Bitcoin: The Pioneer of Cryptoverse?


The world got to learn a new concept of Cryptocurrency through Bitcoin. The topic of what is a cryptocurrency and what is bitcoin have become synonymous and are used interchangeably. We all have learned what cryptocurrency is, what blockchain is, its key features, and what led to the emergence of cryptocurrency. In this article, we will know cryptocurrency more specifically and shall gather all knowledge concerning bitcoin, the world’s first cryptocurrency.

Bitcoin was created by a mysterious individual or group of individuals named Satoshi Nakamoto in 2009. Since it is based on a decentralized system, it is based on blockchain technology. It runs on the bitcoin protocol(A set of rules and regulations to maintain the sanity of the bitcoin blockchain network).

 The consensus of the algorithm: 

Proof of work forms the basis of the bitcoin blockchain. It is a hexadecimal SHA 256 hash algorithm puzzle that needs to be solved to create a block in the blockchain and to fulfill transactions that occurred in the block. The algorithm is very difficult to solve and needs a sophisticated computational device. The nodes(stakeholders/devices in the blockchain) get into a rat race to solve it, and the node that solves the algorithm puzzle gets the reward in case of creating a block in the blockchain and a transaction fee for successful transactions. The transaction is considered a success only after getting validation from other users and storing it in their network. The process of creating or adding a block in the blockchain is called Bitcoin Mining, and nodes who indulge in this process are called Bitcoin Miners. Miners give a certain reward for adding a new block to the chain. We will discuss it later.


 Understanding Bitcoin Mining 

While we have an overview of blockchain technology and bitcoin Mining, we must know the structure of the block to have crystal clear knowledge of blockchain and bitcoin Mining. The block consists of things listed below:-

Bitcoin Monetary Policy 

The smallest unit is known as Satoshi. One bitcoin is equivalent to 100 million satoshis. The “B” in bitcoin stands for Ledger, and “b” stands for the amount of bitcoin.

Bitcoin is capped at 21 million, and for every block creation or transaction, the miner gets the reward of 6.25 bitcoin. The reward gets halved after every four years or after an interval of every 210,000 blocks created. The next halving will take place in May 2024. Continuation of the halving process will go on till 2140. According to experts, in the year 2140, miners will get 0 rewards. The halving process will maintain the supply of bitcoins in the market. The capping is done to avoid the devaluation of the currency, which happens in traditional fiat currency. 

Frequency of block creation: On average, it takes 10 minutes to create one block, and after every halving process, the speed gets reduced to half. 

In this way, bitcoin tries to maintain the flow of liquidity in the market. However, the excess demand and supply shortage due to monetary policy results in soaring bitcoin value. 

What kind of effect having will have on the bitcoin market and miners will be a topic of discussion in another blog.