Going back to basics, Bitcoin 101

Always good to go back to the basics from time to time.

What is Bitcoin?

Bitcoin is a decentralized digital currency that is based on a peer-to-peer network. It was created in 2009 by an anonymous individual or group of individuals known as Satoshi Nakamoto.

What can you do you it?

Users can send and receive bitcoins through the use of bitcoin addresses, which are similar to email addresses. However, unlike traditional currencies, bitcoin is not backed by any physical asset or government and is not issued or regulated by any central authority. Instead, it relies on the trust and consensus of its users to maintain its value. This truest and consensus is maintained by running nodes and mining.

What is a bitcoin node?

A bitcoin node is a computer that is connected to the bitcoin network and participates in the validation and relay of transactions. There are two types of nodes in the bitcoin network: full nodes and lightweight nodes.

Full nodes are responsible for fully validating transactions and blocks and ensuring that they follow the rules of the bitcoin protocol. They do this by downloading the entire blockchain and verifying each block and transaction against the consensus rules. Full nodes are an important part of the bitcoin network, as they help to ensure the integrity and security of the blockchain.

Lightweight nodes, also known as simplified payment verification (SPV) nodes, do not download the entire blockchain. Instead, they rely on full nodes to provide them with the necessary information to validate transactions. Lightweight nodes are typically used by bitcoin wallet software to allow users to send and receive payments without having to download the entire blockchain.

Both full nodes and lightweight nodes are important for the overall health and security of the bitcoin network. Full nodes help to ensure the integrity of the blockchain, while lightweight nodes allow for greater accessibility and convenience for users.

What is this mining all about?

Bitcoin mining is an important part of the bitcoin network, as it helps to ensure the integrity and security of the blockchain and enables new transactions to be verified and added to the public ledger. Miners perform this work by using their computers to solve complex mathematical problems(SHA256), which are used to validate transactions and add new blocks to the blockchain. When a miner successfully adds a new block to the blockchain, they are rewarded with a certain number of bitcoins, which is known as the block reward. The current Block reward is 6.25 BTC.

What makes bitcoin special?

1. Decentralization: Bitcoin is not controlled by any government or financial institution. Instead, it is decentralized, meaning that it is underpinned by a network of computers that work together to verify and record transactions. This makes it resistant to censorship and fraud.
2. Limited supply: There is a limited supply of bitcoins, with a maximum of 21 million coins that will ever be in circulation. This means that, unlike fiat currencies, which can be printed by governments at will, bitcoins have a built-in scarcity that could potentially make them more valuable over time.
3. Security: Bitcoin uses advanced cryptographic techniques to secure its transactions and prevent fraud. This makes it a very secure way to store and transfer value.
4. International use: Bitcoin can be used to send and receive payments anywhere in the world, regardless of geographic location or local currency. This makes it an appealing option for people in countries with unstable or oppressive governments, or for those who want to make cross-border transactions without incurring high fees.
5. Potential for growth: Bitcoin has a relatively small market capitalization compared to other asset classes, which means that it has the potential for significant price appreciation if it becomes more widely adopted.