Bitcoin network — How it revolutionized tech and financial industries?

Today, Bitcoin is a symbol of pop culture. Some investors calls it a digital gold, others are super fascinated with grow of value in FIAT. Some of them see opportunities to use it while fighting with government’s policy of ruling money.

There are also people who hates it and celebrate every crash on the market. However, it does not change the fact, that Bitcoin is known all around the world.

Have you ever wondered how bitcoin network works? Why there are halvings? Why it is the first currency which can be named digital gold? How it happened that it is anti-inflation financial instrument?

Answers for these questions and many more… you will find in this material

Agenda:

• Intro,
• Definition,
• History,
• How it works,
• Proof of work,
• Halving,
• Anti inflation asset,
• Conclusion.

Definition

Bitcoin is a decentralized digital currency, which allows to secure transferring of financial assets through entire ecosystem, distracted all around the world.

Bitcoin is decentralized, because is basing on blockchain, not like centralized assets in some kind of databases, which are administered by someone.

If you want to know more about blockchain, and why it allows to decentralization, read my latest tweet:

History

Bitcoin’s beginnings comes from 2008, when an anonymous programmer, Satoshi Nakamoto created 9 pages document outlining decentralized digital currency — Bitcoin. This document is called Bitcoin’s whitepaper.

More about whitepapers in my other day of a challenge:

Bitcoin was launched in 2009, changing market totally. First real shopping with bitcoin was proceeded in 2010, some man bought two pizzas, which were worth 25 usd, with 10 000 bitcoins. It set the price of bitcoin to 0,0025 usd.

The rest is history, through many ups and downs, bitcoin reached first 100 usd, then 1000 usd, 10 000 usd and is waiting to 100 000 usd. Some of investors even say that it will be worth one million dollar. Who knows, this article is not about investing, but a technology hidden behind this revolutionary technology.

How it works

Bitcoin working is pretty good described in my latest tweets, so let’s set it in the correct hierarchy.

As we know how blockchain works, we can go to the part about transferring holdings.

Blockchain allows to have a peer-to-peer network. It means that no middleman is needed, like in traditional financial system. Bitcoin is transferred from “user A” to “user B” without letting know or requesting permission from some kind of institution.

Each transaction requires mining block, which is added to the chain. These operation I described in the previous materials:

Proof of work

Bitcoin network uses proof of work consensus model, what means that miners have to do some work to add new transaction. By work it is meant to solve hash function. It is described in my latest material:

Halving

From above section, it is known that miners are gratified with bitcoins for mining each block. However, the reward is constantly decreasing. It started with 50 BTC reward for block, each 4 years (210k blocks) is reduced by 50%. It led to 25 BTC in 2012, 12,5 BTC in 2016 and 6,25 BTC in 2020.

Anti-inflation asset

When delivery of every currency is increasing, bitcoins amount in network is going to stop at 21 millions. The last bitcoin will be mined in 2140, but all 20 millions will be in circulation till 2025.

Moreover, a lot of bitcoins are lost in wallets, because of invalid passwords. Technically, this amount of available coins is a lot less. It makes this technology, anti inflationary.

Conclusion

Bitcoin network is a huge revolution. It changed the financial and technical industries dramatically. Amount of bitcoins which has an inflation rate less than gold, make it a rare asset.

This asset is also so easy to store, it even does not require special tool. Private key of the wallet can be remembered by human with a little help of seed phrase. More about wallets in my other material:

If you like my web3 content, make sure you start my repo on GitHub, which consists all days from a challenge, and soon also projects like

Blockchain with Typescript

https://github.com/Kacper-Hernacki/100-days-of-web3-challenge-blockchain-free-materials