What is BTC Cryptocurrency?
In the world of digital finance, Bitcoin (BTC) stands as a groundbreaking cryptocurrency, designed as a peer-to-peer electronic cash system by an enigmatic figure known as Satoshi Nakamoto. Let's take a look at how Bitcoin works.
Bitcoin: A Peer-to-Peer Electronic Cash System
At its core, Bitcoin is a cryptocurrency, a form of digital currency operating on a decentralized distributed ledger technology called blockchain. Unlike traditional currencies such as the US dollar, Bitcoin operates without a central authority, making it a store of value and a medium of exchange that transcends geographical boundaries and institutions.
Since its inception in a white paper published by Satoshi Nakamoto in 2008, Bitcoin has revolutionized the financial world. Bitcoin relies on strong cryptographic algorithms to secure transactions and provide transparency through its public ledger. The open-source nature of Bitcoin has inspired the development of other cryptocurrencies, with Ethereum being a notable example.
Unlike traditional payment systems such as credit cards, debit cards or PayPal, Bitcoin operates independently from financial institutions and central banks. It facilitates quick and low-cost cross-border transactions, eliminating the need for intermediaries and their associated fees. Instead, bank accounts are replaced by bitcoin addresses and crypto wallets. Users can purchase the digital money on cryptocurrency exchanges such as Coinbase, Binance and many more. They can use other cryptocurrencies or fiat currencies to purchase their BTC, and should always do their own research to avoid scams and fake Bitcoin exchanges. To enter the world of Bitcoin, you'll need a Bitcoin wallet to store your private keys and public address securely. Various wallet types, know as hot or cold wallets, cater to different security needs.
Understanding Bitcoin Transactions and Bitcoin Mining
Bitcoin transactions are the backbone of its functionality. When users send BTC, they sign the transaction with their private keys, alongside their public keys, using cryptography and ensuring security and authenticity on the Bitcoin network. These transactions are verified and recorded on the Bitcoin blockchain through a process called mining. Bitcoin uses the proof-of-work consensus mechanism, which requires members of the network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from cheating the system, making it extremely secure. Bitcoin miners (also known as nodes) use their computing power to solve complex mathematical problems, adding new blocks, each containing new transactions, to the blockchain and earning new Bitcoins as a reward.
The genesis block, where the first bitcoin was mined, was mined on January 3rd, 2009. The amount of Bitcoin that can circulate is capped: it has a finite supply of 21 million coins. This scarcity has led many to view BTC as a hedge against traditional financial markets and a potential store of value. Every four years approximately, Bitcoin block rewards are cut in half: this is known as the Bitcoin halving. The halving occurs every 210,000 blocks. With the halving, the rate at which new bitcoins are released into circulation is reduced, enforcing a synthetic inflation of the price of Bitcoin, until the maximum supply of 21 million BTC is reached.
Bitcoin use cases
Cryptocurrencies are known for their volatility: the value of Bitcoin varies and yet, BTC has remained the biggest and most trusted crypto out there. In fact, any cryptocurrency that isn't Bitcoin is called an altcoin. As Bitcoin continues to evolve, it faces ongoing debates and challenges regarding its scalability, transaction fees, and energy consumption, as well as its use cases.
Payment
To use your BTC, you'll need a cryptocurrency wallet (that is compatible with Bitcoin). As the value of Bitcoin continues to grow and be more widely recognized, more and more merchants, retailers and stores now accept Bitcoin as a valid form of payment for goods and services. You can also find ATMs that let you withdraw cash with Bitcoin, or that let you purchase Bitcoin with cash. El Salvador was the first country to officially adopt Bitcoin as legal tender in June 2021. Transactions are facilitated using a wallet address or hardware terminals. Online businesses can also effortlessly incorporate Bitcoin as a payment option alongside traditional ones.
Speculation and investments
Bitcoin garnered the attention of investors and speculators as its popularity surged. The emergence of cryptocurrency exchanges from 2009 to 2017 streamlined the buying and selling of Bitcoin, resulting in a gradual increase in prices. This momentum persisted, prompting many individuals to acquire and hold Bitcoin with the expectation of continued price appreciation. Concurrently, traders began leveraging cryptocurrency exchanges for short-term trading, leading to a significant expansion of the market. With an all-time high of $64,863.10 on April 14, 2021, Bitcoin's popularity only increased.
However, in 2022, Bitcoin experienced a sharp decline in its price, which can be attributed in part to broader market instability stemming from factors such as inflation, rising interest rates, disruptions in supply chains due to the pandemic, and the conflict in Ukraine. Additionally, some prominent cryptocurrencies experienced substantial crashes, as did a major cryptocurrency exchange, raising concerns about the overall stability of digital currencies.
Many people buy Bitcoin primarily as an investment asset rather than relying on it as a means of conducting transactions. Nevertheless, its absence of guaranteed worth and its purely digital essence introduce various risks associated with both its acquisition and utilization, as with any other cryptocurrency. Bitcoin is often sold and bought on popular online markets which are entirely digital, and as any other virtual system, are therefore at risk from hackers, malware, and glitches. It should also be noted that Bitcoin and cryptocurrencies are not insured through the Securities Investor Protection Corporation (SIPC) or the Federal Deposit Insurance Corporation (FDIC), and there are no uniform or universal regulations about Bitcoin. Lastly, as mentioned above, Bitcoin values can fluctuate, so while BTC holders could make a lot of money, they could also lose some.
Ordinal inscriptions
Each Bitcoin is broken into 100,000,000 units called satoshis (or sats). Each sat is serially numbered, starting at 0. These numbers are "ordinal numbers" in the mathematical sense, giving an order to each sat in the total supply. Satoshi scarcity is cut in half every four years (halving every 210,000 blocks).
In 2023, the Ordinals protocol was released, allowing users to inscribe data (an image, text, etc) directly onto a satoshi, essentially bringing NFTs directly to the Bitcoin blockchain.
There has been a lot of controversy regarding Ordinals within the Bitcoin ecosystem. Debates encompass technical and narrative dimensions, highlighting stark divisions on how the Bitcoin blockchain should be harnessed.
For some, Bitcoin represents an emblematic identity, serving as a safeguard for their savings against inflation and making a powerful political statement. To this group, Bitcoin signifies a means of demonstrating that the world can function independently of entities like government bodies and conventional banks.
Conversely, there are those who view Bitcoin as merely one among many blockchain networks and cryptocurrencies, where digital assets are equally legitimate and welcome, much like on any other blockchain technology. In this context, Bitcoin ordinal inscriptions present a novel approach, obviating the need for a separate token or side chain, with data seamlessly etched into a Bitcoin block, while metadata resides on-chain, marking a transformative development in the realm of NFTs.