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Bitcoin

Last Updated: December 21, 2021

Bitcoin (BTC) is a decentralized digital currency – the first based on blockchain technology. BTC operates via the Bitcoin network, a proof-of-work (PoW) blockchain that enables cryptographically-secured peer-to-peer transactions.

Bitcoin is currently the largest cryptocurrency by market valuation.

Background

BTC is the cryptocurrency that drives the Bitcoin blockchain. BTC provides utility to blockchain network participants by allowing them to spend it in order to send transactions on the network. The Bitcoin blockchain was the first decentralized digital currency network to be deployed by software developers that is not controlled by any central authority. Bitcoin operates as a transaction network, the core layer of which is capable of supporting Script code-based, self-executing agreements, known as smart contracts.

History

Bitcoin represents the first decentralized network supporting a cryptographically-secure digital currency. Development began in 2006 by a pseudonymous group or individual known as “Satoshi Nakamoto,” who published the whitepaper outlining the network’s framework and operation in 2008. In 2009, the Bitcoin network software 0.1 launched. Nakamoto remained an active participant in the Bitcoin development ecosystem, providing insight into the future of the network until leaving the project in 2011. Nakamoto’s actual identity is a contentious topic in the cryptocurrency community, and considering there has been no verifiable communication from Nakamoto since leaving the Bitcoin project, the debate goes on. Today, Bitcoin’s code is the engineering effort of hundreds of developers who work together to fix, enhance, and update the network.

What is BTC’s place in the ecosystem?

Scalability

As one of the first blockchain protocols, Bitcoin also is among the most heavily traded, and hundreds of thousands of transactions are processed on the network every day. Since inception, there have been a number of updates, including the integration of Schnorr signatures to improve scaling and fungibility, and Merkelized Abstract Syntax Trees to reduce the size and increase the privacy of smart contracts. In addition, the Bitcoin network utilizes the Lightning Network, a second-layer solution featuring specific channels to enable rapid payments within the channel, or route payments through other channels via intermediate nodes with reduced fees.

Speed

The Bitcoin blockchain supports around 4 transactions per second, averaging a 60-minute confirmation time until block finality.

Security

The Bitcoin blockchain’s governance mechanism is designed to disincentivize attacks as the cost of hardware and energy to do so would far outweigh any potential gains. While the Bitcoin network architecture shields against external threats, account custody and smart contract security are largely managed by users and developers respectively.

Governance

The Bitcoin blockchain utilizes a proof-of-work (PoW) based consensus mechanism consisting of mining pools and hash power. Network participants operate specifically designed computer rigs, known as miners. By solving difficult math problems that in turn cryptographically secure transaction blocks, miners both confirm transaction blocks to the blockchain and receive a reward for doing so consisting of gas and network fees. Miners can form collectives in order to win the right to mine the next transaction block. When a group of miners wins, each participant receives a share of the block rewards equivalent to the hash power their miner provided to the mining pool.

Usage

BTC has started to be accepted among vendors as a payment for goods and services. Examples include telecommunications providers such as AT&T, software corporations such as Microsoft, and sports franchises such as the Dallas Mavericks. In 2021, the Legislative Assembly of El Salvador voted to make Bitcoin legal tender in El Salvador.

Community

The Bitcoin blockchain is supported by a global team of open-source developers committed to building on network functionality and features. As a non-profit entity, the Bitcoin Foundation facilitates workshops and conferences designed to help software engineers and other early adopters develop and innovate on the Bitcoin platform.

Resources

Bitcoin Foundation WebsiteWhitepaper

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