What is Bitcoin (BTC)
Bitcoin (BTC) is essentially a peer-to-peer (P2P) cryptocurrency that enables the exchange of value on a global scale without involving any central authority
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What is Bitcoin (BTC) and How Does It Work?
The native cryptocurrency used to power the blockchain network is known as BTC, which can be transferred through electronic means in a way that is secure, verifiable, and immutable.
Bitcoin has seen primary usage for payments and has limited support when it comes to smart contract functionality, as by default, they are not available but are implemented through Layer-2 solutions.
What Makes Bitcoin (BTC) Unique?
The Bitcoin protocol utilizes a consensus mechanism known as Proof-of-Work (PoW) as a means of securing the network and preventing people from being malicious on top of it. It uses the SHA-256d Algorithm, where miners, which are spread globally, essentially have the role of solving the complex cryptographic puzzle and verifying the transactions on top of the blockchain, which gets recorded on top of the public ledger.
Throughout the years within the blockchain space, Bitcoin implemented numerous additional features to its lineup.
One such feature is Segregated Witness (SegWit). Segregated Witness (SegWit) is a protocol upgrade that first took place in August of 2017, aiming to separate witness signatures from transaction-related data. This enabled the network to handle more transactions per second.
Another notable feature is the Lightning Network. The Bitcoin Lightning Network is a Layer-2 micropayment solution aimed at enhancing the overall scalability of Bitcoin. It enables near-instantaneous, as well as low-cost payments between merchants as well as customers that aim to use Bitcoin as a payment method.
One of the most substantial developments throughout the history of Bitcoin is also its Taproot upgrade that aimed to enable Bitcoin to facilitate more private as well as secure transactions whilst also improving scalability. The upgrade led to the introduction of Schnorr signatures for use in Bitcoin.
How Does the Bitcoin Network Work?
Transactions that take place on top of the Bitcoin network are recorded into bundles of blocks. The first block to ever get added to the blockchain network is known as the "genesis block." Afterward, each block that gets added connects to the block that was added before it, and they, in turn, form a chain.
The network has a target block time of around 10 minutes. In order to prevent potential fluctuations to this block time, or in other words, to prevent the cryptographic puzzles from becoming too easy, the network's block difficulty gets re-adjusted through the usage of an algorithm based on the past 2016 block times.
Miners can utilize Graphics Processing Units (GPUs) or Application-Specific Integrated Circuit (ASIC) Miner configurations in order to mine cryptocurrencies.
Each of these miners is spread out globally, making the network truly decentralized. The miner that ends up winning, and confirming the transaction, get rewarded with the newly mined BTC cryptocurrency.
However, while some miners conduct the mining process themselves, others utilize what is known as mining pools. Here, miners can contribute their processing power within a pool, where they get rewarded a specific percentage of the block reward, depending on how much computing power they contributed to the overall mining process.
What Is The Maximum Supply of Bitcoin (BTC) That Can Get Mined?
The maximum supply of Bitcoin that can ever be mined is capped at 21 million tokens. What all of this essentially means is that no more than 21,000,000 BTC can ever be mined or brought into existence to become a part of the circulating supply.
However, in order to ensure that the cryptocurrencies do not get mined too quickly, Bitcoin introduced what is known as Bitcoin Halving". This is a procedure where once every 210,000 blocks get mined, which occurs roughly every four years, the block reward that is given to miners for processing the transactions gets cut in half.
In 2009 the standard mining block reward was 50 BTC per block. In 2012, it halved to 25. Then in 2016, it halved again, this time to 12.5. In 2020, the third halving occurred, and the current block rewards are at 6.25 BTC. The next halving is expected to occur in 2024 when Bitcoin's reward will be 3.125. The final Bitcoin halving, based on this pattern, is expected to occur in 2140.
Who Are The Founders and Contributors Behind The Bitcoin Blockchain?
The whitepaper behind Bitcoin was originally written by an anonymous person or a group of people that used the pseudonym Satoshi Nakamoto in 2008. However, the network first launched in 2009 with the main goal of solving the double-spending issue, which involved spending the same amount of digital money twice.
Aside from the anonymous team of original creators, there are project contributors that are known, including Wladimir J. van der Laan, Marco Falke, Pieter Wuille, Gavin Andresen, Jonas Schnelli, Michael Ford, Matt Corallo, and Cory Fields, all of which are core contributors or have been at some point throughout the history of the project.
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