BITCOIN:Origin, Core concepts, Adoption and the Future!
Cryptocurrency is one of the most hotly debated global financial topics today. In 2013, Forbes named Bitcoin (BTC) the year's best investment. In 2014, Bloomberg countered with its proclamation of Bitcoin being the year's worst investment. From the early days of the FBI shutting down crypto-funded darknet black markets to the Securities and Exchange Commission approving ProShares Bitcoin Strategy, the first Bitcoin ETF in October 2021, cryptocurrency has had an exciting and volatile history.
Here are some of the highlights of Bitcoin's relatively short history:
✅How Bitcoin Started?
Bitcoin was the first cryptocurrency created and is now the most valuable and well known. It was first launched in January 2009 by a computer programmer or group of programmers under the pseudonym Satoshi Nakamoto, whose actual identity has never been verified.
A 2008 white paper by Bitcoin's mysterious creator revealed the blockchain system that would be the backbone of the cryptocurrency market. A blockchain is a digital ledger of transactions that is replicated and distributed across a network of computer systems to secure information.
✅Bitcoin Core Concepts:
1️⃣Block: A block is a group of Bitcoin transactions over a certain period of time. The transactions are verified by "miners," who are rewarded for verifying the transactions with newly created BTC.
2️⃣Bitcoin units: Each Bitcoin is divisible to eight decimal places. A millibitcoin (mBTC) is 1/1,000th of a Bitcoin. The smallest unit is a satoshi (sat), which is 1/100,000,000th of a Bitcoin.
3️⃣Transaction: A computer directive styled as "payer X sends Y Bitcoin to receiver Z."
4️⃣Blockchain: Each transaction forms an unbroken link on the chain. This transparent, public chain is what allows Bitcoin to exist and be usable. All blocks of transactions are linked to previous blocks of transactions, forming the etymology for the word "blockchain."
5️⃣Mining: Independent individuals or groups complete intensive and costly computer calculations to create a block.
6️⃣Block hash: Mining activities incorporate a record-keeping service that keeps the blockchain consistent, complete and unalterable. The hashes validate available Bitcoin and serve as a means of uniformly rewarding the miners.
7️⃣Blockchain address: A sequence of 25 to 34 alphanumeric characters. This is the information that is given to other parties so they know where to send the coins. They are considered pseudonymous because, while the blockchain itself is public, the address shields personally identifiable information.
Cryptocurrency exchanges may be required by law to collect personally identifiable information, but each transaction can be associated with a different Bitcoin address to maintain privacy.
8️⃣Wallet: Any individual or entity wishing to exchange Bitcoin (and not store them on an exchange, in someone else's custody) must create a digital collection of the credentials, known as a wallet, necessary to transact coins.
9️⃣Full clients: This is a wallet that includes a full copy of the entire blockchain. This is the safest form of storage other than offline, or "cold storage," but it requires substantial digital space.
🔟Lightweight clients: This is a wallet that includes a more limited version of the blockchain to enable it to be portable on devices, such as a smartphone. Since the entire blockchain is not available, a party using a lightweight wallet must trust intermediaries who have full wallets.
1️⃣1️⃣Keys: These are the credentials stored in the wallet. Like a safe-deposit box, there are two keys necessary for each transaction.
Public: This is the technology necessary to encrypt and decrypt transactions. It is "one way," meaning that it easily unlocks transactions, but it can't be used to reverse the transaction. This key enables the blockchain to be uninterrupted.
Private: This is the passcode that transacting parties initiate so that the transaction is unique to themselves. To spend Bitcoin, one must know their own private key and digitally sign the transaction. The party's signature is verified by the public key without revealing the private key.
If the party loses its key, the Bitcoin in the wallet becomes essentially worthless, as it is unrecognizable and inaccessible by anyone. According to Chainalysis, a blockchain analytics company, roughly 20% of Bitcoins have been forgone by parties who lost the private key. Additionally, if the private key is revealed in a security breach, it is possible for the value of Bitcoins to be stolen. In 2022, cryptocurrency investors lost a record $3.8 billion to hackers.
1️⃣2️⃣Cold storage: Private keys are stored offline to help avoid losing them or exposing them to a security breach.
✅Bitcoin Adoption and Controversy:
Bitcoin supporters also note that more and more institutions, countries and platforms are accepting the digital currency, and they hold hopes for Bitcoin to become a global reserve currency.
Although some countries, most notably China, have banned Bitcoin and other cryptocurrencies, others still are embracing it.
Some countries have actively begun trading in Bitcoin, often due to global financial pressures. El Salvador adopted Bitcoin as its legal tender in 2021 to resolve deep economic woes. Unfortunately, the price of Bitcoin dropped precipitously since, the country is still struggling to meet its debt obligations, and public adoption has been lackluster.
Ukraine posted two crypto wallets at the beginning of the Russian invasion to raise funds, attracting more than $10.2 million within the first week to fund both humanitarian needs and military support. Ukraine anticipates rebuilding its economy using blockchain technology. Iran has transacted $8 billion in Bitcoin to bypass U.S. financial sanctions on the country.
Bitcoin has also attracted controversy due to its climate change implications. Mining Bitcoin requires significant electricity use and is responsible for 0.1% of global greenhouse gas emissions. The University of Cambridge publishes the Cambridge Bitcoin Electricity Consumption Index (CEBCI), which provides estimates on the greenhouse gas emissions related to Bitcoin; its calculation is about 70 metric tons of carbon dioxide equivalent annually.
✅Anticipating the Future of Bitcoin:
Although Bitcoin is having a banner 2023 so far, surging more than 70% year to date through September 13, the cryptocurrency industry as a whole was dealt a major blow by the collapse of Sam Bankman-Fried's crypto exchange FTX and sister firm Alameda Research in 2022. The fallout may be felt for quite a while, and Congress will be determining what regulations are needed for Bitcoin going forward. It remains to be seen whether the industry can remain true to its decentralization goal.
However, the time is also ripe for new innovation to take place in blockchain technology, including non-fungible tokens, or NFTs, on the Ethereum blockchain. Web3 applications are also gaining momentum, especially in the gaming space, where digital currencies would have an eager audience.
Artificial intelligence is also rising in trading applications. Blockchain technology may be the key to determining what content is AI driven versus uniquely human, a differentiator that could have a great effect on the overall public adoption of AI.
However, despite the bumps in the road, blockchain technology is here to stay, says Marion Laboure, a senior economist at Deutsche Bank Research. The $1.2 trillion market cap for cryptocurrencies is simply too big to ignore, Laboure says.