What is Bitcoin? The Best Features of Bitcoin
On Aug 13, 2021
If you are wondering, “What is Bitcoin?” then you are at the right place. Throughout the article, you will get detailed and explained info about BTC.
As with any other story, the Bitcoin story has its reasons and motives. The creation of the peer-to-peer decentralized cryptocurrency emerged as a failure of the traditional financial system in 2008. The debt crisis arose with the mortgage problem in the USA, and it spilled over to the financial markets all over the world. The main bad actors are the people with the money craze. Debts ballooned, and it came to the moment that it could not go further than that. Something was not right with the financial system. That was the financial system without intermediaries.
What is Bitcoin?
Bitcoin is the first cryptocurrency created. The ideology and the work system of Bitcoin were written in detail in the well-known scientific article named – “Bitcoin: A Peer-to-Peer Electronic Cash System.” The idea of this cryptocurrency came from Satoshi Nakamoto – the supposed creator of this digital currency. The vision of Satoshi Nakamoto has changed the world ever since the creation of Bitcoin. There are some debates around Satoshi’s identity because no one knows the true story of this man.
People refer to Bitcoin as cryptocurrency, digital currency, or virtual currency since it is not physical. In other words, it cannot be touched or seen by the human eye. The unit of Bitcoin is called bitcoin. To honor Satoshi’s name, the smallest unit of Bitcoin (0.00000001) is named a “satoshi.” Any amount of Bitcoin can be bought at the exchanges. Buying Bitcoin in Dubai is pretty trending and Coinsfera exchange serves you to buy your first Bitcoin.
As its creator, Bitcoin is mysterious at first glance too. The abstract process of the Bitcoin network can be seen as dangerous for some people because they cannot grasp the working system of cryptocurrency. That’s why not all people are interested in it, and misunderstanding holds one of the innovative tools in the world back from wildly available in public. We will explore Bitcoin in detail in the following paragraphs. Also, if you want to get information about check our blockchain blog.
Peer-to-Peer Transaction on Bitcoin Blockchain
Transactions in Bitcoin blockchain occur in a peer-to-peer fashion. There is not a trusted third party to execute the transaction. Both parties have to act trustworthy to each other to finalize it successfully. Each individual owns a Bitcoin address, and the security of this address depends on individuals themselves. The security of the system is essential, and blockchain technology allows it to be safe and trustless.
Bitcoin miners write down the record of every transaction in their digital book. Those transactions are publicly available, and you can readily figure out which transactions occur and in which amount. However, it is not possible to find out who made those transactions unless they explicitly declare it. This kind of system is referred to as pseudo-anonymous, everything seems transparent, but still, you cannot determine the owners of those accounts.
Transactions are also irreversible, unlike PayPal or other digital payment systems. If you have sent bitcoin to the wrong address by mistake, then highly likely that you lost your bitcoin. Probably it is lost in the blockchain since the address is unknown. If you have sent more bitcoins than it should be, then you can ask the recipient to send the excess amount to your wallet. That’s why you should trust the person you work with to save yourself from additional troubles. To buy Bitcoin safe and secure in Dubai you can visit the Coinsfera exchange. Since 2017, Coinsfera operates in Dubai, Istanbul, Kosovo, and London serving crypto enthusiasts.
What is Bitcoin Mining?
Bitcoin mining is the process of validating the blocks of transactions and getting rewarded in return. It may sound complex at first, but we will try to explain it in simple words. Each transaction you make with Bitcoin is recorded to the digital books as known as the blockchain. Bitcoin blockchain, unlike Ethereum, is very simple and less functional. Only the transactions are recorded in the Bitcoin blockchain. Those transactions are grouped into blocks, and each block consists of approximately 4000 transactions.
As it is obvious from its name, blockchain is comprised of blocks of transactions linked to each other with some specific coding. The security of the blockchain is ensured by the nodes which are computers or some specific hardware that is designed for the Bitcoin blockchain.
If you get the intuition of the Bitcoin blockchain, then the mining process will be easier for you. In order to make it to the blockchain, each transaction and transaction block need to be validated, approved, or “mined.” The nodes of the blockchain are known as miners, play important role in validating the blocks. They solve a mathematical problem to earn the right to mine blocks. To earn the right to mine, they need to have high-quality hardware, which consumes a high amount of energy. If they solve this before anyone else, then get a chance to validate and get a reward in the form of bitcoins. This process is called Bitcoin mining, and you can get more information about bitcoin mining at our dedicated blog. Anyone can sell BTC fast in Dubai at Coinsfera if they get it from mining.
When things go decentralized, some actions need to be changed in order to be compliant with the system. Blockchain needs to adopt some rules for miners to mine and the overall system to work as a clock. Proof-of-work is the way to organize things in the Bitcoin blockchain.
The concept of proof-of-work has been proposed in 1992 by Dwork and Naor to prevent junk mails. This concept was developed further by Adam Back which was the creator of the Hashcash. Satoshi used this algorithm as the base for Bitcoin.
Here miners play an important role in recording transactions to the blockchain. They need to make cryptographic calculations to get the correct hash function for the block. To do so they have to have the computing power to come up with the solution first. For each new block of transactions, miners need to find the hash of the 3 codes: the hash code of the previous blockchain, the set of transactions in the block, and a nonce. SHA-256 is used as the hashing algorithm. Computers continue to calculate till the correct hash function. If the mining difficulty is high, then much energy will be consumed.
The number only used once, as known as the nonce, determines the mining difficulty. Nodes are calculating to find the right amount of nonce to get right to mine the block. This process filters out the weak nodes and only computers with high computing power get a chance to mine the block and get rewarded in return.
What is Bitcoin Hashrate?
Hashrate is the rate of the computational power that is needed in the mining process of Bitcoin. It is usually measured in computational power per second and basically is the speed of mining. In the case of Bitcoin, it measures how many SHA-256 are performed in second. The high hash rate is positively correlated with the security and endurance to attack.
What is Bitcoin Halving Event?
We have mentioned rewards that miners get when they validate or mine the blocks on the bitcoin blockchain. It is programmed that after every 210,000 blocks, which take ~4 years, the rewards will be divided into half. It will continue like that till all 21 million tokens are distributed. The process will end in 2140 when all bitcoins are in circulation. Halving events affects the price of Bitcoin since the emission rate of bitcoins decreases. This is simply the supply and demand rule.
The last halving event occurred in 2020 May, and the price sky-rocketed to $64,000 in 2021 April. Currently, the block reward for Bitcoin mining is 6.25 bitcoins. The next halving event will occur in 2024, and many crypto enthusiasts are waiting for that occasion.
What is Bitcoin Wallet?
Where do Bitcoin owners hold their rewards or bitcoin holdings? The Bitcoin wallets are the software or hardware wallets that are designed for safekeeping bitcoins by storing your private and public keys. The types of wallets are different: hot and cold wallets. Unlike cold wallet which is required to connect to the internet only during the transaction, hot wallets are the ones that stay connected to the network. That’s why hot wallets are more vulnerable to threats by hackers. You must be cautious about where you connect your wallet, otherwise you can lose your funds without getting a chance to ask for help. Coinsfera exchange can assist you to buy and sell Bitcoin securely in Dubai. Coinsfera can assist you to send and receive funds with your wallet safely.
What is Bitcoin Private Key?
A private key is a digital signature that is used to encrypt and decrypt the data. Bitcoin wallets store your private and public keys, which are required for sending and receiving bitcoins. Each bitcoin wallet consists of public and private keys. You must keep your private key secret to secure the funds you have. The only provision of both keys can finalize the transaction. For example, if you want to send funds, you need to know the public key of the recipient, and you need to sign the transaction with your private key. Only the private key of the relevant public can sign the transaction, without a private key it is not possible to send or receive funds. The public key is generated from the private key, so this makes it matched pair.
Given the bank manages all of these transactions, the bank is a centralized body to offer you banking services. However, Bitcoin has a network of computers that store your transaction history on all connected computers. If you have a computer operating as a node, then you can operate as a bitcoin node and record the ledgers by yourself. Decentralization is better from a safety standpoint too. If hackers want to hack the bank, they know where to begin, and they do it once. Bitcoin, on the other hand, consists of many nodes, and if you want to hack your accounts, they have to hack all those computers, and this is highly unlikely. Nodes are the computers connected to the network to share information and obey rules. These nodes are essential to run the cryptocurrency network.
Bitcoin does not have any entities that can support the currency during unfavorable times. On the other hand, The Federal Reserve regulates the USD. The FED decides what amount of money to inject and eject out of the economy. So, this process circumvents the sudden fluctuations and helps to regulate the price of the currency. It is a fact that the limit for Bitcoin is 21 million, and it is impossible to mine more bitcoins. Since it is not possible to produce more than 21 million BTC, then it is not possible to control the price of Bitcoin.
Bitcoin Core vs Bitcoin Cash
Bitcoin Core (BTC) is the core and first version of Bitcoin, which operates since 2009. Bitcoin Cash (BCH) is the modified version of the Bitcoin Core, which operates since August 2017. Bitcoin core reserves a block size of 1 MB per block. However, Bitcoin Cash proponents preferred large-size blocks, and they determined that size will be 8 MB, and it raised to 32 MB per block in a short period. Bitcoin Core proponents claimed that large blocks would be hard to validate, and it will take longer since not all nodes are ready to adopt such changes. However, the big blockers maintained that big blocks would be the solution for the high transaction fee during boom periods.
Becoming the Hot Topic in the Media
The initial paper introduced by Satoshi did not gather attention at first. The first major attraction to Bitcoin was in 2013 because transaction volume and market capitalization became eyeballing. Bitcoin hit its first high market value in late 2013. In December 2013, the market price was around 1,130$, and it was the highest since it has been around. In that period, market capitalization was 8.92 billion USD. In the last quarter of 2017, the price of bitcoin increased to appx. 19,100$, and market capitalization surged to 238 billion USD. It was highly unprecedented that bitcoin could get so much popularity. However, these were not its peak price.
The Bitcoin halving occurred in 2020, and following this, the price of bitcoin began to rise within a few months. The price of BTC was as low as $4,000, and it spiked up to $30,000 at the end of the year. The rally continued in 2021, and the price hit its all-time high of $64,804, according to Coin Gecko. The market capitalization of Bitcoin went above 1 trillion USD. This was remarkable for the cryptocurrencies sphere.
The latest events are highlighted on social media and all over the world. Twitter, Reddit was home to cryptocurrencies. Barely there was a day that Bitcoin was not trending on Twitter. Renowned people tweeted about Bitcoin, and many companies added bitcoin to their balance sheet, including Tesla, MicroStrategy. The inclusion of the bitcoin by the top companies made this first-page news at respected journals. If the decision of the big companies seems logical, then Coinsfera is the best place to buy Bitcoin (BTC) in Dubai for those who live in the UAE.
What is Bitcoin Price?
The price of Bitcoin is volatile and changes nonstop within 24 hours. For the easy understanding of the people, the value of Bitcoin is expressed in the USD amount. The price of Bitcoin peaked at $64,805 on 14th April 2021. It is important to know the price before buying Bitcoin (BTC) in Dubai. You can check out the price graph below to be informed about the real-time price change.
Bitcoin is considered the future of the financial system by many analysts. If the future is here then why not benefit from it. Ending this article with his own words of Satoshi Nakamoto would be better:
“In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I’m sure that in 20 years there will either be very large transaction volume or no volume.”
Disclaimer: All information provided in the content is for informational purposes only and should not perceive as investment, financial, or trading advice. Any investment decision you make should be a personal choice based on financial knowledge, experience, and market research.