Bitcoin the Crypto King
Bitcoin was launched in 2008 by an anonymous person or group called Satoshi Nakamoto.
It was the first cryptocurrency to become popular on the internet, and for that reason, Bitcoin is often referred to as the King of Cryptocurrencies or the original cryptocurrency.
There is a maximum supply of 21 million bitcoin, which will never be increased, however each bitcoin may be split into 100 million Satoshis.
On 22nd May 2010, a man called Laszlo Hanyecz agreed to pay 10,000 bitcoin, worth a total of $41 at the time, for two pizzas. Currently in 2021, that same 10,000 bitcoin would be worth a staggering $298.2 million!
What is a Bitcoin?
Bitcoin, as all other cryptocurrencies do not exist as objects, the bitcoin network is simply a shared public ledger.
These ledgers record all the transactions ever made within the blockchain network, and are verified throughout the network nodes to form a consensus. Cryptography is employed to secure the network, which follow strict rules, and prevents previous blocks from being modified.
The blocks form a chain hence ‘blockchain’, and each block refers to the previous block via a cryptographic hash. If a previous hash is altered, it would corrupt the whole chain and flag an error in the consensus.
The Bitcoin Network
To maintain the Bitcoin network, it is necessary for computers (nodes), to process the transactions. These nodes are rewarded in bitcoin for their work and are known as miners. Miners have to use electricity for their computing devices or nodes, which can be very expensive.
This is why many mining pools are located in areas of the world where the cost of electricity is cheap.
Due to the expensive costs of acquiring mining hardware and paying electricity bills, bitcoin miners have come together to form mining pools.
Most of these mining pools are currently located in China, Czech Republic, Iceland, Japan, Georgia and Russia. However, at the time of writing there are some miners moving from China to countries like Norway, Sweden and the US, due to the cheaper electricity prices.
What is proof of work?
Bitcoin employs a proof of work system (POW) called HashCash. The bitcoin miners run some computer code, which pools together unconfirmed transactions and combined with other data forms a block, resulting in a reward.
However, the block can only be accepted if it meets certain criteria, which takes some additional computational processing. The block is accepted when a miner discovers by trial and error something called a Nonce number – number only used once.
The Nonce is used to set a difficulty level on the network, and requires a block hash to be preceded by a certain quantity of leading zeros. The difficulty level is periodically adjusted in the bitcoin network to maintain an average creation of six blocks per hour.
At the beginning of 2020, the hash difficulty requirement was hardened, as a response to faster hashing mining equipment. The new requirement was for the first 74 of 256 hash bits to be zero.
There have been many concerns over the amount of energy the bitcoin network consumes, however as global energy suppliers shift to cleaner alternatives, like wind and solar, then these concerns should become less of a concern.
You can view the original Bitcoin White Paper here
How to buy Bitcoin
Head over to our guide here