What is Bitcoin?
Bitcoin (BTC) is the first cryptocurrency to emerge on the market and is currently the most popular and sought-after crypto coin in the world. This goliath was created with the intent of a de-centralized finance system without a middleman like a bank or government. One of the most notable features is the fully transparent public ledger that is immutable. It offers users increased security, transaction speed, and control over their funds. Transactions can vary between 10 minutes up to an hour depending on the size of the funds. The maximum supply limit is 21 million BTC and the smallest Bitcoin unit is a Satoshi – 0.0000000001 BTC (one hundred millionth).
Advantages
One of the main advantages of the Bitcoin network is the public ledger providing anonymity, transparency, and immutability. Here are some of the other benefits:
- Lightning Network
- Peer-to-peer transactions with no 3rd party as the middleman
- Low transaction fees – customizable by the user
Disadvantages
Transactions in the network can take as long as a few hours to confirm depending on the network traffic and amount of funds sent. This is due to the necessity of multiple confirmations and in the crypto world it is considered slow. Here are a few more drawbacks:
- Limited transactions per second (3.3 to 7 transactions per second)
- Risk of lost funds due to malicious activity
History and Evolution
The BTC network was created in January 2009 by Satoshi Nakamoto when he mined the first (Genesis) block. Nakamoto is estimated to have accumulated over 1 million coins before disappearing in 2010. Prior to that, he handed over the network alert key and control over the code repository to Gavin Andresen, who later became the founder of the Bitcoin Foundation. No one knows who Nakamoto is, if it’s a group of people or a single person. The Bitcoin cryptocurrency is famous for its volatility and firm grip on the market. In 2011 it was valued at $0.30 and by December 2017 it reached an all-time high of $19,666.
Bitcoin Blockchain
The blockchain technology of Bitcoin allowed it to become the first truly de-centralized peer-to-peer payment network. What makes the blockchain unique is that all transactions are stored in a public, tamper-proof database that is open for anyone to read without sacrificing anonymity. The network is run entirely by users, be that different types of nodes or miners, without 3rd party dependence. The driving force is validating blocks and thus confirming transactions. The hashing algorithm used in Bitcoin is SHA256 and the consensus protocol of the network is called Proof of Work. The way it works is that to receive a reward, miners need to run countless calculations to find an answer to the cryptographic puzzle. The difficulty and conditions of finding the correct result are defined in the PoW. If you’re interested in learning more about Blockchain’s inner working, I’ve got you covered.
For the network to keep operating, the users running miners and confirming transactions need to be incentivized. They get rewarded a fixed number of Bitcoin coins, once they find a block. The amount received is halved every 210 000 blocks and the difficulty of the networks increases with the increasing power of miners working in it. Currently, they receive 12.5 BTC for their efforts. Block time is generally 10 minutes and the size 1MB, which can extend up to 4MB after the adoption of SegWit.
Bitcoin Nodes
Nodes are an integral part of any blockchain network. They store either a partial or full copy of the blockchain transaction history, depending on their role. All wallets that connect to the blockchain can be considered a node. In the Bitcoin network there are Light nodes and Full nodes:
- Light Nodes – To operate they download a part of the blockchain on the device and keep it updated. Light nodes serve no validation purposes
- Full Nodes – These are the most important ones for the network. To have a full node on the Bitcoin network, you will need to download the whole blockchain which is over 200GB currently. Full nodes are also called Full Validation Nodes. They are the ones that reach a final consensus on the validity of blocks from miners and thus allow the initiation of transactions
The new Lightning Network
The whole idea of the Lightning Network introduces an off-chain approach for small transactions. This method could prove to be the solution to Bitcoin’s scalability issues. Users open a payment channel between themselves and can transfer funds freely without miners. Transactions are kept on a balance sheet which is regularly signed by both parties. After the channel is closed, it is fed back to the network as a single transaction.
Forks or Tokens Based on the Bitcoin network
Due to the popularity of this coin, there were users that wanted to improve its network or copy it. Hence, forks of the blockchain started appearing and other cryptocurrencies being developed mimicking Bitcoin but always improving on it.
Hard forks
- Bitcoin Cash: Forked at block 478558 – 1 August 2017
- Bitcoin Gold: Forked at block 491407 – 24 October 2017
- Bitcoin Private: Forked at block 511346 – 28 February 2018
Soft Forks
- Bitcoin XT
- Bitcoin Classic
- Bitcoin Unlimited
- Bitcoin ABC
The Bitcoin blockchain is the base for these tokens:
- Omni Token (OMNI)
- Factom (FCT)
- Counterparty Token (XCP)
How to Get Bitcoin
Because of its popularity and potential to turn a relatively small investment into a fortune, a lot of people want to obtain Bitcoin cryptocurrency. To do so, you currently have two options. The easiest method would be just to buy coins from a cryptocurrency exchange platform. Alternatively, you can opt for mining.
Where to Buy Bitcoins
Because Bitcoin is a titan in the crypto world, you can find it on every exchange platform. Here are the top 3 in which you can use fiat currency (USD, EUR etc.) to buy BTC coins:
| Exchange | Cryptocurrencies | Fiat Money | |
|---|---|---|---|
|
Bitmex
|
Bitcoin, Ripple, Cardano + 5 more | USD | Trade now |
|
Bitfinex
|
Bitcoin, Ethereum, Monero + 50 more | EUR, USD, GBP, JPY | Trade now |
|
Coinbase Pro
|
Bitcoin, Ethereum, Litecoin + 2 more | EUR, USD, GBP | Trade now |
Mining Bitcoin
Before the creation of exchange platforms, the only way that you could obtain Bitcoin was mining it. The most profitable way to do it currently is by using Application Specific Integrated Circuit devices, otherwise known as ASICs. They are specifically designed for the task with operating with high efficiency.
The best ASIC miner for Bitcoin according to my research will be the Pangolin Whatsminer M10S which is set to release in October 2018. You can find some alternatives below. If you’d like to learn more, here’s a detailed guide on BTC mining for your convenience.
| Мining Hardware | Hash Rate | Power | Price | |
|---|---|---|---|---|
| Whatsminer M10 ASIC | 33.0 TH/s | 2145W | $ 1,580 | buy now |
| Antminer S9i ASIC | 14.5 TH/s | 1320W | $ 612 | buy now |
| Antminer T9+ ASIC | 10.5 TH/s | 1400W | $ 498 | buy now |
Wallets for Bitcoin
To get started in the world of cryptocurrency, you will need a wallet. What it does is store your private and public keys which are used to receive, send and access funds.
The official wallet for Bitcoin is BitcoinCore. You can download it from their official website. This is a desktop version and when you install it, it will become a Full Node, meaning it will download the whole blockchain. Supported operating systems are Windows 7/8/10, MAC OSx and Linux.
- Windows installation – https://Bitcoin.org/en/full-node#windows-instructions
- Mac OSx guide – https://Bitcoin.org/en/full-node#mac-os-x-instructions
- Linux setup – https://Bitcoin.org/en/full-node#linux-instructions
Alternative Wallets
Alternative wallets can offer benefits like easier access, faster synchronization, the ability to hold alt coins, having higher security or just being a cold storage wallet. Here are the top choices for each category that support Bitcoin:
Online Wallets
Mobile Wallets
Network Security
The main security issues for the Bitcoin network are the double spending and 51% attacks. While double spending issues were solved in the past, 51% attacks are still a possibility. To read more about them you can check out Tripwire’s article.
Despite them, the Bitcoin cryptocurrency offers great security through its public ledger. There is no practical way to affect it in a malicious manner. As mentioned before it is completely transparent while still maintaining identity privacy. There are systems in place to prevent double spending of coins or centralization.
Future of the BTC Cryptocurrency
For better or worse, there is no official roadmap for the development of Bitcoin. It is community driven and decisions regarding improvements and updates are made on the fly.
News and Useful Links
I hope this short Bitcoin review was beneficial for your needs. Having in mind that everyone who invested in BTC coins wants to keep in touch with current or future events, I’ve compiled a list of trustworthy sources of information below.