Hello everyone, I am Paul Miyi, a small programmer. Here are our 8 days of learning blockchain from scratch together (if you are interested in blockchain technology, you can follow me for joint learning). Today, we want to talk about BTC.
Bitcoin (BTC) is the world's first cryptocurrency based on blockchain technology and is the starting point and cornerstone of the entire blockchain industry. It is not only the highest market capitalization digital asset but also a symbol of faith for global cryptocurrency investors and developers.
1. The Birth and Mission of Bitcoin
Bitcoin was born in 2009 and was designed by an anonymous developer known as Satoshi Nakamoto.
Background of the issue: Satoshi Nakamoto's distrust of the traditional financial system became the starting point for the birth of Bitcoin. The 2008 financial crisis exposed the drawbacks of centralized financial systems, such as trust crises, excessive currency issuance, and risks of bank bankruptcies.
Vision: The design goal of Bitcoin is to create a peer-to-peer electronic cash system that bypasses centralized institutions to achieve trustless global value transfer.
2. The Technical Core of Bitcoin
The underlying technology of Bitcoin is blockchain, and its technical design determines Bitcoin's security, transparency, and decentralization attributes.
2.1 Blockchain Ledger
Each transaction record is packed into a 'block', and each block is linked to form a chain through cryptographic algorithms.
Data is immutable, and the records of each block are jointly verified and stored by all nodes.
2.2 Proof of Work (PoW) Mechanism
Miners compete to generate new blocks by solving complex mathematical problems, ensuring network security and fairness.
Mining consumes a large amount of computational power, giving Bitcoin a high 'production cost' and enhancing its scarcity and value.
2.3 Decentralized Node Network
The Bitcoin network consists of thousands of nodes worldwide, with no single controlling party, making it highly resistant to censorship.
3. The economic model of Bitcoin
3.1 Constant Supply
The maximum supply of Bitcoin is 21 million coins, which is written into the protocol through algorithms and cannot be changed.
Currently, over 19.3 million Bitcoins have been mined (data from 2024), and about 1.7 million coins will be gradually released before 2140.
3.2 Block Rewards and Halving Mechanism
Bitcoin's mining rewards are halved every four years, and the current reward per block is 6.25 BTC.
The halving mechanism leads to a gradual reduction in Bitcoin supply, enhancing its deflationary characteristics.
3.3 Transaction Fees
In addition to mining rewards, miners also profit from transaction fees paid by users. As block rewards gradually decrease, transaction fees will become the main source of incentives.
4. The Application and Value of Bitcoin
4.1 Value Storage
Bitcoin is referred to as 'digital gold' due to its scarcity and anti-inflation characteristics. Institutional investors use it as a hedge tool in asset allocation.
4.2 Payment Functionality
Bitcoin can be used for peer-to-peer payments, especially with advantages of low cost and high efficiency in cross-border transfers.
However, due to insufficient network scalability, the popularity of Bitcoin payments remains limited.
4.3 Social Significance
Financial Freedom: Bitcoin allows users to hold and transfer wealth without relying on banks, giving individuals more financial autonomy.
Censorship Resistance: Regardless of government or institutional intervention, no one can easily freeze or stop Bitcoin transactions.
5. The market performance and significance of Bitcoin
5.1 Market Capitalization Performance
Bitcoin has long occupied 40%-50% of the total market capitalization of cryptocurrencies.
Its price has experienced several volatile swings over the past decade but has shown an overall upward trend.
5.2 Market Position
Bitcoin is the foundational trading pair for nearly all cryptocurrency exchanges (BTC/USD, BTC/ETH, etc.).
It is the 'first stop' for institutional investors and retail users entering the crypto market.
5.3 Impact on the Industry
The success of Bitcoin has driven the emergence of blockchain platforms such as Ethereum, laying the foundation for application ecosystems like DeFi and NFTs.
It is regarded as the cornerstone of trust and value in the blockchain industry, inspiring thousands of projects worldwide.
6. The Challenges and Future of Bitcoin
6.1 Scalability Issues
The Bitcoin network can only process about 7 transactions per second (TPS), which is less efficient compared to traditional payment systems like Visa.
Layer 2 solutions like the Lightning Network are exploring ways to solve this problem but have not yet been fully adopted.
6.2 Energy Consumption Controversy
The mining process consumes a large amount of energy, and some critics believe this contradicts global environmental goals.
In the future, more clean energy mining solutions may be needed to reduce carbon footprints.
6.3 Regulatory Pressure
The anonymity and decentralization of Bitcoin make it face regulatory challenges from countries around the world, especially concerning money laundering and illegal transactions.
7. Summary: The irreplaceability of Bitcoin
Bitcoin is not just a cryptocurrency; it represents a decentralized economic revolution.
It is the pioneer of cryptocurrencies, opening up a whole new path for blockchain technology.
As the token with the highest market capitalization, Bitcoin symbolizes 'hard currency' in the eyes of investors.
Tomorrow, we will continue to interpret the second-ranked token by market capitalization, Ethereum (ETH), stay tuned!