Bitcoin is a decentralized cryptocurrency that allows digital transactions to be made without intermediaries, using blockchain technology. It is the first cryptocurrency to be created and the most widely used and strongest cryptocurrency today.
What is Bitcoin (BTC)?
Bitcoin is the first cryptocurrency based on the cryptography asymmetrical and that has opened a world of possibilities. The idea of this cryptocurrency is born from other existing and less known elements, such as hashcash, BitGold o DigiCash, which are combined within a peer-to-peer payment network (peer-to-peer or P2P).
In fact, the creation of this new and revolutionary form of money is such that its creator, Satoshi Nakamoto, commented the following about its creation:
I would be surprised if in 10 years we will not use electronic currency in some way, now that we know a way to do it that inevitably is not going to fall apart when the trusted third party.
- Satoshi Nakamoto, January 17, 2009
Bitcoin's initial proposal
The creation of Bitcoin begins with the idea embodied in the project DigiCash, a digital money project created by David ChaumSatoshi Nakamoto used this project as the basis to start creating Bitcoin, but to do so some problems within DigiCash had to be corrected.
Among these problems, the most serious of all is that of double-spending. When we talk about double-spending, we talk about the possibility of using the same amount of tokens or coins twice, without leaving any record of the first use. It was a problem long studied by Chaum and that Nakamoto began to study and solve, all with one purpose: create a decentralized digital currency.
However, Nakamoto devised a plan to solve this. His plan was to use the proof of work (PoW), along with a decentralized consensus system that would allow network information to be packaged into blocks.
These blocks could be issued regularly every so often and with the information contained in them a proof of work would be applied that would create a hash unique for that block. This hash would be a marker, one that would make it special and set it apart from the rest. But, not only that, that hash would also be an indissoluble link to relate the previous block to the next one within the network. With this idea the blockchain or blockchain technology started.
In a first instance the idea of Nakamoto would allow the use of Bitcoin in small niches. But the goal was to expand it to the point where it became a massive, global payment system.
It could start in a narrow niche like reward points, donation tokens, in-game currency, or micropayments for adult sites.
- Satoshi Nakamoto, January 17, 2009.
When was the Bitcoin cryptocurrency born?
Nakamoto's work had its first public mention on 31th October 2008 on the Crypto Mailing List. In an email, Satoshi Nakamoto defined the idea of Bitcoin (BTC) as a cryptocurrency that had the ability to prevent double spending using a peer-to-peer network. In addition, there will be no central banking entity or trusted parties, participants can be pseudo anonymous and it would be based on HashCash-style proof of work. The proof-of-work is used to prevent double-spending and to enter the market of new coins that will be progressively released as compensation for the work done.
But it wasn't until January 9, 2009, when the first version of the Bitcoin software appears: version 0.1.0. According to Nakamoto himself, it is a version in alpha format and completely experimental, but it fulfilled everything that Nakamoto promised: a decentralized, secure digital currency without the danger of double spending.
The first Bitcoin update
The version XNUMX was released in December and is a simple update that corrects the communication problems of the nodes , which after a while disappeared from the network.
The evolution of Bitcoin continued its path, but this time with a community of developers increasingly interested in this technology. Here characters such as Martti Malmi, Amir Taki, among others. Updating the version 0.2 of Bitcoin, published on December 16, 2009, added important improvements to the software, allowing among others the automatic start of boot so that the software can run in the background automatically. In addition, a compatible client for Windows is launched and a client for Linux is added. Additionally, Nakamoto implements for this software multiprocessor support for the generation of new currencies and proxy support for use in the network. Tor.
Although it is not a software update or an implementation, May 17, 2010 is very important for Bitcoin (BTC), as this is the date that Laszlo Hayneck made the first bitcoin payment for a good or service. Hayneck bought two pizzas at the popular American chain Papa John's and paid 10.000 BTC for them (then they were worth $ 0.003). Since then, this date is commemorated every year as the Bitcoin Pizza Day.
Bitcoin Pizza Day - The day that Bitcoin showed its power
On May 22, 2010, an event took place that marked the life of Laszlo Hanyecz. Laszlo was a renowned bitcoiner who wrote days before in the forum of Bitcointalk a little wish: "buy two large pizzas with 10.000 BTC as a payment method ”.
At that time, Bitcoin was a very little known technology. However, Laszlo's offer piqued the interest of many people, after all it was $ 41 that Laszlo was paying in bitcoins. If 10.000 BTC in 2010 only had the value of 41 $, and currently it exceeds 90 million dollars. These were the most expensive pizzas in the world, but Laszlo was able to enjoy them with his family and prove one thing: Bitcoin had enormous potential to show the world.
Follow the development of Bitcoin
The version 0.3 was released in June 2010 and implemented some important new features such as transaction filtering, hash calculation acceleration by 20%, a mining power performance viewer and a version for Mac OS X developed by Laszlo Hayneck.
These are the most prominent updates from the early days, but there have been many more. We are currently in version 0.16.1 of the client Bitcoin Core, the base software of Bitcoin.
The arrival of SegWit
Among the major Bitcoin updates, the one on August 24, 2017, when the activation of Segregated Witness, also known as followed. SegWit is a powerful solution for Bitcoin and its full implementation within the Bitcoin Core software has been at version 0.16.0. With SegWit, Bitcoin sought to solve a serious transaction malleability problem, and at the same time, offer the basis for the construction of technology such as Lightning Network.
While this update was criticized by many in the Bitcoin community, and even led to hard fork that gave rise to Bitcoin Cash (BCH), it is clear that its need was very important for the technological evolution of Bitcoin.
However, this did not stop the anti-Bitcoin community from trying to discredit the flagship blockchain technology project, releasing a large number of myths and FUD.
Taproot, a new improvement for Bitcoin
Another of the great improvements of Bitcoin can be seen in tap root which was activated on June 12, 2021. This improvement is actually the union of several technologies that seek to improve the privacy of the Bitcoin network and its ability to process smart contracts within its blockchain. All this thanks to the arrival of technologies and implementations such as MAST and Schnorr crypto firms.
The idea is that conventional transactions and advanced transactions within Bitcoin are indistinguishable from each other, thus preventing a third party from identifying what type of transactions they really are. This will improve the security of the network, by preventing the disclosure of important data of the transactions carried out.
In addition, Taproot also allows the Bitcoin network to expand its multi-signature capacity for the creation of smart contracts within its system. This functionality is part of the work done by the developer Greg Maxwell, who presented her proposal in January 2018.
Bitcoin security and mining
To offer security Bitcoin is based on the SHA-256 cryptographic algorithm for information encryption (or the transactions in this case). The information is verified by working with processors called mining is..
The Bitcoin mining process seeks to perform a series of complex mathematical calculations that are used to validate transactions. These calculations demand enormous computing power that has evolved over time. In principle, a simple computer could carry them out without problems, but nowadays specialized equipment is necessary for the task. This is because the mining difficulty Bitcoin has increased exponentially since its inception until today.
Due to the complexity of the work, the miners receive compensation for the validation and creation of each block. This is delivered in the form of bitcoins depending on the amount of work contributed.
Issuance of new bitcoins and units of account
Another particular of Bitcoin is its issuing. The maximum emission of Bitcoin cannot exceed 21 million bitcoins (BTC). In addition, Bitcoin has the ability to be subdivided to eight decimal places. In this way, a unit (1 bitcoin) can be divided into up to 100.000.000 smaller units. These units are called "satoshis“, which is equivalent to 0.00000001 BTC.
But coin issuance in Bitcoin s handled by a delicate algorithm. First of all, each block in Bitcoin is generated approximately every 10 minutes. That is, every 10 minutes miners have to include a series of transactions, solve the block's cryptographic riddle and transmit it to the network. The miner who manages to solve the riddle receives a reward that is the one that allows introducing new coins to the market.
In principle, Bitcoin did this at the rate of 50 BTC per validated block, but currently it does it at 12,5 BTC per block. This is because the reward halves every 210.000 blocks, due to a process known as halving. Halving's task is to control Bitcoin's inflation and turn it into a deflationary emission.
What is Bitcoin halving?
El Bitcoin halving is a crucial mechanism within the cryptocurrency protocol, designed to gradually reduce the issuance of new bitcoins and ensure their scarcity over time. It occurs approximately every 210,000 blocks mined, which is equivalent to a period of about four years. During a halving, the reward miners receive for each block added to the blockchain is halved. This means that if before the halving the block reward was 12.5 BTC, after the event it will be 6.25 BTC, and so on.
Objectives and effects of the halving:
- inflation control: By reducing the rate at which new bitcoins are issued, the halving is designed to simulate the natural scarcity of resources like gold. Since only a few can exist 21 million bitcoins Overall, the halving slows down the creation of new bitcoins and helps prevent excessive inflation.
- Impact on priceHistorically, halvings have had a significant impact on the price of Bitcoin, as the reduction in supply can increase demand if interest in the cryptocurrency remains strong. This has led to cycles of price increases after each halving.
- Effects on miners: Miners are the most affected by the halving, as their rewards are reduced. This can make mining less profitable, especially for those with less efficient equipment or higher operating costs. In the long term, this could result in increased centralization of mining, with larger, more efficient miners dominating the market.
Past halving events:
- El First Halving happened in 2012, reducing the reward from 50 BTC to 25 BTC.
- El second halving It was in 2016, decreasing the reward to 12.5 BTC.
- El third halving This happened in May 2020, lowering the reward to 6.25 BTC.
- El fourth halving de 2024, the reward dropped to 3.125 BTC.
Bitcoin and energy consumption
One of the points that currently draws the most attention to Bitcoin is related to its energy consumption. It is certainly a fact that the Proof of Work (PoW) is a system that consumes large amounts of energy, but consequently, such a level of security is obtained that it is practically impossible to hack into this system. This is why PoW is the consensus protocol of choice for Bitcoin, and the main reason why it probably won't change unless something better is believed.
Bitcoin's future
Depending on who you ask, it will be defined as a digital asset, since we have a digital asset that we can dispose of at our disposal. At the same time it is also digital money, since it does not exist physically and allows us to acquire goods, services and debt settlement. Finally it can also be considered a token, since it is a representation of a value of fiat money.
The biggest challenge Bitcoin faces is scalability. In addition, a single Bitcoin transaction can be made in dozens of shipments to dozens of different addresses, currently the network only supports around 7 transaction validations per second, which can be a problem since other altcoins offer a higher volume of transactions. Bitcoin's main challenge since its inception is precisely that: increasing the network's capacity to support a greater volume of transactions.
Among the solutions provided in the Bitcoin (BTC) improvement roadmap has been devised one called the Lightning Network. This is a payment gateway with low commissions and designed for payments of less than $100.
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Links of interest
| Symbol |
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| BTC |
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| SHA-256 |
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| PoW |
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