Bitcoin (BTC) Token Guide. Explanation, price and staking

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What is Bitcoin (BTC)?

Bitcoin is a decentralized cryptocurrency originally described in a 2008 white paper by a person, or group of people, using the pseudonym Satoshi Nakamoto. It was released shortly after, in January 2009.

Bitcoin is a peer-to-peer online currency, which means that all transactions take place directly between equal and independent network participants, without the need for any intermediary to allow or facilitate them. Bitcoin was created, in Nakamoto's own words, to allow "online payments to be sent directly from one party to another without going through a financial institution."

Some concepts for a similar type of decentralized electronic currency predate BTC, but Bitcoin has the distinction of being the first cryptocurrency to actually be used.

Who are the founders of Bitcoin?

The original inventor of Bitcoin is known under the pseudonym Satoshi Nakamoto. As of 2021, the true identity of the person, or organization, behind the alias is unknown.

On October 31, 2008, Nakamoto published the Bitcoin whitepaper, detailing how to implement a peer-to-peer online currency. They proposed using a decentralized ledger of transactions packed into batches (called "blocks") and protected by cryptographic algorithms: the entire system would later be called a "blockchain".

Just two months later, on January 3, 2009, Nakamoto mined the first block on the Bitcoin network, known as the genesis block, thus launching the world's first cryptocurrency. The price of bitcoins was $0 when it was first introduced, and most bitcoins were obtained through mining, which only required moderately powerful devices (eg PCs) and mining software. The first known Bitcoin trading transaction took place on May 22, 2010, when programmer Laszlo Hanyecz exchanged 10,000 Bitcoins for two pizzas. At the current price of Bitcoin in mid-September 2021, those pizzas would be worth a staggering $478 million. This event is now known as "Bitcoin Pizza Day". In July 2010, Bitcoin began trading, with the price of Bitcoin hovering between $0.0008 and $0.08 at the time.

However, although Nakamoto was the original inventor of Bitcoin, as well as the author of its first implementation, he handed over the network alert key and control of the code repository to Gavin Andresen, who later became the main developer of the Bitcoin. Bitcoin Foundation. Over the years, a large number of people have helped improve cryptocurrency software by fixing vulnerabilities and adding new features.

The Bitcoin source code repository on GitHub lists more than 750 contributors, including some of the top ones: Wladimir J. van der Laan, Marco Falke, Pieter Wuille, Gavin Andresen, Jonas Schnelli, and others.

What makes Bitcoin unique?

Bitcoin's most unique advantage comes from the fact that it was the first cryptocurrency to appear on the market.

It has managed to create a global community and give birth to a whole new industry of millions of enthusiasts who create, invest, trade and use Bitcoin and other cryptocurrencies in their daily lives. The emergence of the first cryptocurrency created a conceptual and technological foundation that later inspired the development of thousands of competing projects.

The entire cryptocurrency market, now worth more than $2 trillion, is based on the idea realized by Bitcoin: money that can be sent and received by anyone, anywhere in the world without relying on trusted intermediaries such as banks and financial services. companies.

Due to its pioneering nature, BTC remains at the top of this energy market after more than a decade of existence. Even after Bitcoin lost its undisputed dominance, it remains the largest cryptocurrency, with a market capitalization that surpassed the $1 trillion mark in 2021, after the price of Bitcoin hit an all-time high of $64,863.10 on Jan 14. April 2021. This is largely due to the growing institutional interest in Bitcoin and the ubiquity of platforms that provide use cases for BTC: wallets, exchanges, payment services, online games, and more.

How much Bitcoin is in circulation?

The total supply of Bitcoin is limited by its software and will never exceed 21,000,000 coins. New coins are created during the process known as "mining": when transactions are sent over the network, miners collect and package them into blocks, which are themselves protected by complex cryptographic calculations.

As compensation for spending their computing resources, miners receive rewards for each block they successfully add to the blockchain. At the time of Bitcoin's launch, the reward was 50 bitcoins per block; this amount is halved for every 210,000 new blocks mined, which takes the network about four years. As of 2020, the block reward has been halved three times and includes 6.25 bitcoins.

Bitcoin was not awarded, which means that no coins were mined or distributed among the founders before it became available to the public. However, during the early years of BTC's existence, competition among miners was relatively low, allowing early network participants to amass significant amounts of coins through regular mining - only Satoshi Nakamoto is believed to own more than a million Bitcoins.

Bitcoin mining can be very profitable for miners, depending on the current hash rate and price of Bitcoin. Although the Bitcoin mining process is complex, let's discuss how long it takes to mine a Bitcoin on CoinMarketCap Alexandria: As we wrote earlier, Bitcoin mining is best understood as the time it takes to mine a block, as opposed to a Bitcoin. As of mid-September 2021, the Bitcoin mining reward is capped at 6.25 BTC after the 2020 halving, which is around $299,200 at the current Bitcoin price.

How is the Bitcoin network protected?

Bitcoin is protected with the SHA-256 algorithm, which belongs to the SHA-2 family of hash algorithms, also used by its Bitcoin Cash (BCH) fork, as well as many other cryptocurrencies.

Energy consumption in bitcoin

In recent decades, consumers have become more curious about their energy consumption and the personal effects on climate change. As the news began to swirl around the possible negative effects of Bitcoin's power consumption, many became concerned about Bitcoin and criticized this power consumption. One report found that each Bitcoin transaction requires 1,173 KW of electricity, which can “power the typical American household for six weeks.” Another report calculates that the annual energy required by Bitcoin is higher than the annual hourly energy consumption of Finland, a country with a population of 5.5 million.

The news drew comment from tech entrepreneurs, environmental activists, and political leaders alike. In May 2021, Tesla CEO Elon Musk even stated that Tesla would no longer accept cryptocurrencies as payment, due to his concern about his environmental footprint. While many of these people condemned this problem and moved on, some suggested solutions: How can we make Bitcoin more energy efficient? Others have simply taken a defensive stance, saying that Bitcoin's energy problem may be overblown.

Right now, miners rely heavily on renewable energy sources, with estimates suggesting that Bitcoin's renewable energy use could range from 40 to 75 percent. However, at this point, critics say that increasing Bitcoin's use of renewable energy will eliminate solar sources that power other sectors and industries, such as hospitals, factories, or homes. The Bitcoin mining community is also attesting that the expansion of mining may help lead to the construction of new solar and wind farms in the future.

Additionally, some Bitcoin advocates argue that the gold and banking sectors individually consume twice as much energy as Bitcoin, making criticism of Bitcoin's energy consumption a nonstarter. Furthermore, the energy consumption of Bitcoin can be easily tracked and traced, which cannot be said for the other two sectors. Those who defend Bitcoin also point out that the complex validation process creates a more secure transaction system, which justifies the energy consumption.

Another point made by Bitcoin proponents is that the required energy use of Bitcoin is all-encompassing in such a way that the process of creating, protecting, using and transporting Bitcoin is understood. Whereas with other financial sectors, this is not the case. For example, when they calculate the carbon footprint of a payment processing system like Visa, they do not calculate the energy needed to print money or power ATMs, smartphones, bank branches, security vehicles, among other payment processing components and The bench. supply chain.

What exactly are governments and nonprofits doing to reduce Bitcoin's energy consumption? A congressional hearing on the issue was held earlier this year in the United States in which politicians and tech figures discussed the future of cryptocurrency mining in the United States, highlighting in particular their concerns about cryptocurrency consumption. fossil fuels. The leaders also discussed the current debate over the trend from coal to cryptocurrencies, particularly regarding the number of coal-fired power plants in New York and Pennsylvania that are in the process of being converted to mining farms.

In addition to congressional hearings, there are private sector crypto initiatives dedicated to solving environmental issues, such as the Crypto-Climate Agreement and the Bitcoin Mining Council. In fact, the Crypto Climate Accord proposes a plan to eliminate all greenhouse gas emissions by 2040, and due to the innovative potential of Bitcoin, it is reasonable to believe that these grandiose plans can be realized.

What is the role of Bitcoin as a store of value?

Bitcoin is the first peer-to-peer decentralized digital currency. One of its most important functions is that it is used as a decentralized store of value. In other words, it grants property rights as a physical asset or as a unit of account. However, the latter reserve-of-value feature has been discussed. Many cryptocurrency enthusiasts and economists believe that the large-scale adoption of the major currency will usher in a new modern financial world where transaction amounts will be denominated in smaller units.

The smallest units of Bitcoin, 0.00000001 BTC, are called Satoshis (or Sats for short), in a nod to the creator of the pseudonym. At the price of Bitcoin now, 1 Satoshi equals around $0.00048.

The best cryptocurrency is considered a store of value, like gold, by many, rather than a currency. This idea of ​​the first cryptocurrency as a store of value, rather than a payment method, means that many people buy cryptocurrency and hold it for the long term (or HODL) rather than spend it on items like they normally would with a dollar. . - treating it like gold. digital.

crypto wallets

The most popular wallets for cryptocurrencies include hot and cold wallets. Cryptocurrency wallets vary from hot wallets and cold wallets. Hot wallets can be connected to the web, while cold wallets are used to keep large amounts of coins offline.

Some of the best cryptocurrency cold wallets are Trezor, Ledger, and CoolBitX. Some of the best crypto wallets include Exodus, Electrum, and Mycelium.

Still not sure which wallet to use? Check out CoinMarketCap Alexandria's guide to the best cold wallets of 2021 and the best hot wallets of 2021.

How is Bitcoin technology updated?

A hard fork is a radical change in the protocol that makes previously invalid blocks/transactions valid and thus requires all users to upgrade. For example, if users A and B disagree on the validity of an incoming transaction, a hard fork could make the transaction valid for users A and B, but not for user C.

A hard fork is a protocol update that is incompatible with previous versions. This means that each node (computer connected to the Bitcoin network through a client that performs the task of validating and forwarding transactions) must be upgraded before the new hard forked blockchain becomes active and rejects any block or transaction. the old blockchain. The old blockchain will still exist and will continue to accept transactions, although it may be incompatible with other newer Bitcoin clients.

A soft fork is a change to the Bitcoin protocol where only previously valid blocks/transactions become invalid. Since old nodes will recognize new blocks as valid, a soft fork is backward compatible. This type of fork requires only the majority of miners to upgrade to enforce the new rules.

Some examples of major cryptocurrencies that have forked are: Bitcoin hard fork which led to Bitcoin Cash, Ethereum hard fork which led to Ethereum Classic.

Bitcoin Cash has been a hard fork since its original fork, with the creation of Bitcoin SV. Read more about the difference between Bitcoin, Bitcoin Cash and Bitcoin SV here.

What is the main root?

Taproot is a soft fork that bundles BIP 340, 341, and 342 and aims to improve the scalability, efficiency, and privacy of the blockchain by introducing several new features.

The two main changes are the introduction of the Merkelized Abstract Syntax Tree (MAST) and the Schnorr Signature. MAST introduces a condition that allows the sender and recipient of a transaction to jointly sign its settlement. Schnorr Signature allows users to add multiple signatures in one for a single transaction. This results in similar to normal or more complex multi-signature transactions. By introducing this new address type, users can also save on transaction fees, as even complex transactions appear simple, with a single signature.

While HODLers may not notice much of an impact, Taproot could become a key milestone in equipping the network with smart contract capabilities. Specifically, Schnorr Signatures would lay the groundwork for building more complex applications on the existing blockchain, as users begin to switch primarily to Taproot addresses. If adopted by users, Taproot could, in the long run, lead the network to develop its own DeFi ecosystem that rivals those of alternative blockchains like Ethereum.

What is the lightning network?

The Lightning Network is an off-chain tiered payment protocol that manages two-way payment channels that enable instant transfers with instant reconciliation. It enables private, high-volume, trustless transactions between two parties. The Lightning Network scales transaction capacity without incurring the costs associated with transactions and interventions on the underlying blockchain.

How much is Bitcoin worth?

The current valuation of Bitcoin is in constant flux, all day, every day. It is a truly global resource. Since its inception at less than a penny a coin, the price of BTC has risen thousands of percent to the numbers you see above. The prices of all cryptocurrencies are quite volatile, which means that anyone who understands how much Bitcoin is will change minute by minute. However, there are times when different countries and stock exchanges display different prices and understanding how much Bitcoin is going to be a function of a person's location.

Is bitcoin political?

Bitcoin is becoming more political by the day, particularly after El Salvador started accepting it as legal tender. The country's president, Nayib Bukele, announced and implemented the decision almost unilaterally, rejecting criticism from his citizens, the Bank of England, the IMF, Vitalik Buterin and many others. Since the Bitcoin law was passed in September 2021, Bukele has also announced plans to build Bitcoin City, a city entirely based on Bitcoin mining with geothermal energy from volcanoes.

Countries like Mexico, Russia, and others are said to be candidates to accept Bitcoin as legal tender, but so far El Salvador stands alone.

Where can you buy Bitcoin (BTC)?

Bitcoin is, in many ways, almost synonymous with cryptocurrency, which means that you can buy Bitcoin on virtually all cryptocurrency exchanges, whether for fiat money or other cryptocurrencies. Some of the major markets where BTC trading is available are:

  • Binance
  • Coinbase Pro
  • Accept ex.
  • kraken
  • world huobi
  • Bitfinex

If you're new to crypto, use CoinMarketCap's Alexandria educational portal to learn how to get started buying Bitcoin and other cryptocurrencies.