Last Updated on December 2, 2024 by sandeeppote

Bitcoin is a internet of money. Invented in 2008. Started in 2009

Bitcoin consists of –

  • Bitcoin Protocol – A denetralized peer-to-peer network
  • Blockchain – Public transaction ledger
  • Consensus rule – Set of rules for independent transaction validation and currency issuance
  • Proof-of-Work – Distributed computation system.

Mining– A decentralized mathematical and deterministic currency issuance. Competing to find solutions to a mathematical problem while processing bitcoin transactions (power to verify and record transactions) which is done every 10 minutes.

The mining process serves two purposes
in bitcoin:

  • Mining nodes validate all transactions by reference to bitcoin’s consensus rules.
    Therefore, mining provides security for bitcoin transactions by rejecting invalid
    or malformed transactions.
  • Mining creates new bitcoin in each block, almost like a central bank printing new
    money. The amount of bitcoin created per block is limited and diminishes with
    time, following a fixed issuance schedule

Transaction script – A decentralized transaction verification system.

Paper title – “Bitcoin: A Peer-to-Peer Electronic Cash System” written by Satoshi Nakamoto.

Fast, Secure and Borderless. Distributed, peer-to-peer system. No central server or point of control. Created through a process called as mining.

Bitcoin is completerly decentralised by design and free of any central authority or point of control that can be attacked or corrupted.

Every 10 minutes or so, Mining computers compete against thousands of similar systems in a global race to find a solution to a block of transactions. Finding such a solution, the so called Proof-of-Work (PoW)

Fixed total 21 millions coins will be created by the year 2140.

Bitcoin is virtual. User of bitcoin own keys that allow then to prove ownership stored in digital wallet.

Application Specific Integrated Circuits (ASIC)

Unverified transactions when included in a new block it is called as candidate block.

Bitcoin Improvement Proposal

Important Notes-

  • Bitcoin currency will defalte in long term as the rate of issuance will reduce and ultimately diminish.
  • Bitcoin is not a physical or digital coins. The coins are implied in transactions that can be transfered from sender to receipient.
  • Bitcoin users can transfer funds using the keys that a re stored in digital wallet/ledger. They need to sign a tranasction to unlock the value and spend it by transfering the funds. key that can sign the transactions is the only pre-requisite to spend bitcoin.