Sunday, November 26, 2017

Evolution XXVIII

What is Bitcoin?

A Peer-to-Peer Electronic Cash System 

Bitcoin first of all is a network. We have Bitcoin as the network and Bitcoin as the currency. 

Bitcoin was created by a developer or a group of developers named Satoshi Nakamoto. Satoshi Nakamoto is a pseudonym and no one knows for sure who this person or group of people is. This makes the real identity of Satoshi completely irrelevant. Bitcoin was released as an open source project and the Bitcoin protocol invented by Satoshi is more of a blueprint than anything else. Satoshi Nakamoto has no control over the network.

Bitcoin is money for the internet, anyone in the world can open an account and start sending and receiving funds. The only thing you need in order to open an account is a computer or a mobile phone and an Internet connection. 

Bitcoin as a network works 24/7. Bitcoin it is completely decentralized and there isn't any government, nation controlling this network. No single entity controls Bitcoin. There is no central bank, no institution, organization or company that has total control of the network. That is why Bitcoin is completely decentralized. 

Bitcoin the currency is "discovered" by a process called mining, a reward for providing security and processing transactions into the ledger called blockchain, a chain of blocks where the amount of Bitcoins are registered into accounts.

The blockchain is a public database of all transactions that ever happened on the Bitcoin network. This database is constructed of blocks that are cryptographically linked together forming a chain. Each block contains a set of transactions during a period of time. A copy of this public database is distributed to everyone in the network.

"By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation."  - Satoshi Nakamoto White Paper page 4

The blockchain is blocks cryptographically linked together because if someone decides to cheat the network and claim that they have more Bitcoin than they actually have they would need to modify a transaction made in a previous block.
This would break the cryptographic link between the blocks in the blockchain and because everyone else has a copy of the blockchain everyone else would be able to detect this fraud because the cryptographic links would not match. 

The Bitcoin network is structured in such a way that you don't need to trust any other party in the Bitcoin network. It is impossible to cheat about the number of Bitcoin you have, you can't forge a transaction and isn't possible for anyone to take your Bitcoin from you, as longer you control your private key, that is why you should always use a hardware wallet to prevent you being hacked.

Bitcoin is a peer-to-peer (P2P) technology without any central bank, server, institution, government or company managing it. If you’ve ever heard of torrent technology this is similar in the way that there is no single point of failure. The Bitcoin protocol and software coordinate the entire network using miners.

A miner is a book keeper of the system . These miners process and put transactions into blocks. Mining Bitcoin involves solving computationally difficult cryptographic puzzles. The miner that manages to solve the puzzle gets rewarded in Bitcoin.

When a transaction is propagated through the network and reaches a miner, the miner checks that the transaction actually is valid. Theoretically a miner could validate non-valid transactions but other miners would quickly notice that and the malicious miner wouldn’t be able to claim the mining reward.
This way miners are incentivized to perform their job correctly. Today different companies are building data centers in order to profit from Bitcoin mining. You can also mine several cryptocurrencies using your computer, you will use your computer power and depending of the performance of your components like CPU and GPU you will be rewarded.

Why should I research more about Bitcoin, Altcoins, Tokens and cryptocurrencies? 

Well there is no simple and direct answer to that question but like in every evolving process that takes time and takes true efforts, it is always worth it.

Start earning Bitcoin by mining cryptocurrencies ---> Minergate

Do you want to buy Bitcoin? ( In-person / Cash exchange ) ---> LocalBitcoins

Cryptocurrency exchange ---> Hitbtc

Do you need a safe place ( hardware wallet ) to store your coins? ---> Ledger

Like always have a great week and make something amazing!

Your friend,