Time and again Bitcoin has been on the headlines for some reason or the other. Initially, when the idea of cryptocurrency was proposed in 2008, by Satoshi Nakamoto, Bitcoin was an obscure concept. People couldn’t grasp how this new mode of digital currency could revolutionize transactions across the globe.
In 2017, Bitcoin created a sensation all over the world. The currency that started with an initial price as low as 0.008 USD, suddenly surpassed the 20,000 USD mark in December. Several rags to riches stories surfaced across the world, where people who had casually invested a few dollars in this new currency were suddenly millionaires.
The idea of cryptocurrency gained a lot of prominences eventually. New cryptos like Litecoin, Ethereum, Dogecoin, Ripple, etc were introduced in the ever-expanding crypto market. However, Bitcoin has retained its position as the top-ranking cryptocurrency in the market.
So what exactly is Bitcoin? Let us find out.
Bitcoin and blockchain
Bitcoin is a digital currency that can be transferred on a peer-to-peer basis. Bitcoin like most other cryptocurrencies uses a decentralized ledger system. This decentralized ledger is what distinguishes it from the legal; tender issued by the government. The legal tender or the fiat money is regulated by government institutions such as the central banks, who are bestowed with the regulatory powers. Bitcoin on the other hand uses a public blockchain that can be accessed by computer networks across the world.
The blockchain is series of transactions that are made using the token of any cryptocurrency platform. For Bitcoin, the transaction history is approved and integrated into the blockchain by miners. Blockchain runs on smart contract technology. The smart contract is a code that runs the blockchain. This code requires a logical sequence to be attained for the blockchain to run. This logical sequence can only be obtained by solving complex mathematical equations that find the approximate sequence which will agree with the contract. This smart contract is what ensures the secure transaction and circulation of Bitcoins within its network.
The miners have equipped highly powered mining rigs (computers with high powered GPU) that solve mathematical equations to earn the ‘hash’ that is required for the continuation of the blockchain. When someone owns Bitcoin and a crypto wallet (to know more about Bitcoin investment and what differentiates it from other cryptos, you can visit BitBolt App) the transaction is approved of by the miners. Once it has been approved, new memory blocks are formulated which goes into the expansion of the existing blockchain.
Some Myths about Bitcoin
- It is believed that Bitcoin is completely secure. This draws in several investors and traders to deposit their life savings in Bitcoin. The Mt Gox hack is one popular instance where millions of Bitcoins were hacked from this famous Bitcoin exchange. While blockchain technology is based on cryptography, a highly secure and coded language that can be understood only by cryptographers, the security standard depends on the implementers of the blockchain.
- Similarly, there is a negative notion that Bitcoin blockchains are not scalable at all. While it is true that the scalability of Bitcoin is poor compared to other cryptos. The consensus that is required to obtain the Proof of Work for Bitcoin takes up a lot of time. This does not mean it is not scalable. The TPS (transaction per second) of Bitcoin can be improved by expanding the size of the blocks, without changing its POW algorithm, thus ramping up its scalability.
- Investors are demotivated from trading in Bitcoin because it is believed that the crypto technology wastes a lot of energy in generating the power that is required to sustain the Bitcoin network (it takes up as much power as a country like Chile would require). Any effort, from mining minerals to running the social media network requires a lot of energy input, and they some way or the other contribute to the natural degradation. To label a system adversely even when it is putting in the effort to reduce its carbon footprints (Bitcoin network uses non-renewable energy for almost 39% of its total power input) is simply an unfounded myth.
These myths negatively or positively shape the way we look at Bitcoin. While we do acknowledge that no system is perfect, we should also acknowledge that Bitcoin and other cryptocurrencies have ramped up the global economic infrastructure to make it better adapted to the age that we are living in.