the Unicode Consortium in October 2015.

2014 – Expanding blockSize of 1Mb up to 8Mb

“Bitcoin XT was one of the first significant hard forks.” 

The program was created by Mike Hearn in the latter part of 2014, in order to add some new features that he had suggested. 

While the prior version of bitcoin was able to handle as many as seven transactions in a second. Bitcoin XT aimed for 24 transactions per second, however, to accomplish this, the Bitcoin XT team proposed increasing blocks’ size by 1 megabyte up to 8 megabytes.

2013 – Bitcoin Version 0.8.0

On the 15th of May, a deadline was given for bitcoin miners along with the bitcoin merchant to update bitcoin client 

The reason for the deadline was, that bitcoin users were running the most recent version of bitcoin’s client version 0.8.0 and that unfortunately generated a huge block that was “incompatible with earlier versions.”  

Due to that, two blockchains with different protocols were created which could compromise the integrity of bitcoin’s network.

The reason to upgrade comes from the “hard fork” that occurred in the bitcoin blockchain on the 11th of March.

2012 – Establishment of the Bitcoin Foundation 

Bitcoin Foundation was founded in September 2012 to help accelerate the global growth of bitcoin via the protection, promotion, and standardization of the open-source Bitcoin protocol.

BitPay announced it was launching in October and that the payment processing service has more than 1,000 merchants who accept bitcoin. Additionally, WordPress began accepting bitcoins in November 2012.

2010 –  Bitcoin Pizza Day

On May 22 in 2010, the first retail transaction that involved tangible commodities was concluded by trading 10,000 of mined BTC in exchange for pizzas at a pizza place in Florida and named the day Bitcoin Pizza Day. 

Slush; The first mining pool produced Bitcoin in a successful manner for the first time this year. Mining pools are places where many miners pool their resources to create Bitcoin.

Blockchain experts estimate that Nakamoto had mined more than 100,000 bitcoin, before disappearing in 2010, when he turned the network alert key as well as management of the repository for code to Gavin Andresen.

2009 – The first P2P Bitcoin transaction

Just a few days into 2009, the first-ever block of Bitcoins, known as the Genesis Block, was mined. By Jan. 9, the first iteration of Bitcoin software was released, and on Jan.

In the first P2P Bitcoin transaction, Satoshi Nakamoto transfers 10 Bitcoins to Hal Finney, a computer scientist who was one of the early users of Bitcoin and was the first to post a tweet on Bitcoin.

2008 – Beginning of Bitcoin

The first time it was introduced in 2008, Bitcoin was the first cryptocurrency to use peer-to-peer electronic networks and was designed initially to be a decentralized and transparent asset. 

Bitcoin creator Satoshi Nakamoto, in his whitepaper, suggested that Bitcoin should not be controlled by any particular government.

How Bitcoin Wallets Function?

Bitcoin wallets store a user’s keys, allowing them to accept bitcoin, make transactions, and view their balance. The keys for public and private keys kept in a bitcoin wallet possess two distinct purposes;

For example, in case you wish to send an email to your friend, via email address to another email, though you & only your friend have access to that mail. It’s because it is protected by an encryption system that combines both private and public keys.

• Public Key:- A hashing of your public key creates a string of alphanumeric addresses that you provide to receive Bitcoin. 
• Private Key:- A private key can be described as a form of a password that permits users to sign off on transactions by digitally signing them.         

For example: –  You do credit card transactions to make the payment via adding your private key, i.e. (Credit Card Pin). However, this protects against any unauthorized access to your funds. It is not advisable to share your private keys, as it grants access to all the funds stored within your wallet. 

Eventually, Bitcoin functions similarly, however using different terminology and language. 

If someone loses their wallet or their bitcoin, they can utilize the mnemonic/hint word, also called a seed, to retrieve their wallet. Making sure that the private key and seeds are kept safe, is vital to protect against threats from both sides that could compromise users’ bitcoin.

Wallets Utilize both Public and Private Keys

• Key pairs of cryptographic encryption can be used to send or receive Bitcoin. 
• Key pairs consist of one secret key and a public key. 
• Private keys can be used to transfer bitcoin and should be kept confidential. 
• The public keys can be used to receive bitcoin and can be given to anyone. 
• Public keys can be derived directly from the private key.

Recent developments in Bitcoin

Bitcoin has received a major upgrade that lets its Blockchain process more complex transactions, possibly expanding the use cases for the virtual currency and increasing its competitiveness with Ethereum in the field of smart contract processing.

The enhancement is referred to as “Taproot”. Taproot was the very first upgrade of the Bitcoin protocol following SegWit was introduced in July of 2017.

Following the proposal of the developer of the core Gregory Maxwell in January 2018 and Taproot was accepted by miners across the globe in June 2021. The many reviews and testing sessions account for a long time between the proposal and its activation. On the 14^th of November, 2021 the change was made effective.

The update includes “Schnorr,” a new digital signature system that can enable Bitcoin transactions to be more secure and efficient. Schnorr could also allow Bitcoin users to create more complex smart contracts.

The Schnorr signatures can facilitate more complex Bitcoin transactions, for instance, transactions from wallets that require multiple signatures. These transactions appear to be normal. Transactions become more secure and secure because of this.

Three Bitcoin Improvement Proposals BIPs, also known as Bitcoin Improvement Proposals, are part of the upgrade which aims to make the Bitcoin network more secure, private, and expandable.

This means that Bitcoin transactions are more efficient by maximizing the capacity of blocks, resulting in a lower cost of transactions.

Global Laws & Acceptance Approach toward Bitcoin

As cryptocurrency has grown to become an increasingly significant element in the global financial landscape and has been a subject of debate, different countries have adopted different ways of regulating the class of assets. While it isn’t easy to establish a similar legal system at a global level. 

To know more in-depth about cryptocurrency regulation,Coinpedia has a detailed article, to help you understand the different aspects & various stands of countries on Cryptocurrency.

Conclusion

Bitcoin is bringing about an era of a technological and financial revolution that allows anyone to hold onto their own money and decrease the use of that middleman transaction systems as well as costly intermediaries. Since the invention of blockchain technology, it has led to several other cryptocurrency-related projects that have come up to fulfill various demands.

Many of them are eventually made by altering some of the Bitcoin Core codebase, such as Bitcoin Cash (BCH). Ultimately all crypto projects owe it to Bitcoin to be the catalyst for the cryptocurrency revolution.

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