An Introduction to Bitcoin (BTC) for 2020

By January 18, 2020 Bitcoin Business
Click here to view original web page at coincodex.com

Key highlights:

  • Bitcoin is the first and most popular digital currency in the world in terms of adoption
  • Bitcoin's core features provide unbiased consensus, transparency, and immutability, eliminating the need for centralized intermediates that would capitalize on people's trust
  • Bitcoin can even offer advantages over gold as a store of value. Bitcoin is a decentralized, transparent, permissionless, secure, open-source, pseudo-anonymous mechanism that cannot be forged

Bitcoin is the first cryptocurrency ever created and still remains the most popular asset on the cryptocurrency market. People from all over the world can send and receive BTC using a peer-to-peer (P2P) network without relying on third-party authorities such as banking institutions, government agencies, and monetary vendors/apps.

The highly influential digital currency that would spark a new era for financial technology (fintech) enthusiasts was initially proposed in a whitepaper in October 2008 by a pseudonymous person or group of people using the name Satoshi Nakamoto. The true identity of Satoshi Nakamoto remains a mystery to this very day.

In January 2009, the first-ever successful Bitcoin transaction took place between Satoshi Nakamoto and Hal Finney, a cypherpunk responsible for the creation of the reusable proof-of-work (PoW) concept that is used by Bitcoin and other popular cryptocurrencies. An impressive selection of cryptography experts, digital network architects, and computer scientists would contribute to Bitcoin's development moving forward.

This event marked the beginning of a new era of "what's possible" on a global scale, similar to the introduction of the world wide web, which came to essentially support the digital presence of every single organization on the globe whether private, public or government-backed.

While it is unclear what was the driving force behind Nakamoto's vision, the Bitcoin whitepaper shows that BTC it was initially aiming to eliminate issues plaguing the traditional economic system including costly fees, long processing times, and fraudulent transactions.

Bitcoin's core principles suggested an unbiased consensus, transparency, and immutability, eliminating the need for centralized intermediates that would capitalize on people's trust.

After a decade of successful operations and only growing adoption, Bitcoin became the brand label of a totally new digital asset class, where its domination attributes for more than 50% of the overall market cap across all public cryptocurrencies.

Nowadays, many analysts and blockchain historians suggest that Bitcoin might have been introduced as a solution to the global economic crisis of 2008, hence it is one of the most popular hedges against global scale financial recessions, and often presented as an alternative to physical gold.

If you want to learn about the pre-history of digital money as well as Bitcoin's history from 0 to 100 you should consider reading our equivalent series of articles.

Tokenomics

From a tokenomics perspective, Bitcoin is one of the most impressive blockchain-powered digital assets out there. Although its networking architecture is considered outdated by many nowadays, the tiny details that compile the whole Bitcoin consensus are extremely well-crafted and often hard to copy and use in other projects.

BTC, the native currency of the Bitcoin blockchain, is the asset subject to transactions within the network and its participants. The total supply of BTC ever possible is fixed to 21 million units.

While not all of the available BTC are out in the circulating market, new BTC enters circulations through mining. Miners basically get compensated with BTC every time their committed processing power manages to solve a complex mathematical problem that ensures the integrity of the network.

Besides the fixed total supply, Satoshi Nakamoto has also algorithmically fixed the rate at which new BTCs will become available over time, in order to avoid inflation effects as observed with traditional fiat currencies that can be printed in large quantities at practically any given time.

This algorithm suggests that even if more than 80% of all BTCs are already released in the broader market, it will take us to 2140 until the last BTC is mined due to the halving mechanism Satoshi Nakamoto introduced in his paper.

In a nutshell, the halving mechanism decreases the amount of BTC rewards in half approximately every four years. The difficulty of mining Bitcoin adjusts depending on the amount of processing power active in the Bitcoin network. To give you a clear example of how this works you should think about the fact that back in 2010 you could mine Bitcoin with your laptop, and get around 50BTC for each successful problem solved. Today, you get 12.5BTC in case you mine a block, and you'd need tens of thousands of laptops to successfully achieve the necessary hashrate.

The next halving is set to occur in May 2020, where the block reward will be downgraded to 6.25BTC per successful operation.

Attributes

Besides the sophisticated computer science behind Bitcoin's protocol, there are some key attributes that make Bitcoin as important as it is, and most of them are paralleling the attributes of gold.

We can't be 100% sure whether that was intentional or a natural occurrence of such a well-designed value-exchange protocol, but Bitcoin has many of the attractive properties of gold and it is easily the best alternative for the ancient precious metal created so far.

Put aside scarcity, authenticity, immutability, division, and transferability, and Bitcoin can even offer perks gold never could. Bitcoin is a decentralized, transparent, permissionless, secure, open-source, pseudo-anonymous mechanism that cannot be forged.

Sure, gold is hard to forge as well, but we've seen many steel bars covered in gold leaves being promoted as real gold even under central banks' hands. In Bitcoin's case, you either have a real Bitcoin, or you don't.

You can learn more about Bitcoin's relativity to physical gold by reading one of our previous articles.

Conclusion

In the end, it's 2020, and just before the change of the year, Bank of America announced that Bitcoin was the most profitable asset of the decade, while Deutsche Bank cited that Bitcoin and public cryptocurrencies could represent the future of the digital economy.

Is Bitcoin something you should care about? It depends on what you're looking for. If you forget the price speculation and you investigate the possible ways such a system could benefit you or your business, I think Bitcoin and blockchain technology by extension is more than capable of leveling-up whatever it is that you do.

Bitcoin is the first and most popular digital currency in the world in terms of adoption

Bitcoin’s core features provide unbiased consensus, transparency, and immutability, eliminating […]

Leave a Reply