Hello everyone, I am Paul, a little coder. Here is our 8-day journey of learning blockchain from scratch together (if you are interested in blockchain technology, feel free to follow me for co-learning). Today, we want to talk about BTC.

Bitcoin (BTC) is the world's first cryptocurrency based on blockchain technology, and it is also the starting point and cornerstone of the entire blockchain industry. It is not only the highest-valued 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 using the pseudonym 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 shortcomings of centralized financial systems, such as trust crises, excessive currency issuance, and risks of bank failures.

  • Vision: The design goal of Bitcoin is to create a peer-to-peer electronic cash system that bypasses centralized institutions, achieving trustless global value transfer.

2. The Technical Core of Bitcoin

The underlying technology of Bitcoin is blockchain, and its technological 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 into a chain using 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 requires a significant amount of computational power, thus giving Bitcoin a high 'production cost', increasing 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 an algorithm and cannot be changed.

  • Currently, over 19.3 million Bitcoins have been mined (2024 data), with approximately 1.7 million remaining to be gradually released before 2140.

3.2 Block Rewards and Halving Mechanism

  • Bitcoin's mining rewards are halved every four years, with the current reward per block being 6.25 BTC.

  • The halving mechanism causes Bitcoin's supply to gradually decrease, 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 primary source of incentive.

4. The Applications and Values of Bitcoin

4.1 Value Storage

  • Due to its scarcity and anti-inflation characteristics, Bitcoin is referred to as 'digital gold'. Institutional investors use it as a hedging tool in asset allocation.

4.2 Payment Function

  • Bitcoin can be used for peer-to-peer payments, particularly having low costs and high efficiency in cross-border transfers.

  • However, due to insufficient network scalability, the adoption of Bitcoin payments remains limited.

4.3 Social Significance

  • Financial Freedom: Bitcoin allows users to hold and transfer wealth without relying on banks, granting individuals more financial autonomy.

  • Censorship Resistance: No matter how governments or institutions intervene, no one can easily freeze or block Bitcoin transactions.

5. The market performance and significance of Bitcoin

5.1 Market Capitalization Performance

  • Bitcoin has long accounted for 40%-50% of the total market capitalization of cryptocurrencies.

  • Its price has experienced several drastic fluctuations over the past decade, but overall shows an upward trend.

5.2 Market Position

  • Bitcoin is the foundational trading pair for almost 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 like Ethereum, laying the foundation for applications such as 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 handle about 7 transactions per second (TPS), which is relatively low compared to traditional payment systems like Visa.

  • Layer 2 solutions like the Lightning Network are exploring ways to address this issue, but they have not yet been fully adopted.

6.2 Energy Consumption Controversy

  • The mining process consumes a significant amount of energy, and some critics argue that this contradicts global environmental goals.

  • In the future, more clean energy mining solutions may be needed to reduce the carbon footprint.

6.3 Regulatory Pressure

  • Bitcoin's anonymity and decentralized features face regulatory challenges from various countries, 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 a new path for blockchain technology.

  • As the number one token by market capitalization, Bitcoin symbolizes 'hard currency' in the minds of investors.

Tomorrow, we will continue to explore the second-largest token by market capitalization, Ethereum (ETH). Stay tuned!