Bitcoin is a hot topic right now around the world, and it seemingly had a sudden rise to fame with the latest bullish cycle that resulted in a value of Bitcoin of over $60,000 in 2021. In contrast, the price of Bitcoin ranged between $9,000 and $10,000 in the past year around March.
However, after the latest halving event, Bitcoin’s price surged, and it made a substantial change in the crypto market. If you’re new to the world of crypto and you want to learn more about Bitcoin, the best place to start is to read Bitcoin’s whitepaper, which is written by Bitcoin’s creator Satoshi Nakamoto. But, if you don’t have a lot of time to delve into Bitcoin’s white paper in this article, we explain the central aspects of Bitcoin from that document.
The Purpose of Bitcoin
The purpose of Bitcoin was to create a decentralized virtual currency that can be used for transferring funds online and on blockchain technology; in the paper, it is also mentioned as a peer-to-peer electronic cash system.
As a user, you need to know that Satoshi Nakamoto is an anonymous creator that didn’t want to have his real or identity associated with Bitcoin. But this is a minor distraction from the main goal of this project which was to create a decentralized cryptocurrency that isn’t impacted by economic factors like recession, inflation, financial crisis.
Actually, the cryptocurrency Bitcoin was launched in 2009, which is one year after the devastating global financial crisis has started. By developing a peer-to-peer-based system that is decentralized and not controlled by any financial institution, Bitcoin solves the problem of digital transactions being reliant on financial institutions.
Value of Bitcoin
Because this is a decentralized cryptocurrency, its value is based on the relationship between supply and demand. However, the supply is restricted to 21 million from the beginning—this promoted Bitcoin to a status of a rare digital currency.
And it’s another reason why Bitcoin is considered a safe-haven asset that is immune to inflation, recession, and other economic events. If you want to invest in Bitcoin, there are automated trading sites like Bitcoin Profit that make it easier for beginners to invest in BTC.
As the technology is quite advanced, you don’t need to spend a lot of time on the platform in order to gain better results. Actually, you only need about 20 minutes to set up your account for live trading.
Proof of Work
But, there is another problem that is only associated with cryptocurrencies, which is a double-spending problem. This problem isn’t associated with physical currencies because after you use cash in the real world, you will no longer have it, and you are no longer able to use it again. In terms of using fiat currencies for digital transactions again, there is an intermediary like a bank that updates your records when you use your funds online.
But this isn’t the case with Bitcoin since it is decentralized, and that’s why the proof of work as a concept and as a mechanism is extremely important for any cryptocurrency, including Bitcoin. It simultaneously solves the double-spending problem, and it creates a decentralized, safe, transparent environment for processing BTC transactions.
But, the blockchain network uses cryptographic proof in order to solve this problem. The blockchain network is designed in a way where the records are continuously updated, and they cannot be edited once they are added to the database.
Furthermore, the miners involved in the proof of work mechanism need to compete against each other to solve a hash puzzle, representing the cryptographic proof that the BTC transactions are legitimate. Plus, by working on the blockchain network, they enhance the level of security and ensure that the network is running smoothly.