What is Bitcoin and how to work with it?

Bitcoin

Today we have a new post about “What is Bitcoin and how to work with it?” and we will tell you:

What Bitcoin is and when and where came from,

How it works? Where to buy? And where to store it?

Bitcoin coin

What is Bitcoin?

Bitcoin is the first and most widely recognized cryptocurrency.

It enables peer-to-peer exchange of value in the digital realm through the use of a decentralized protocol, cryptography, and a mechanism to achieve global consensus on the state of a periodically updated public transaction ledger called a ‘blockchain
Bitcoin’s origin, early growth, and evolution
BTC is based on the ideas laid out in a 2008 whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System.

The paper detailed methods for “allowing any two willing parties to transact directly with each other without the need for a trusted third party”.

The technologies deployed solved the ‘double spend’ problem, enabling scarcity in the digital environment for the first time.

The listed author of the paper is Satoshi Nakamoto, a presumed pseudonym for a person or group whose true identity remains a mystery.

Nakamoto released the first open-source Bitcoin software client on January 9th, 2009, and anyone who installed the client could begin using Bitcoin.

The initial growth of the Bitcoin network was driven primarily by its utility as a novel method for transacting value in the digital world.

Early proponents were, by and large, ‘cypherpunks’ – individuals who advocated the use of strong cryptography and privacy-enhancing technologies as a route to social and political change.

However, speculation as to the future value of Bitcoin soon became a significant driver of adoption.

 

What is Bitcoin (BTC)?

In August 2008, the domain name Bitcoin.org was registered.

Today, at least, this domain is WhoisGuard Protected,

meaning the identity of the person who registered it is not public information.
In October 2008, a person or group using the false name Satoshi Nakamoto announced the Cryptography Mailing List at metzdowd.com:

“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

This now-famous white paper published on Bitcoin.org, entitled “Bitcoin: A Peer-to-Peer Electronic Cash System,” would become the Magna Carta for how Btc operates today.
On Jan. 3, 2009, the first Bitcoin block was mined—Block 0.

This is also known as the “genesis block” and contains the text:

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,”

perhaps proof that the block was mined on or after that date, and maybe also as relevant political commentary.
BTC rewards are halved every 210,000 blocks.

For example, the block reward was 50 new btc in 2009.

On May 11, 2020, the third halving occurred, bringing the reward for each block discovery down to 6.25 bitcoins.
One bitcoin is divisible to eight decimal places (100 millionths of one bitcoin), and this smallest unit is referred to as a satoshi.

If necessary, and if the participating miners accept the change, BTC could eventually be made divisible to even more decimal places.
Bitcoin, as a form of digital currency, isn’t too complicated to understand.

For example, if you own a btc , you can use your cryptocurrency wallet to send smaller portions of that btc as payment for goods or services.

However, it becomes very complex when you try to understand how it works.

 

What is bitcoin mining?

Bitcoin mining is the process of adding new transactions to the Bitcoin blockchain.

It’s a tough job. People who choose to mine Bitcoin use proof of work, deploying computers in a race to solve mathematical puzzles that verify transactions.

What is proof-of-work(PoW)?

Computers in the Btc network use a process called (PoW) to validate transactions and secure the network.

Proof-of-work is the Btc blockchain’s “consensus mechanism.”
While PoW was the first and is generally the most common type of consensus mechanism for cryptocurrencies that run on blockchains,

there are others — most notably proof-of-stake (PoS), which tends to consume less overall computing power (and therefore less energy).
Pow elevates certain network contributors to the role of “validators” – commonly known as “miners” – only after they have proven their commitment to the network by dedicating an immense amount of computing power to discovering new blocks — a process that typically takes 10 minutes.
When a new block is discovered, the successful miner who found it through the mining process gets to fill it with 1 megabyte’s worth of validated transactions. This new block is then added to the chain and everyone’s copy of the ledger is updated to reflect the new data.

In exchange for their efforts, the miner is allowed to keep any fees attached to the transactions they add,

plus they’re given an amount of newly minted btc .

Bitcoin mining

What is block reward:

The new bitcoin created and handed to successful miners is known as a “block reward.”
All Bitcoin users have to pay a network fee each time they send a transaction (usually based on the size of it) before the payment can be queued for validation.

Think of it like buying a stamp to post a letter.
The goal when adding a transaction fee is to match or exceed the average fee paid by other network participants so your transaction is processed on time.

Miners have to cover their own electricity and maintenance costs when running their machines all day to validate the bitcoin network,

so they prioritize transactions with the highest fees attached to make the most money possible when filling new blocks.
You can view the average fees on the Bitcoin mempool,

which can be likened to a waiting room where unconfirmed transactions are held until they are selected and added to the blockchain by miners

Blockchain

Is bitcoin a currency?

There are several currencies in this world used for trading amenities. Rupee, Dollar, Pound Euro, and Yen are some of them.

These are printed currencies and coins and you might be having one of these in your wallet.

But bitcoin is a currency you can not touch, you can not see but you can efficiently use it to trade amenities.

How to Buy Bitcoin?

Most people buy btc via cryptocurrency exchanges. Exchanges allow you to buy, sell and hold cryptocurrency.

Setting up an account is similar to opening a brokerage account—you’ll need to verify your identity and provide some funding source, such as a bank account or debit card.

Major exchanges include Coinbase, Kraken, and Gemini. You can also buy Bitcoin at an online broker like Robinhood.

Regardless of where you buy your Bitcoin, you’ll need a Bitcoin wallet in which to store it.

This might be called a “hot wallet” or a “cold wallet.”

A hot wallet (also called an online wallet) is held by an exchange or a provider in the cloud.

Providers of online wallets include Exodus, Electrum, and Mycelium.

A cold wallet (or mobile wallet) is an offline device used to store btc and is not connected to the Internet.

Some mobile wallet options include Trezor and Ledger.

A few important notes about buying Bitcoin: While Bitcoin is expensive,

you can purchase fractional Bitcoin from some vendors. You’ll also need to look out for fees,

which are generally small percentages of your crypto transaction amount but can add up on small-dollar purchases.

Finally, btc purchases are not instantaneous like many other equity purchases.

Because miners must verify Bitcoin transactions, it may take you at least 10 to 20 minutes to see your Bitcoin purchase in your account.

 

What is a bitcoin wallet?

A bitcoin wallet is a software program that runs on a computer or a dedicated device that provides the functionality required to secure,

send and receive btc. Counterintuitively,

the btc itself is not stored in a wallet.

So why you need a wallet?

Instead, the wallet secures the cryptographic keys that prove the ownership of a specific amount of btc on the btc network.
Anytime a bitcoin transaction is executed, ownership of the bitcoin transfers from the sender to the recipient,

with the network designating the recipient’s keys as the new “password” for accessing the bitcoin.
btc uses a system called public-key cryptography (PKC) to preserve the integrity of its blockchain.

Originally used to encrypt and decrypt messages, PKC is now commonly used on blockchains to secure transactions.

This system allows only individuals with the right set of keys to access specific coins.
There are two types of keys required to own and execute bitcoin transactions: A private key and a public key.

Both keys are strings of randomly generated alphanumeric characters used to encrypt and decrypt transactions.

On the bitcoin network,

PKC implements one-way mathematical functions that are easy to solve in one way and almost impossible to reverse.
The blockchain uses a one-way mathematical algorithm to create a public key from the private key.

keeping bitcoin

Safety note*:

With this, it is practically impossible to regenerate the private key from the public key,

meaning you’d better not lose your keys (or forget your password to access them).

Also, you will receive a public address, which is simply the hashed or shorter form of your public key.
This address functions similarly to a house address and is shared to receive btc.

Also, the private key must be kept hidden from prying eyes, just as your debit card’s PIN is meant for your eyes alone.
To execute transactions,

you are required to use your private key and public key to encrypt and sign your btc transactions.

Also, you have to include the public address of the recipient.

With this, only the recipient with the right private key can unlock or claim the transferred bitcoin.

sources of this post:

netkafe.epizy.com

bitcoin.com

investopedia.com

forbes.com

coindesk.com

 

Also read this post:

Crypto Basics: What is cryptocurrency?

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