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Specificity and Function of Bitcoin

The concept of Bitcoin was to make a decentralized currency that would not have anything to do with banks. When you make a money transfer through any bank, it tracks everything from the withdrawal of your money from your account to making your transfer.

But when you buy or transfer bitcoins, all processes are performed without a human intermediary, and all transactions on the bitcoin network are recorded in a distributed data registry called blockchain, a copy of which is stored in a full node connected to the global bitcoin network. The blockchain data is regularly verified using the Proof-of-Work consensus algorithm.

In current versions of Bitcoin, the blockchain is downloaded entirely by each client, which makes the system completely decentralized. The data is not encrypted in any way and anyone can manually trace all transactions. There is even a special website called Bitcoin Block Explorer where one can easily see all the information about blocks and transactions.

For calculations in the bitcoin network, it uses the unit of the same name "Bitcoin" (BTC), which is the first and best-known cryptocurrency. Since its creation, bitcoin remains the largest cryptocurrency by its market capitalization.

If you look globally, Bitcoin is the very first cryptocurrency and the first technology that essentially established the concept of private property in the digital space. Property in the real world has a very limited default value and can lose its worth, can always be challenged in court, and so on. But the digital private property, in theory, has absolutely no limitations and no boundaries.

Advantages of Bitcoin over Fiat Currency

Bitcoin has a number of fundamental differences compared to conventional money:

• Decentralization: a central body of control just do not exist, as the control is distributed to all participants.
• Ease of use and owner confidentiality: it takes you about a minute to create a bitcoin wallet, and you don't have to provide any personal information.
• Transparency: Bitcoin stores all the history of transactions that ever took place.

It is also very practical and profitable thanks to:

• Small commission.
• High transfer speed.
• High protection.
• No risk of economic crises and legislative changes.

History of Bitcoin

• In January 2009, the first version of the payment system software appeared on the Internet. Initially, the currency was only used by computer geeks.
• On May 22, 2010, Florida programmer Laszlo Hanich first performed a documented bitcoin exchange for a real object, transferring 10,000 units of cryptocurrency to a user under the pseudonym Jerocs and getting two pizzas from him.
• Since mid-2010, Nakamoto stopped participating in bitcoin development. After that, the developer community is now responsible for the further development and coordination of the network.
• The first exchanges where bitcoins could be exchanged for real currency appeared on the Internet in 2010-2011. In the spring of 2011, bitcoin reached equal value with the U.S. dollar.
• Since 2011, this payment system has attracted the attention of drug traffickers and other illegal businesses because of the anonymity of the transactions. Since 2013, bitcoins can be used to pay for services and goods in several online stores and hotel booking services.
• In 2013. The University of Nicosia was the first university that began accepting bitcoins as a payment for tuition.

In mid-2010, Nakamoto stopped participating in bitcoin development. After that, the developer community is now responsible for the further development and coordination of the network.

New bitcoins are generated whenever a new block is successfully mined in its network. The frequency of creation of such blocks is constant: six units per hour. The amount of reward per block, and therefore the rate at which new bitcoins are issued, periodically decreases as a result of the so-called halving, which takes place every four years.

The first exchanges where bitcoins could be exchanged for real currency appeared on the Internet in 2010-2011. In the spring of 2011, bitcoin reached equal value with the U.S. dollar.

Since 2011, this payment system has attracted the attention of drug traffickers and other illegal businesses because of the anonymity of the transactions. Since 2013, bitcoins can be used to pay for services and goods in several online stores and hotel booking services. In 2013, The University of Nicosia was the first university that began accepting bitcoins as payment for tuition.

Bitcoin Mining

Bitcoin mining, roughly speaking, is the process of creating new blocks of the first cryptocurrency's network, based on computers solving complex mathematical problems.

The reward for mining is new bitcoins. Bitcoin mining involves people and organizations making calculations using special devices and as a result creating new blocks. For this work, miners are rewarded by the network with new coins.

In addition, hardware requires a lot of electricity and additional cooling for the system. The growing complexity of the network and decreasing rewards have also led to the fact that it is not profitable to mine bitcoin by yourself now. To be able to participate in mining and earn rewards, individual miners join together to form mining pools.

Mining Pools

Mining pool is the combined power of the equipment of several "miners" at once, which increases the probability of finding a block. Rewards are divided among all participants. Usually, to work together productively, a mining pool appoints special coordinators.

They monitor all organizational moments, and they are also responsible for distributing rewards. Rewards are divided according to calculations related to the amount of work performed by each participant.

The difficulty of transfers creates additional risk for Bitcoin investors because of the high transaction costs. Also, they are troublesome because they are energy intensive. That's why Bill Gates called Bitcoin an unsustainable tool: it causes high electricity consumption and increased heat generation. At the same time, the difficulty of translations helps miners, who have acquired powerful equipment.

Bitcoin's Downfall

Bitcoin began to quickly lose value in the first half of May 2022. On May 10, 2022 bitcoin rate fell below $30,000 according to Binance, a cryptocurrency exchange. One of the main factors that regularly influenced bitcoin's fall was the U.S. Federal Reserve's tightening of monetary policy. At the last meeting, in September 2022, the Federal Reserve raised its key rate for the fifth time in a row, to 3-3.25%. This has affected the global exchange system, including the cryptocurrency market because fear of uncertainty is forcing a lot of investors to convert their money into fiat assets.

At the last meeting, in September 2022, the Federal Reserve raised its key rate for the fifth time in a row, to 3-3.25%. This has affected the global exchange system, including the cryptocurrency market because fear of uncertainty is forcing many investors to convert their money into fiat assets.

Bitcoin's Future

Bitcoin is having a hard time nowadays, but many things indicate that this is just a temporary fall. The approval of the regulation of stablecoins in the United States will be an important event that is good for the growth of the crypto market.

The Stablecoin Transparency Act mentioned by the billionaire has already been introduced in the Senate. It not only fixes the concept of stablecoin but also forces all issuers of such cryptocurrencies to have reserves to support them.