Sure, Bitcoin Price Is Cool, But Bitcoin Technology Is Hot

Bitcoin is back in the news.

As a wave of institutional liquidity is pouring into Bitcoin markets, even some of its best critics are struggling to dismiss the 12-year-old asset as its price soars to new heights.

At least, the last three years have proven that Bitcoin is definitely not dead. At most, it pays tribute to the investment thesis of its most bullish bidders: it was one of the most revolutionary technologies of its time.

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But what makes bitcoin so different from any other investment (or cryptocurrency) that blue-chip insurance funds, hedge funds and asset managers are now comfortable with buying?

Read more: Over $ 20K? Why is Bitcoin a Anything Value at all?

Bitcoin is a synthesis of decades of cryptographic technology and research with numerous predecessors and false startups that precede it. For all its predecessors, Bitcoin was the first attempt at digital cash and set out a (largely) decentralized system.

For those of you who are new, here’s what that means and the technical features that make bitcoin such a standout.

Fact # 1: Bitcoin is a cryptographic currency

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Unlike a common misconception, Bitcoin transactions are not kept secret or encrypted – in fact, they are quite public.

But Bitcoin’s system is built on public key cryptography, a branch of computer science that uses complex math (through a system of digital keys) to encode data and keep it hidden from those who don’t have the right key to decode it.

Read more: What Is Bitcoin?

With Bitcoin, users have a public key (where they can create public addresses to receive bitcoin) and a private key; as their names suggest, the former is supposed to be shared while the latter has to be kept secret (if revealed, your bitcoin can be stolen, but more on that later).

The private key is what gives you a claim to the bitcoin you own. Technically speaking, wallets store private keys and not “bitcoin.” All bitcoin exists on the blockchain – wallets hold the keys that give them user access.

You need your private key to approve transactions, and you need someone else’s public address to send a transaction.

If you are familiar with PGP encryption, you may see how similar Bitcoin transactions are. The same principles that make encrypted communications so secure are baked into Bitcoin code, except instead of messaging, Bitcoin design secures the bitcoin currency.

Fact: Bitcoin with capital “B” refers to Bitcoin technology or protocol. We use bitcoin with lowercase “b” when we refer to the digital currency.

Like sending an encrypted message, Bitcoin transactions are peer-to-peer and (because of the mining process, which we will deal with later) no one can block them.

Fact # 2: Bitcoin is unauthorized and resistant to censorship

Because bitcoin can be sent as freely as a message, Bitcoin is inclusive.

When Bitcoin’s creator Satoshi Nakamoto designed the system, he made it “unauthorized,” meaning that anyone can use Bitcoin to capture and transfer value. It also designed it to be “censorship-resistant,” meaning no one can stop you from joining the network and making transactions. No one can freeze the money in your wallet, and no one can stop you from making a transaction with Bitcoin.

Due to the way bitcoin transactions are processed, no central party has control over your payments. Unlike PayPal, Venmo, or any other electronic transfer, bitcoin payments are made directly between the payer and the recipient, thanks to the cryptography we touched on above.

The basis of this system, Bitcoin Core, is an open source software that is a wallet and an all-in-one server for the Bitcoin network. Anyone with the right hardware can download and run Bitcoin software; it keeps a copy of the Bitcoin blockchain transaction ledger and broadcasts transactions to other servers in the network.

“Running a full goal,” as it is called, is the ultimate exercise in Bitcoin management because you can fully explore the Bitcoin ledger yourself and broadcast your own transactions.

Even without running a full node, Bitcoin users can use the network at their discretion when using a wallet that allows them to control their own private keys, although this means they trust someone else’s network node to broadcast their proceedings for them.

Fact # 3: Bitcoin transactions are forever

The Bitcoin blockchain – the digital ledger that stores a record of all network transactions – is irreversible. A central party cannot change it, and no one can fool the network into spending coins that they do not own.

Bitcoin transactions are processed into the ledger by a global network of “miners,” individuals and co-operatives running machines to “mine” (maintain) the Bitcoin blockchain. Miners receive bitcoin as a reward for mining in the form of a “block reward,” a payment that goes to the miner (s) who finds the next block in blockchain order and records the latest transactions forthcoming in it.

Read more: How Does Bitcoin Transactions Work?

If you know anything about mining, you probably know that it needs * a lot * of energy because the mining competition is fierce. When you consider the price of bitcoin, this makes sense – they don’t give these things away for free!

This competition and energy expenditure help protect the network. Miners are incentivized to process transactions and not interfere with the transaction ledger – otherwise, they risk their payday and, in the case of the large mining companies, tens of millions of dollars in hardware and operational costs.

If a miner wanted to cheat, the only way to change Bitcoin transactions logged in the blockchain is to perform more work than about half of all other miners in the network – and the older the transaction, the longer it will have to for you to do it work. To give you an idea of ​​how much energy you would need to attack Bitcoin, the network consumes just as much electricity as an Austrian-sized nation or Switzerland.

Read more: How Bitcoin Mining Works

So changing a transaction of, say, three years ago would require hundreds of millions of dollars. Barriers are not theoretically impossible, but when you factor in the cost to mine with the decentralization of Bitcoin mining, they are highly unlikely (and have never happened in Bitcoin’s existence).

Fact # 4: Bitcoin is (practically) inconceivable

Of course, bitcoin can be stolen or seized if you are not careful.

But if you take the right precautions, you can make your coins practically impervious to seizure, because as long as you keep your private key (or password that controls your bitcoin) in your custody and away from the eyes of others, your coins in your complete control.

Read more: Incredible? Using Bitcoin to Counteract Police Terrorism in Nigeria

To increase security, you can set up “multi-signature” wallets that distribute access to your funds across multiple devices. Some wallets even include security features such as fake passwords that you can enter to show a blank account if you are at risk of being distorted, for example.

You can even memorize your private key in the form of a 12 to 24 word seed phrase, destroy the wallet associated with it, and store your bitcoin in your brain. When you want to access them again, you can download almost any Bitcoin wallet (all good ones support these “seed expressions”), plug in your seed phrase, and you can access the bitcoin in your ” brainwallet. ”

You can also store your seed phrase on a piece of paper or (more to the taste of hard-core Bitcoiners) on metal sheets to protect it from the elements, or you can encrypt it on a USB drive and store it in an airgapped laptop – and a computer that doesn’t is never connected to the internet.

It is even possible to send a bitcoin transaction without being connected to the internet via satellites and mesh networks.

Read more: GoTenna Partners With Blockstream Satellite To Make Using Bitcoin Without Internet Connection Simpler

Fact # 5: Bitcoin is a decentralized digital financial system

Bitcoin is a peer-to-peer payment network and a personal digital bank. Its economy is driven by consumers buying bitcoin, miners who process transactions and coin new bitcoin for circulation, node operators who explore the network and broadcast transactions, businesses that build on bitcoin and everyone in between.

This economy is also self-regulated. Every four years, a self-operating mechanism cuts the number of bitcoin mined by mining in half. Eventually, this reward will diminish until the last bitcoin is mined over a hundred years from now. This “halving cycle” ensures that Bitcoin’s supply will never exceed 21 million and makes its inflation rate predictable.

Satoshi Nakamoto titled Bitcoin white paper “Bitcoin: Peer-to-Peer Electronic Money System.” At its sharpest since then, Bitcoin * is * digital cash that you can spend as freely as physical currency, but some have taken this brand from the creator of Bitcoin as a sign that bitcoin is meant to be used primarily as a currency.

Bitcoin can be used this way, and new scaling technologies like the Lightning Network provide an infrastructure to process these transactions in faster and cheaper ways.

Read more: What Is Bitcoin Lightning Network?

But Bitcoin doesn’t care about what you’re using, ultimately. Companies including Square and MicroStrategy use it as treasury for their company’s savings. At the same time, everything that makes Bitcoin censorship resistant and unauthorized makes it an attractive source of disagreement protesting abusive governments, or a financial rescue for citizens living in countries that are with financial sanctions (and economically battered).

Yes, Bitcoin technology makes it attractive to criminals, but that’s only a small portion of the network’s real users. (Criminals use cash, too, after all!) And since all bitcoin transactions are public, sometimes it’s easier than not pinching illegal transactions on their handlers. Of course, there are also technologies that preserve privacy to make your blockchain footprint less traceable.

Bitcoin’s core technology is rooted in the principles of consumer freedom and financial freedom. Branches of this are a host of other software, wallets, protocols and dodads that developers are working on to make bitcoin more functional and sustainable for the long haul.

The rabbit hole is deep. If you’re ready to dive in and learn more, we’ve paid attention.

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