What Is Bitcoin?

Bitcoin was created by a Cypherpunk under the pseudonym "Satoshi Nakamoto" and it is the first and largest blockchain.

Bitcoin is a simple ledger with accounts and balances which accepts new transactions to move balances from account to account.

One of the critical security points of Bitcoin is that is does full transmission and full replication of every single transaction to all the 50,000 to 100,000 machines that participate in the peer-to-peer network. This means that all the data and information from all the accounts, balances, and transactions is copied identically across all the nodes of the network. These nodes are located in many countries, on all continents, and even space!

the Bitcoin network includes new transactions into the network by producing blocks of transactions every 10 minutes that are connected in a chain of blocks since inception. This is why it is called a "blockchain".

Each block is created by a subset of all the machines in the network that are called "miners". The term "miners" is just an analogy to gold mining in the real world since Bitcoin is considered "digital gold". To build each block, miners do a lot of work and spend a lot of electricity in order to create a cryptographic hash, also known as a cryptographic stamp. When they create each block, they immediately send it to the rest of the network for verification.

When the non-miner machines, or "verifiers", receive and check that the block is well formed and built with a lot of work, they pay the miner who built it a reward in Bitcoin or BTC into their account. Since inception, miners have been paid per block a decreasing amount of BTC every 10 minutes that was 50 BTC in the first 210,000 blocks, or 4 years. Then, it went down by 1/2 to 25 BTC, then 12.50 BTC, then 6.25 BTC, and so on into the future every 4 years. Because this schedule is 50% less or 1/2 every 210,000 block period, this discount every 4 years is called "the having".

This schedule will go to 0 in about the year 2130 and the total amount of Bitcoin that will ever exist will be 21,000,000.

The process that the miners use to build blocks by creating a very costly cryptographic stamp per block is called "Proof of Work".

Proof of work has 5 great benefits:

  1. The cost of creating blocks is equal to the cost of creating the currency.
  2. It enables global consensus between all computers.
  3. It is a safe focal point for entry, exit, and reentry to the network by anyone with no permission.
  4. It provides protection for new incoming transactions.
  5. It provides protection for all the history of transactions since inception.

The whole process of the Bitcoin network is called "Nakamoto Consensus" in honor of its creator. This process includes, as mentioned above:

  1. Full transmission
  2. Full replication
  3. Proof of Work
  4. Block production
  5. Fixed supply of 21,000,000 BTC

What does Bitcoin accomplish?

All the components of the Bitcoin network guarantee the following features:

  1. Decentralization and a high level of security.
  2. Bitcoin can survive a nuclear war.
  3. Bitcoin is hard money.