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Bitcoin: Everything you need to know

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What is Bitcoin?

Created in January 2009, Bitcoin is a digitally held currency. It was given birth following the housing market crash on the ideas set out by the mysterious Satoshi Nakamoto. However, the real identity of the person or group of persons who actually created Bitcoin is still unknown. Bitcoins do not exist physically and the balances are held on a public ledge local transparent access. It is operated by a decentralized authority (unlike the government-issued conventional currencies) and all transactions in Bitcoin are controlled and verified by enormous computing power. The digital currency offers lower transaction fees in comparison to traditional and conventional online payment platforms.

Despite not being a legal tender and not being issued or backed by any government or bank it has gained high popularity triggering the launch of several other virtual currencies known as Altcoins. The individual bitcoins are not valuable as a separate commodity either.

It is run by a collection of computers that store all its blockchain and carry out all its code. Anyone can view the transactions occurring in Bitcoin live. The high level of technology involved would involve a bad actor operating 51% of the computing power that makes up Bitcoin to carry out a nefarious act as it has as many as 47,000 nodes (as of May 2020). The number of these nodes is incessantly growing, making a hack or an attach an unlikely to happen event. But even if, such an attack was likely to happen, the Bitcoin nodes or Bitcoin investors would most probably fork to a new blockchain.

The tokens of the cryptocurrency are kept using “keys” (public and private). Keys are nothing but a long string of numbers and letters that are linked together through a mathematical encryption algorithm. The terms related to Bitcoin transactions are:

  1. The Public key: It can be compared to a bank account number and serves as the address published to the world.
  2. The private key : It can be compared to an ATM PIN that can only be used to authorize Bitcoin transmissions.
  3. Bitcoin Wallet : It is a physical or digital device that works in facilitating the trade of the currency. It also allows users to track ownership of coins. Although the term “wallet” can be a little misleading or inappropriate because Bitcoin is highly decentralized and is never stored “in” a wallet privately.

How does Bitcoin trade works? Or how is it used to perform transactions?

It is one of the most popular methods to facilitate instant payments. Miners are the people who process the transactions on the blockchain. The incentives that they receive on using and holding bitcoin is the rewards such as the release of new bitcoin, and lower transaction fees involved. They are responsible to enforce the credibility of the Bitcoin network.

Bitcoin mining refers to the process of releasing bitcoins into circulation that requires the solving of computationally difficult puzzles to create a new block in the existing blockchain. New bitcoins will be released (with release rate ahead of time and according to an established algorithm) to the miners at a fixed rate that may periodically decline (the regard is halved after every 210,000 blocks) making sure that the total supply of bitcoins reaches the mind stone of 21 million. And there were approximately 3 million bitcoins as of July 2020. This is how all these cryptocurrencies are generated through a similar process. In 2009, the block reward was 50 new bitcoins and currently stands at 12.5 with the third halving occurring on May 11th, 2020 bringing the reward down to 6.25 bitcoins.

Satoshi refers to the smallest unit of one bitcoin that is divisible to eight decimal places or 100 millionths of one bitcoin. Moreover, if the participating miners are willing to they can eventually make the Bitcoin divisible to even more decimal places.

Why Is Satoshi Anonymous?

Satoshi Nakamoto is the name is related to the person or persons who, in 2008, released the original Bitcoin white paper. He/ She/ They are also known to work on the original Bitcoin software released in 2009. All this time we have known Bitcoin, many individuals have claimed to be the real-life people behind the technology. However, as of May 2020, the real identity or identities behind the pseudonym remain/ s anonymous and obscured.

There are certain assumed reasons that people in general believe motivate the inventor of Bitcoin to remain unknown.

  1. Privacy: This is the ultimate requirement and unique idea of Bitcoin. With it gaining mass popularity and a worldwide phenomenon, it is likely that Satoshi Nakamoto would come under enormous political pressure. He would likely garner a lot of attention from the global media and from governments.
  2. The Risk factor involved: Bitcoin has the potential to cause major disruptions in the present banking and monetary systems and if it gains mass adoption and support, the currently established system could surpass fiat currencies printed, backed, and managed by these formal institutions. This may make the governments wanting to take legal action against the creator.
  3. Safety : In just 2009, 32,489 blocks were mined at a reward rate of 50 Bitcoin per block leading to a total payout of 1,624,500 Bitcoins valuing $13.9 billion (as of October 25, 2019). It is a commonplace thought process that Satoshi and/ or a few other were mining through 2009 possessing a major share of that bitcoin. Someone in possession of this much amount could attract criminals towards this value. The criminals too will be highly interested because bitcoins are not more like cash needing just the private keys to authorize spending. The keys could be printed out and literally kept under a mattress and thus, remaining anonymous is a good way for Satoshi to limit exposure.
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