Lesson 2 – What is Bitcoin (BTC)?

Everything you need to know about Bitcoin (BTC)

Bitcoin (BTC) is the first and most well-known cryptocurrency, invented in 2009 by an individual (or group) using the pseudonym Satoshi Nakamoto. Bitcoin is a decentralized, censorship-resistant, and technically secure digital currency transferred directly from one person to another via the blockchain network.

In this system, central actors such as banks or other financial institutions are unnecessary for transactions. The blockchain is decentralized, with numerous users contributing their computing power to maintain the network. They play a crucial role in verifying bitcoin transactions and facilitating the creation and circulation of new Bitcoin.

How is Bitcoin created?

Bitcoins are traded and created through “mining”, a proccess enabled by the blockchain –– the underlying technology of the cryptocurrency. The Bitcoin blockchain can be visualized as a chain of blocks containing a collection of transactions. Since all participants always have access to the blockchain’s current data and can trace the entire transaction history, it is easy for them to check for manipulations in the blockchain.

The network is governed not by a central authority, but by its diverse users. With no single entity in control, the blockchain is regarded as particularly tamper-proof and resistant to censorship.

Another key element contributing to the security of the Bitcoin network is the consensus mechanism Proof- of- Work (PoW). When transactions are carried out, miners in the network verify the transactions contained in the blocks. This involves executing complex mathematical calculations. Once the network confirms the miners’ results, the transaction is verified and the block is added to the chain of previous blocks. Hence the name “blockchain”.

Once a block has been added, the miners begin verifying the next block in the queue. Mining requires significant computational effort, and as compensation, miners receive rewards in the form of Bitcoin. Thus, through the mining process, blocks are verified, added to the blockchain, and new Bitcoin is generated, which is then distributed as a reward to the miners.

What makes Bitcoin valuable?

Although a vast majority of them are already in circulation, predictions suggest that the last Bitcoin will not be generated until the year 2140. The reason for this is a process known as Bitcoin halving.

Bitcoin halving, which occurs roughly every four years, halves the rewards given to Bitcoin miners. This reduction in supply has the potential to increase Bitcoin’s value, making it appealing for investors. However, it may also impact the profitability of mining and the overall security of the network.

What is the difference between Bitcoin and altcoins?

Bitcoin and altcoins are both cryptocurrencies, but differ in their origin, purpose, and technology.

The term “altcoin” –– short for “Alternative to Bitcoin” –– refers to all cryptocurrencies developed after Bitcoin. These include thousands of different varieties, grouped into categories like Ethereum, Ripple’s XRP, Litecoin, and others.

1. Technological basis: Bitcoin operates on a decentralized blockchain using the Proof-of-Work consensus mechanism for mining new blocks. In contrast, altcoins use various consensus mechanisms (e.g., Proof-of-Stake, Delegated Proof-of-Stake) and offer varied functionalities. Some altcoins, like Litecoin, are closely based on Bitcoin’s code, while others, like Ethereum, feature completely different blockchain architectures.
2. Purpose and use: Bitcoin was initially conceptualized as a decentralized peer-to-peer payment system. Some altcoins, like Litecoin, were also developed as a means of payment but with slight modifications. Others, like Ethereum, provide platforms for decentralized applications (DApps) and smart contracts. There are also altcoins tailored to specific purposes, such as those focusing on privacy (Monero, Zcash) or cross-border payment solutions (Ripple’s XRP).

Where can one buy Bitcoin?

Investors can quickly, easily, and securely access the world of cryptocurrencies with BISON. BISON offers a platform where one can register for free and confidently invest in Bitcoin, ensuring the secure safekeeping of their assets. Your journey into Bitcoin investment can begin with this platform.