Sunday, December 26, 2021

Bitcoin (BTC) – the Gold Mined on the Blockchain

What is Bitcoin?

Bitcoin (BTC) is the world’s first peer-to-peer digital currency with the greatest market capitalization. Its enigmatic creator, Satoshi Nakamoto, published the Bitcoin whitepaper in late 2008 and mined the first block (aka the genesis block) in 2009. Their identity remains unknown, but it’s safe to say the person or people behind this name have changed the world forever.

What is a blockchain?

It is a distributed public ledger that provides a mechanism for the transaction data to be stored in a chain of blocks, each containing a hash of the previous block and other information. The blockchain is immutable, so records cannot be altered once the network approves them.

Proof-of-Work Algorithm

Bitcoin uses the Proof-of-Work (PoW) algorithm. To add a new block to Bitcoin’s public ledger, a miner must solve a cryptographic puzzle that requires significant processing power. This process of adding transaction records is called mining. The winner is rewarded with a certain number of bitcoins and gets to keep the transaction fees, so miners are invested in the system’s stability and fairness of transactions.

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BTC vs. Fiat

Unlike traditional currencies (or fiat money), Bitcoin is decentralized in nature, and by design, no single person or group influences the cryptocurrency. Furthermore, Bitcoin has a finite supply with an intentionally decreasing rate at which it can be generated. This makes Bitcoin similar to commodities such as gold and platinum. Moreover, Bitcoin is intended to behave like cash in the way that a transaction can’t be reversed once it has been included in the blockchain. And finally, Bitcoin is pseudonymous, meaning even though the user’s activity is linked to their address, there is little risk of their identities being revealed. Everyone has access to transaction history on the blockchain, but there’s no easy way of finding out who the coins belong to.

Into the Future

As the cryptocurrency industry has been evolving at an alarming rate, some have begun to doubt Bitcoin’s sustainability and relevance in the market. The first crypto is embarrassingly slow, with a transaction speed of fewer than 7 TPS, whereas many coins can easily do over 1000 TPS. Nevertheless, there are second-layer solutions such as Segregated Witness (or SegWit) and the Lightning Network already in place to ensure that Bitcoin can handle the growing traffic in its ecosystem. Besides, the enormous computational power that goes into the processing of transactions also means that the coin has an underlying physical value.

Where to store Bitcoins? One may find it easy to get lost in various cryptocurrency software these days, including wallets that can manage Bitcoins. Magnum Wallet offers a simple and secure way to send, receive, store and trade your digital currency, along with a few useful features such as hardware wallet support, airdrops, staking, and more.

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