Bitcoin

WHAT IS BITCOIN?

There are over 5000 different types of cryptocurrency in circulation, but all have come into existence thanks to the emergence and pioneering role of Bitcoin in the late 2000s. Here is a short list of some of the most widely used and popular cryptocurrencies in circulation today.

FunctionCurrency – Bitcoin (₿)
Ledger born3/1/09
Timestamping schemeProof-of-Work
Block reward₿12.5
Block completion time ave10 minutes
Circulating supply18,355,100 (1/5/20)
Supply limit21,000,000

Bitcoin is the original cryptocurrency, programmed by an unknown entity called Satoshi Nakamoto. 

This programmer or group of programmers signed off on a white paper announcing Bitcoin to the world outlining how it can end third-party requirements to make digital money transfers, and the attached costs and restrictions incurred by these banks and financial institutions.

Bitcoin made this possible for the first time, solving the problem plaguing digital currency developers for decades. Its developers found a way to verify fund transfers between two parties without having to involve a bank to oversee the process, solving what is known as the Double Spend Problem.

Blockchain technology is the fundamental factor in making Bitcoin work, and it provides the blueprint for most other cryptocurrencies on the market today.

The security provided by this technology and application on cryptocurrency was pioneered by Bitcoin giving the cryptocurrency world the tools to show that a secure, decentralised and publicly ledgered currency is possible.

The blockchain technology concept relies on a process of mining to verify transactions and adding blocks to the chain within a publicly accessed ledger.
This system is popular because of its network design and resulting security capabilities – the larger the network, the more secure it becomes.
While there are other processes and concepts for verifying all sorts of different cryptocurrencies today, this is the original PoW cryptocurrency function.

WHAT ELSE WAS REVOLUTIONARY ABOUT BITCOIN?

While this new concept of secure P2P transactions was revolutionary, Bitcoin added another layer of security and all but removed the risk of hacks by making all transactions available to see in a public ledger in a system called the distributed ledger technology (DLT).

Satoshi Nakamoto first proposed and developed Bitcoin to be a fixed asset, meaning that unlike fiat currency, which can be printed on demand, there will only ever be a finite peak total of 21 million Bitcoins available, or a supply limit.
But while Bitcoins are divisible, and therefore will always have growth potential, It is its status as the first decentralised global medium of exchange meaning Bitcoin will likely always attract interest.

supply limitsupply limitThe maximum number of a cryptocurrency’s coins or tokens that will ever be created for circulation.
Bitcoin’s decentralised model is the basis for its popularity and is in the DNA of all cryptocurrency that have followed. It means Bitcoin relies simply on supply and demand to determine its buying and selling price, which means no third-party can influence its value.

While its value is often volatile, Bitcoin holders are confident in knowing the currency’s system is stable and cannot be influenced by financial policies of countries, or the performance and policies of banks.

Bitcoins users also enjoy everyday benefits of using a borderless currency, offering comparatively cheap international transfers and no spending limits.
Operating with fiat currency between international borders happens under strict government control, whereas Bitcoin’s decentralised status means it is fast becoming the cryptocurrency of choice for exclusive use across borders.

WHAT IMPACT HAS BITCOIN MADE?

Bitcoin’s international status is encouraging the world to adjust to the cryptocurrency wave, which is making it more and more accessible and practical for everyday use. Some debit cards now offer an option to use Bitcoin as direct currency for regular transactions.

Visa and Mastercard are among several major credit card companies offering a cryptocurrency connection, enabling holders to use their Bitcoins like cash. Anywhere a Visa or Mastercard can be used for a transaction, so can Bitcoin.

Online retailers are also beginning to adopt Bitcoin as a form of payment. As cryptocurrency has become more popular, so has the need to adjust and develop the medium. Because Bitcoin is the original version of cryptocurrency, it also still has many of the same functions and capabilities fast becoming inefficient or redundant.
Bitcoin has adjusted its protocol several times since its inception to improve its functionality, albeit slightly.

2010s

One of the major issues of contention between Bitcoin users appeared as more users began using the network, and other cryptocurrencies began to emerge during the early 2010s.

While the original goal was to incorporate global use of the Bitcoin network, wider use was ironically making this desired function less viable as transfer times began to balloon.

Bitcoin was capable of around seven transactions per second, which is slow compared to the capabilities of most cryptocurrencies and even regular credit card companies.

This process of adding a block takes around 10 minutes to complete on average, much longer than most modern cryptocurrencies, but its users must wait longer if there is high demand and queues for transactions to be verified.

This is largely due to the immense amount of computer processing power it takes for miners to solve the complex algorithms required for verification.

HOW HAS BITCOIN EVOLVED?

Some programmers suggested solving Bitcoin’s scaling issues by altering its blocks to allow 8MB of data instead of 1MB before being added to the chain. Others were against changing the size of the blocks, worried larger blocks would see the network lag, suggesting instead to adopt a segregated witness (SEGWIT).

SEGWITSEGWITSegregated Witness, the processes of separating digital signature data from transaction data. This lets more transactions fit onto one block in the blockchain, improving transaction speeds.

The SEGWIT update was designed to reduce every transaction to around a quarter of its original size allowing four times as many transactions to be packed into the original 1MB blocks every 10 minutes.
Another suggestion from the small blockers was the implementation of a lightning network, which allows instant and free transactions of Bitcoins.

The lightning network acts as a second layer on top of the Bitcoin network with a separate set of protocols dictating how transactions are processed.

The network allows smaller transactions to be processed using payment channels off the blockchain. This allows a series of smaller transactions to happen between two parties using a lump deposit paid equally between the parties.

If a total of ₿.1 was deposited through the blockchain in a multi sig wallet to open a channel between two traders off the blockchain and on the lightning network, the traders can then trade as much currency as they like up to the value of the deposit to the point where one or both submit the ledger for processing on the blockchain.

This process eliminates the need for the blockchain to process every single transaction, instead rounding up multiple transactions and condensing the total into one blockchain validation request and saving time and processing power.

The SEGWIT and lightning network updates are among many minor changes to the Bitcoin blockchain protocol over the past decade enacted to keep the original cryptocurrency relevant to today’s fast-changing market and new demands for a growing client base.

lightning networklightning networkActs as a second layer on top of the Bitcoin network for trading, with a separate set of protocols dictating how transactions are processed. The network allows smaller transactions to be processed off the blockchain between two parties using a lump deposit paid equally between the parties. 

FAQ

What are the most popular cryptocurrencies?
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There are over 5000 different types of cryptocurrency in circulation, but all have come into existence thanks to the emergence and pioneering role of Bitcoin in the late 2000s. The most traded cryptocurrencies are Bitcoin, Ethereum, Ripple, Litecoin and Bitcoin Cash.

What is Bitcoin?
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Bitcoin is the original cryptocurrency, programmed by an unknown entity called Satoshi Nakamoto. Bitcoin and its technology was announced to the world in 2008 bringing into existence the first functioning blockchain-backed cryptocurrency. Bitcoin’s developers found a way to verify fund transfers between two parties without having to involve a bank to oversee the process, solving what is known as the Double Spend Problem.

What is a lightning network?
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A lightning network. The lightning network acts as a second layer on top of an existing blockchain network with a separate set of protocols dictating how transactions are processed. Lightning networks allow smaller transactions to be processed using payment channels off the blockchain, processing instant and free cryptocurrency transactions.

What is a multi sig wallet?
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A multi sig wallet performs a process eliminating the need for the blockchain to process every single transaction, instead rounding up multiple transactions and condensing the total into one blockchain validation request and saving time and processing power.

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