The Bitcoin: history and evolution 1/2
- What is the Bitcoin?
The bitcoin, literally a coin made of bits, is a decentralized digital cryptocurrency created in 2009 by an anonymous developer known under the pseudonym Satoshi Nakamoto. Its symbol is BTC.
- Decentralized because there is no dependency on one central emitter.
- Digital because it is created and stored electronically.
- Crypto because cryptography is used to control the creation and transfer of money.
The bitcoin is a currency while Bitcoin is the payment system used to exchange it.
The bitcoin is very similar to gold. Only 21,000,000 Bitcoins will ever be created as only X amount of gold will ever be discovered on Earth. This is different from usual currencies where central banks can print money at their discretion.
The source code behind Bitcoin is open source so anybody can make sure it is secured.
- How does a transaction work?
The biggest issue with a virtual currency is the “double spending problem” or “How can I be sure you didn’t copy the currency to spend it again”.
With the Bitcoin, the solution is simple, every node is aware of every transaction made, this historic is known as the Blockchain, it records bitcoin ownership at present and at all points in the past, it is public and even web browsable here https://blockchain.info/ .
A Bitcoin transaction is a digitally signed message transferring the ownership of bitcoins (any amount from 0,00000001 BTC) from one Bitcoin address to another.
Here is an example of a Bitcoin address, you can compare it to an account number in a bank except it’s not attached to a name.
Due to the work needed by servers to validate a transaction, the transfer takes about ten minutes to become effective.
- How does a Bitcoin come to life ?
To be valid a transaction has to be signed, cryptographically speaking. It is then sent to a pool of waiting transactions where special servers try to group them in a block validating them and adding a cryptographic checksum (used in the future as identifier of the block) making it unforgeable. The block is then added to the Blockchain.
Those special servers are called miners in reference to gold mining. This process takes time, specific hardware and a lot of computing power, so for each block, the first server achieving the task is rewarded with 25 newly created bitcoins.
The reward will be halved every 4 years until 21 000 000 bitcoins had been produced, approximately in 2140. For now, 25 bitcoins are born every 10 minutes.
Due to the uncertainty of winning the reward (because all the miners try to send the block) people owning the servers regroup in mining pool sharing their incomes.