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What is Bitcoin and how does it work?

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Bitcoin

 

Bitcoin (₿) is a cryptocurrency invented in 2008 by an anonymous person or group known as Satoshi Nakamoto. The currency began to be used in 2009 when its application was released as open-source software.

Bitcoin is the first decentralized digital currency, without a central bank, that can be sent from one person to another through the Bitcoin network in a peer-to-peer manner without the need for a third party (intermediary such as banks). Network transfers are verified using encryption and recorded in a distributed ledger called the blockchain. Bitcoin is created as a reward for a process known as mining. It can be exchanged for other currencies, products, and services. Research produced by the University of Cambridge estimates that in 2017, between 2.9 to 5.8 million users are using a cryptocurrency wallet, most of whom use Bitcoin. Maintain healthy eyes

Bitcoin is criticized for its potential for illegal transactions, the high amount of electricity used for mining to produce new bitcoins, exchange rate fluctuations, and bitcoin exchange hacks. Some economists have described it as a “speculative bubble”.

The Bitcoin network has been operating since 2009 and has not stopped since then, and because of the consensus system in the currency, no one has been able to hack the Bitcoin blockchain, and most of the hacks that take place are due to human errors in wallet management and not due to design flaws.

Date

Foundation

A person calling himself Satoshi Nakamoto first proposed the idea of Bitcoin in a research paper in 2008, describing it as a peer-to-peer electronic cash system, a technical term meaning direct dealing. Between one user and another without an intermediary (such as torrenting). Bitcoin founders say the goal of the currency, which was first introduced in 2009, is to change the global economy in the same way that the Web has changed publishing methods.

First buy with Bitcoin

The first purchase made by Bitcoin, was in exchange for two pizzas when a programmer named Laszlo Hannah posted a discussion on a Bitcoin forum requesting to buy two large pizzas for 10,000 Bitcoin on May 18, 2010, 11 years after that transaction exceeded the value of the 10,000 Bitcoin that Paid for two pizzas $318,000,000.

Satoshi’s identity

In 2016, Australian businessman Craig Wright declared himself Satoshi Nakamoto, providing technical proof, but his evidence was easily debunked.

 

The design

The unit of account

The unit of account in the bitcoin system is the bitcoin. The trading symbol used to represent Bitcoin is BTC and XTC and the Unicode symbol used is ₿. Alternate units for small amounts of bitcoin are millibitcoin (mBTC) and satoshi (sat). The sat unit was named in honor of the creator of the currency, satoshi, and it is the smallest value in the bitcoin system and is 1⁄100,000,000 bitcoins, which is one hundred millionth of a bitcoin. A milli-bitcoin is equal to 1/1000 Bitcoin; one-thousandth of a bitcoin or 100,000 satoshis.

Blinding

Bitcoin is considered a cryptocurrency, meaning that it is based mainly on the principles of encryption in all its aspects, and it is also considered the first currency of its kind and the most famous and widespread, but despite that it is not the only cryptocurrency on the Internet today. Where there are more than 60 different crypto-currencies, 6 of which can be described as the main, depending on the number of users and the structure of each network, in addition to the places where these crypto-currencies can be exchanged and purchased for other currencies. All current cryptocurrencies are based on the principle of Bitcoin itself, except for Ripple, and since Bitcoin is open source, it is possible to clone it, make some modifications to it, and then launch a new currency.

Decentralization

Bitcoin is an anonymous digital currency, as the process of transferring through it only requires knowing the wallet number of the person to whom it is transferred, and the transfer process is stored in the blockchain with a

special serial number, and this does not include the name of the sender or receiver or any other data of their own, which makes it a popular idea for all Privacy advocates, or sellers of illegal goods (such as drugs) alike online.

Bitcoin is based on financial transactions and uses a peer-to-peer network, electronic signature, and encryption between two people directly without an intermediary body regulating these transactions, where the money goes from one user account to another instantly and without any transfer fees (except for Network fees paid to miners) and without going through any banks or any intermediary bodies of any kind.

The currency is available globally and you don’t need complicated requirements or things to use it. When you get the currency, it is stored in an electronic wallet. It is possible to use this currency for many things, including buying books, gifts, or things that can be purchased via the Internet and convert them to other currencies such as the dollar or the euro.

Mining

Bitcoin mining is intended to extract and mine it. To simplify the concept, the process is similar to extracting gold. Extracting it from the ground requires specific equipment dedicated to that purpose and great effort. It is similar to Bitcoin mining. It requires specialized equipment and software that decodes the complex codes and calculations. These programs are free on the Internet and you can mine Bitcoin. On high-performance computers that can withstand the very high pressure of these programs, as for cloud mining, which is simply that companies specialized in the field called the pool (in English: Pool), which is to gather a group of people with the same goal, each pays a percentage of the money is an investment and when Profit takes money according to the percentage set.

 

Privacy

Bitcoin has a high level of secrecy. In principle, it is true, as all you need to send some bitcoins to someone else is only their address. But since every transfer is recorded in the Bitcoin log, although you do not know the identity of the owner of any address, you can know how many Bitcoins he has and what addresses have sent Bitcoins to. If someone explicitly declares that they own certain Bitcoin addresses, then you will be able to find out what addresses they have sent Bitcoins to and what addresses they have sent Bitcoins to. It is not out of the question to reveal your Bitcoin address, as you will need to give it to someone else in case you need them to send you some money. It is recommended to use different addresses for different transfers to maintain a certain level of anonymity, although many do not. Technically, it remains possible to trace the source of some suspicious transactions on the Bitcoin network, as it is sufficient to track transfers until they reach an address whose owner is known, and then it is sufficient to carry out reverse investigations until the suspicious account holder is reached. It is true that the amount of data related to all transfers are huge, but the power of computers is constantly increasing and the possibility of tracking these processes is very present, and it can even be asserted that tracking bitcoin theft is much easier than tracking the theft of money in paper form.

Currently, Bitcoin owners do not have many options to spend their money with, which is why some of them are exchanging them for traditional currencies. This is usually done via special platforms where bitcoins are exchanged with other users. It seems that if governments want to know the identities of the holders of some accounts, they should only legalize transfers instead of preventing them, as it will be possible to know the name of each account holder as soon as he wants to exchange what he has in exchange for traditional currencies, which represents a starting point for tracking stolen money.

 

Wallet

A Bitcoin wallet is like a secret and secure personal bank account and varies according to the bank, but the goal is one, which is to save the personal balance of the Bitcoin currency. The wallet address consists of an encrypted set of letters and numbers in order to receive the Bitcoin when purchasing this currency.

 

Economy

Bitcoin spending

Although there is a relatively limited group of sites that accept bitcoin payments for their products, compared to sites that deal in traditional currencies, bitcoin is supported by a growing group of sites, including large and diverse companies and sites, such as sites selling hosting services, reserving domain names, social networking, video and music sites And various websites that sell different types of products.

 

In addition to purchasing products, the user can exchange their existing bitcoins for other real currencies. This exchange takes place between the same users who want to sell Bitcoin and buy real currencies against it or vice versa. As a result, Bitcoin has its own exchange rate, and this price is heading to rise, reaching $ 30,000 today, after it was equivalent to only a few dollars a few years ago.Although there is a relatively limited group of sites that accept bitcoin payments for their products, compared to sites that deal in traditional currencies, bitcoin is supported by a growing group of sites, including large and diverse companies and sites, such as sites selling hosting services, reserving domain names, social networking, video and music sites And various websites that sell different types of products.

 

In addition to purchasing products, the user can exchange their existing bitcoins for other real currencies. This exchange takes place between the same users who want to sell Bitcoin and buy real currencies against it or vice versa. As a result, Bitcoin has its own exchange rate, and this price is heading to rise, reaching $ 30,000 today, after it was equivalent to only a few dollars a few years ago.

Bitcoin price

The price of Bitcoin is unstable and you have likely heard the news of Bitcoin crossing the $58,000 barrier, up or down. Some believe that this price is exaggerated, but there are many who believe that it is a price that does not give Bitcoin its due. Among the reasons for believing this is that Bitcoin is a commodity that requires a large amount of electricity to produce, and its price is supposed to be at least comparable to the price of the electricity that was consumed to produce it, or a little higher due to the miners playing a vital role in the Bitcoin network, and therefore there must be something to pay them to do so. We can know exactly what miners earn from the operations they perform, as there are sites that

publish these statistics ready-made, but this can be verified by analyzing the Bitcoin account history as well. At the time of writing this, miners have made $3,925,863 in the past 24 hours. This may seem like a huge amount, but doing those mining operations required 11,388,578 Gh/s which is also a very large number and requires a huge amount of electricity to do so. It is not easy to know how much it will cost but some calculations can be done that will give you a rough understanding of the situation.

Let’s say that most of the miners are using a hardware convergence Radeon 5870 video card which is considered as one of the most cost-effective cards on this site. The Radeon 5870 can do 402MB/s and costs about $1.2 per day if used on a device with two cards of the same type in the US, where the electricity price is relatively cheap. To reach the aforementioned result, we need to use 14,164,898 devices at a cost of $16,997,877, which represents a loss of $13,072,014 per day for prospectors.

Most of the miners do not use graphics cards, but mining devices, but these devices will need to provide many times the results of graphics cards in order for this mining profession to be profitable.

It is worth noting that some sites were previously publishing an estimate of the amount of loss/profit recorded by prospectors, but it seems that they have stopped doing so for reasons that we do not know. Some may think that it was not possible to give an

accurate estimate of the amount of loss or profit recorded by the prospectors, so this was eliminated. However, it is very possible that this was disposed of so as not to alienate the prospectors from the excavations.

From the perspective of miners, the current price of Bitcoin is much lower than it should be, which is why you will find that they have no desire to sell the coins in their possession at low prices because they have used huge amounts of electricity to produce it, in addition to investing in special equipment to do so. The situation will get worse for them unless the number of miners decreases significantly, as the number of coins to be produced will be halved every 4 years. On the other hand, large quantities of bitcoins were produced very cheaply in the beginnings of the currency when the number of miners was few and the “hardness” factor was very low, and therefore less electricity was needed, and this created a state of imbalance within the currency network, where bitcoin holders could The old ones sold their coins without recording losses compared to those who joined the front of prospectors recently.

The bitcoin currency crossed the $40,675 barrier on 01/08/2021, achieving a record high.

Paying off

Paying with Bitcoin is easier than buying with credit or debit cards, and it can be accepted without the need for a merchant bank account. Bitcoin payments are made through software to a Bitcoin wallet, either through a personal computer or a smartphone, by entering and sending the recipient’s address and the amount paid.

Bitcoin Apps

Bitcoin applications, sometimes called a Bitcoin client, allow users to interact with the Bitcoin network. In its basic form, the application allows the generation and preservation of user private keys and connections to the currency’s peer-to-peer network. The first Bitcoin app was launched in 2009 by Satoshi Nakamoto, the founder of Bitcoin, as a free and open-source app. This application, which is often called a satoshi application, is used as a wallet on personal computers for making electronic payments or as a server for receiving such payments and for other payment-related services. As for the Bitcoin-Qt application, it is considered a reference application because it represents the mechanism through which the Bitcoin protocol works and is considered an example for other applications. When making purchases using smartphones, Bitcoin applications are usually used that generate and/or read QR codes to facilitate the process of transfer and payment. There are also currently several applications that act as servers that confirm the actions taken on the network and add them to a block of remittances.

Legal status

Germany is the only country that has officially recognized the Bitcoin currency as a type of electronic

money, and thus the German government considered that it can tax the profits made by companies that deal with “Bitcoin”, while individual financial transactions remain tax-exempt.

A federal judge in the United States recently ruled that Bitcoin is a currency and a type of cash, and can be subject to government regulation, but the United States has not yet officially recognized the currency.

Some believe that the official recognition has a positive aspect, which is to give the currency more legitimacy, while others believe that this may open the door to more regulation of the currency and link it to governments, and this contradicts one of the advantages of Bitcoin as a currency that is not subject to any party.

Bitcoin in the Arab world

Compared to other parts of the world, Arab countries started using Bitcoin relatively late, as this currency was announced for the first time in Jordan at a tea bar in the capital, Amman. This was followed by a pizza restaurant and an ATM in Dubai, and Al Safeer Market became one of the first markets in Kuwait and the Middle East to accept Bitcoin in its dealings. As for the e-currency in the Arab media scene, news segments have recently started talking about it, albeit slightly.

 

Altcoins

Bitcoin is not the only virtual currency currently in the virtual markets. Thanks to the successes of Bitcoin, a variety of so-called “altcoins” or alternative virtual currencies have emerged with good value in the markets. The most important differences between Bitcoin and these alternative currencies are: Bitcoin is more difficult to mine and more expensive, while alternative currencies can usually be obtained in an easier and cheaper way, and their price can be more stable than the price of Bitcoin with a volatile price, and many of these currencies were created to avoid problems in the bitcoin system. Here is a list of 6 alternative cryptocurrencies:

Litecoin: If Bitcoin is gold, then Litecoin is silver, as everyone says. Litecoin has seen an increase in popularity in the recent period. Litecoin is based on the Bitcoin protocol but unlike Bitcoin, Litecoin is designed to make mining relatively cheap and easy and is faster in transactions than Bitcoin.

Dogecoin: It means the electronic dog currency and contains the image of a dog in its logo, and one of its most important features is the speed of currency production.

Novacoin: is a digital cryptocurrency based on open source code and peer-to-peer IP. It differs from most digital currencies alternative to Bitcoin in that it integrates protection programs within the currency’s core, which deters abuse by mining groups

Nemcoin: One million is the sum of the Nemcoin, which means that the Nemcoin will be relatively rare, exactly the same level as the rarity of Bitcoin. Namecoin helps create an uncensored internet, denying government control. It is a versatile platform that can be used for decentralized and unstructured DNS, its own kind of internet. It can also be used for messaging, voting, and system login.

Bircoin: Another currency of the digital encrypted virtual currency principle, and like Bitcoin, Bircoin is based on a peer-to-peer Internet protocol. Bircoin offers an increase in mining efficiency, as well as improved security and safeguards to avoid abuse by the mining group. Bitcoin has a market capitalization that is the fourth among the alternative virtual currencies.

VisaCoin: It is also an encrypted digital virtual currency, like Litecoin, which often adjusts the difficulty of mining. Unlike some other cryptocurrencies, Bitcoin is regularly updated to incorporate new features and improvements, including protection against abuse and forking by crowd mining.

Cardano: The Cardano project is an advanced decentralized blockchain system with a modern and advanced cryptocurrency project called (ADA), and the Cardano team launched this project with the aim of launching a smart contract platform so advanced that it allows more advanced features than any other protocol Existing and available in this field. According to the statements of those in charge of the Cardano project, the goal of the Cardano project is to launch the first scientific-based blockchain platform.

 

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