While Bitcoin it was "officially" launched in 2008 with the publication of the project whitepaper, it was not the first attempt of cryptocurrency humanity. Prior to that, there were various attempts such as Bit Gold and B-Money in creating a decentralized currency. Bitcoin was simply the first successful attempt. The coin also drew on technical protocols that had been developed by various individuals.
After the initial proposals failed in practice and during the first decade of the millennium, "Satoshi Nakamoto" was silently working on the launch of a digital coin that worked, in all respects. On 18 August 2008 the Bitcoin.org domain name was registered. In October, an article titled "Bitcoin: a peer-to-peer electronic system" was published, apparently by someone named Satoshi Nakamoto. The network arrived online January 3, 2009, with Nakamoto extracting the "block genesis" of the Bitcoin blockchain, an effort paid with 50 BTC.
The mystery of Satoshi Nakamoto
The true identity of "Satoshi Nakamoto" has become a crypto-legend in its time. Although now it does not really matter who started the currency revolution, such is the entrenchment and overall success of Bitcoin, attempts to correctly identify the creator persist and often fuel sparks of interest. It is widely accepted that the name is a pseudonym and some users have claimed the origin of the digital currency.
The Australian Craig Steven Wright, for example, claimed to be Nakamoto. Although it has an informatic and cryptographic background, most repudiates its claims as unbelievable due to the lack of convincing evidence. Other names called "true Nakamoto" were Dorian Nakamoto and Nick Szabo.
Measuring things from today's point of view, where blockchain technology (the tech underlying Bitcoin) is not only known, but also a thriving job category, it seems unlikely that a person has created Bitcoin. Many people suspect that it was a project team building the first successful digital currency.
The Bitcoin Nutshell
The encoders write the code, which is equivalent to the software, which is equivalent to the app. These are all the same thing for the purpose of explaining Bitcoin. Blockchain technology is also a software for coders and creates a decentralized accounting or transaction book. Bitcoin is a "decentralized currency" that does not rely on national authorities, reserve banks or other financial authorities. A decentralized ledger is used and validated by colleagues millions of users around the world.
The creators have designed Bitcoin as a type of "digital money" that facilitates online and real financial transactions. The crypto coins eliminate the intermediary of the bank or of the national authority as they meet in fiat coins. It is a more empowering and democratic way of experimenting with currency. No one takes a "cut" of any transaction, except that the protocol of the blockchain requires small charges for the transactions. These expenses are the "mining fees" required by users and paid for the validation of block transactions.
The main advantages of Bitcoin are an immutable story, the elimination of legacy third parties (payment processors, banks and other money managers) and anonymity. Personal data are not exposed and the transactions are designed to be fast and almost free. Bitcoin builds in blocks on the chain, and once validated a block can not be canceled. Furthermore, a block can not be constructed with false intel either. The app design is such that only true and validated data can create a block in the Bitcoin blockchain.
A more technical insight would determine that Bitcoin transactions are validated by users using the so-called Elliptical Curve Digital Signature (ECDA) algorithm. This is a mathematical signature that can not be falsified and the process is highly secure. In fact, more secure than legacy payment protocols. Even though in 2010 Bitcoin had an incident that saw a user able to generate as many bitcoins as they wanted through a system defect, this was quickly corrected and the blockchain has been completely sound since then.
Bitcoin Algorithm And Mining
Bitcoin blockchain uses an algorithm called Proof-of-Work (PoW). This means that this is the protocol that constitutes the "mining" of bitcoins. Bitcoin is impossible to hack and it remains almost impossible to falsify transactions on the network.
Users often encounter the term "hashrate" when they look at the Bitcoin construct. What this refers to is the speed with which the PoW algorithm is pursued or applied by users who try to validate the transactions of others and earn the small BTC prizes so released.
The hash power of a user (essentially computing power) "extracts" the blockchain using the PoW algorithm to solve complex equations. Although it sounds very roughly, the speed and nature of "hashing" solves the equation (s) and constructs a confirmed block of the chain. Typically, the process sees three or four transactions per second. The more computing power is available, the more a user can confirm it, the greater his earnings will be.
What is the reverse side of Bitcoin?
The most debilitating problems with Bitcoin's blockchain were transaction costs and scalability issues. With the expansion of the Bitcoin network, it became evident that the system was not addressing the volume of transactions that mass adoption has created. While transactions were always validated, they began to take hours and arrived at great expense.
This was a particular problem for Bitcoin as it was advertised as a general "improvement" on the fiat currency. Although consumer aversion to bank charges and payment processors such as PayPal was a constant complaint, at some point the commissions on the Bitcoin network turned out to be much higher. This problem of expensive transactions is still largely unresolved, although scalability on the network has improved.
Transaction fees depend on the size of the transaction, but the main problem is that users are rarely sure what exactly a transaction will cost. Exchange fees also vary depending on the country, the exchange facilities used and the transfer volume of BTC. Currently there is no uniform tariff structure during the Bitcoin blockchain transaction. Compared to Visa – capable of processing 55,000 transactions per second – and Payoneer or PayPal, the transaction on the Bitcoin network takes relatively much longer. This often turns out to be completely impractical for daily purchases, for example, even if a merchant accepts bitcoin payments.
The main purpose of Bitcoin and an original stated purpose is to perform as a digital currency. This was severely compromised by the scalability and messaging issues that the network encountered when global adoption grew. It remains to be seen whether Bitcoin will solve these problems, otherwise it could remain as a digital asset but can not hope to function as a user-friendly currency.
Although the manifest reality of Bitcoin is still sufficient to allow it to be called a better alternative or a better way of doing things, some issues require compensation. If money really hopes to become a global "currency" in every sense of the word, the existing limits must be eliminated. The currency found a savage appeal to investors and traded at nearly $ 20,000 in December 2017. While it is currently trading at around $ 6,700, the fact that it can be seen as a digital asset and a currency tends to confuse a honest opinion.
Cryptographic tokens are a new asset class and markets bring their dynamism to anything that is traded. As a resource, Bitcoin has gone very well for legacy standards. This, however, is also linked to the ability of the currency to function as a real currency and to consider it as a long-term value reserve is still considered very risky by investors.