What is Bitcoin?

What is Bitcoin?

Bitcoin is, for all intents and purposes, simply money. Money is defined as a unit of account, a store of value, and a medium of exchange. Bitcoin can be sent and received over the internet between anyone on a peer to peer level without banks or other centralized institutions. Bitcoin is an open source, decentralized, deflationary, and cryptographic monetary system that is gaining more and more traction as a store of value and elite currency throughout the world. Bitcoin transactions are accounted for using a new technology called "blockchain". Blockchain is the public ledger of all Bitcoin transactions all the way back to the very first bitcoin transaction and it is stored in its entirety on every computer running the bitcoin client software so it can never be entirely lost.

Bitcoin was created by an anonymous developer with the alias of "Satoshi Nakamoto" and released in 2009 with a detailed manual called the "White Paper" on the function of the coin, particularly the workings of the blockchain technology.

Bitcoin users comprise an anonymous yet public "swarm" network with no middle point. Bitcoin users send and receive coins peer to peer over the internet either across the world or face to face. These transactions are processed with the work of "mining" hardware which is operated all over the world and used to verify transactions along the network as well as building the blockchain itself. The entities or persons running this hardware are referred to as "miners". They perform an essential function in the Bitcoin community. The work they do instills value into the coin by keeping an irrefutable accounting of all bitcoin transactions, universally. They do all the hard math in creating, filing, and maintaining the bitcoin ledger and keeping it up to date. Custom hardware is required to be compatible with the Bitcoin cryptographic algorithm in order to mine and earn bitcoin.

Bitcoin miners race to fill 1MB "blocks" with cryptographically compressed streams of bitcoin transactions as they occur throughout the network on a perpetual basis. As soon as a miner fills a "block" it reports that to the entire network as fast as possible as it begins working on filling the next block. When the entire network agrees on the contents of the completed block, the ledger is communally updated and the system releases a reward of Bitcoin to contributing miners in proportion to the work put forth to calculate that particular block.

Each block contains an address referencing it to the next block and in this way the blockchain is created much as a traditional metal chain is made of the strongest metal, the strength of the blockchain's cryptography scheme determines that it can never be broken, forged, or counterfeited. The computing power simply does not exist to do that as of yet. It is more practical to race for block rewards.

Right now a block reward of 12.5 coins are released when miners find new blocks. Initially at inception of Bitcoin, block rewards were 100 coins. Every 210,000 blocks the number of coins released when blocks are found is cut in half until eventually all 21 Million Bitcoins are released. That won't be for quite a while. The next time we expect another "halvening" though is in mid-2020.

Currently Bitcoin is a valued at a little over $10K each after correction from a recent all time high of $20K. The market continues to favor it on correction after correction. As the market cap grows so does the value of each coin. With a built in limit to the supply, the value can only go up when it is inevitably adopted by the mainstream. It is gaining more and more traction all the time and shows all the signs of complete global participation as people begin to use it in real world situations to purchase property, transportation, and food and more. Bitcoin, blockchain, and cryptocurrency in general is the future of money and banking and it is here now for the taking.

Sources:
Bitcoin White Paper by Satoshi Nakamoto [2009]
https://bitcoin.org/bitcoin.pdf

CoinTelegraph Daily Price Analysis for February 21, 2018
https://cointelegraph.com/news/bitcoin-ethereum-bitcoin-cash-ripple-stellar-litecoin-cardano-neo-eos-price-analysis-february-21-2018