Bitcoin (BTC) operates according to a set of rules embedded in its protocol and network. Here are some key rules and principles governing Bitcoin:
1. Decentralization: Bitcoin operates without a central authority, with a peer-to-peer network of nodes validating transactions and maintaining the blockchain.
2. Consensus Mechanism: Bitcoin uses a Proof-of-Work (PoW) consensus mechanism where miners solve complex mathematical problems to validate transactions and add new blocks to the blockchain.
3. Fixed Supply: The total supply of Bitcoin is capped at 21 million coins. This scarcity is intended to create a deflationary asset.
4. Block Time and Reward: New blocks are added to the Bitcoin blockchain approximately every 10 minutes. Miners are rewarded with newly created bitcoins and transaction fees from the transactions included in the block. The block reward halves approximately every four years (every 210,000 blocks), an event known as the "halving."
5. Transaction Validity: For a transaction to be valid, it must be digitally signed by the sender using their private key, ensuring authenticity and preventing double-spending. Transactions must also include inputs that are equal to or greater than the outputs.
6. Blockchain Immutability: Once a block is added to the blockchain, altering it requires redoing the Proof-of-Work for that block and all subsequent blocks, making it practically immutable.
7. Public Ledger: Bitcoin transactions are recorded on a public ledger called the blockchain, which is accessible to anyone. This ensures transparency and allows anyone to verify transactions.
8. Mining Difficulty: The difficulty of the mathematical problems miners must solve adjusts approximately every two weeks (every 2016 blocks) to ensure that blocks continue to be added to the blockchain at roughly 10-minute intervals, regardless of the total mining power on the network.
9. Script and Smart Contracts: Bitcoin uses a scripting language to define certain transaction conditions, allowing for simple smart contracts and multi-signature transactions.
10. Privacy and Pseudonymity: Bitcoin addresses are pseudonymous, meaning transactions are tied to addresses rather than personal identities. However, the public nature of the blockchain means transactions can sometimes be traced back to individuals through careful analysis.
These rules are maintained and enforced by the network participants (nodes and miners) and are encoded in Bitcoin's open-source software. Changes to these rules require consensus among the community, often leading to extensive discussion and debate within the ecosystem. #BTC☀ $BTC