Bitcoin price has significantly risen since 2008 when Satoshi Nakamoto announced “an electronic payment system based on cryptographic proof instead of trust.” There are a lot of versions of who Satoshi Nakamoto is. Some say it is a group of people, others say it is a pseudonym of one person. Person or persons named Satoshi Nakamoto left the project in 2010. Since then, no clues about the identity of bitcoin’s creator have appeared.
What about the price dynamics? In 2011, the price of one bitcoin (BTC) reached the level of $1. In 2013, bitcoin price reached $1,000 per coin. In December 2017, the price of BTC reached $19,000. BTC reached the maximum price on 10th of November 2021 and was sold for $69,000 per coin. Currently, BTC is traded at a level of $20,000.
When we are talking about Bitcoin, we mean that it is a virtual currency (also known as digital currency or cryptocurrency).
In simple words, Bitcoin is a decentralized digital currency — the largest in the terms of market cap, most recognizable and desirable for crypto traders. The term “bitcoin” has two definitions. When we spell it with a capital “B” letter (Bitcoin) we are talking about peer-to-peer network, and when we spell with lowercase “b” (bitcoin) we are talking about coins.
How does bitcoin work?
As we said earlier, Bitcoin is a virtual currency that uses a decentralized peer-to-peer mechanism.
- “Virtual currency” is a currency that doesn’t have a physical form. For example, you can buy Euros or Dollars in cash, hold them in your hand, and put them in your wallet. But bitcoin is completely digital and consists of lines of computer codes, and you store it in a digital bitcoin wallet.
- “Decentralized” means that bitcoin transactions are not regulated by an overarching body and the transaction will not be valid until more than 50% of the computers on the network will verify it. We know this principle as the “majority-rules principle.”
- “Peer-to-peer” means that you don’t need a third-party mediator to send bitcoins to other users on the network.
For example, bitcoin can be used as regular currency and can be exchanged for goods and services.
Buying with bitcoin
To buy something with bitcoin, you need access to your bitcoin wallet and send the agreed amount of bitcoins to a vendor. To increase security, bitcoin transactions use a “private key” to confirm exchange of coins between wallets.
Then your transactions are added to the “block” of the blockchain. Blockchain is a distributed database in the Bitcoin system which became the basis of this cryptocurrency, acting as a ledger of all operations.
Blocks store cryptographic data about transactions. Each block contains a timestamp and a link to the previous block, and they are all lined up in a chain that is sequential and continuous. Each block has a unique signature that is called “hash”.
Before a transaction is added to the blockchain, it must be authorized, verified and confirmed by the miners.
Miners are nodes of the blockchain network that process, verify and add transactions to blocks. On public blockchains, the decision to add a transaction to the chain is made by a consensus algorithm, a set of rules by which most nodes agree that a transaction is valid. In bitcoin, such a consensus algorithm is Proof-of-Work (PoW).
When a user signs a transaction, it enters the mempool. This is a list of transactions that are waiting to be added to a block. When a miner adds a transaction to a block, it is considered confirmed.
Only after the miners confirm that the transaction is valid, it enters the block (that no one spends the same coins twice or spends funds that he does not have). When the block is generated (added to the blockchain), the sender’s coins will go to the recipient’s wallet. Transaction confirmation time (block generation) takes on average 10 minutes.
In conclusion, we would like to say that the blockchain used in the BTC is one of the best technologies. It is versatile, secure, decentralized, and can be used in a wide range of areas, from the financial sector to energy industry.
