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In the previous video, we talked about how Satoshi Nakamoto set up a mining mechanism to process and package the data on the Bitcoin blockchain, and Bitcoin was also distributed and circulated. So is the number of Bitcoins infinite? What is the use of the Bitcoin rewards for these miners, and what is their value?
In this video, Uncle Wu will talk to you about [Bitcoin's deflation mechanism] and the festival when Bitcoin was first given value, [Bitcoin Pizza Day].
Well, before we officially begin, new friends are welcome to like and follow Uncle Wu. I will continue to share the top 100 essential knowledge points about the Web3 metaverse and blockchain to help everyone learn Web3 in a systematic way. Please continue to pay attention!
1. Bitcoin halving deflation mechanism
We all know the concept of inflation. In the theory of supply and demand, when the supply is far greater than the demand, the price of the product will drop, which is called worthless. In the last video, we said that Satoshi Nakamoto designed a mining mechanism to allow someone to package and process the data in the blockchain, and they also need to be rewarded with a certain amount of Bitcoin. At this time, some people will ask, if Bitcoin continues to run, in 10 or 20 years, won’t the number of Bitcoins be huge and amazing? With such a large number, won’t inflation occur? Isn’t Bitcoin worthless?
At this point, we have to talk about Bitcoin’s halving deflation mechanism. In fact, when Bitcoin was first established, Satoshi Nakamoto thought of this problem and established Bitcoin as a [deflationary currency model]. It cannot be issued as the United States does in the real world, because Bitcoin aims to become an anti-inflation investment currency.
Satoshi Nakamoto stipulated that the total amount of Bitcoin is 21 million, and each coin can be refined to 8 decimal places. 50 Bitcoins will be issued in each block, and the output of each block will be halved after every 210,000 blocks. And because a block is generated on the Bitcoin chain every 10 minutes, 210,000 blocks is about four years, so every four years, we will encounter a Bitcoin halving event.
What does it mean? That is to say, at the beginning, when each block is generated, the miners who packaged it will be rewarded with a total of 50 bitcoins. Four years later, Bitcoin will be halved for the first time, and the reward for miners for each block will be only 25 bitcoins. After another four years, it will be only 12.5 bitcoins. And so on. Some people will ask, with the number decreasing, who will still mine? Everyone has misunderstood here. You have to think about the deflation mechanism itself, which will increase the price of currency. The number is small, but the value of each one has increased. For example, at the beginning, the miners could get 50 bitcoins, but at that time, 50 bitcoins could not even buy an egg. Now, although the number of bitcoins rewarded for each block is small, the price of a single bitcoin has reached tens of thousands of dollars, so it is still very good.
At this time, smart friends will ask again, what use do the miners who first got Bitcoin have? In other words, what was the value of Bitcoin in the beginning? Yes, Bitcoin was worthless in the beginning, so when did it start to have value? Here we have to mention the event when Bitcoin was first given value, that is, Bitcoin Pizza Day.
2. Bitcoin Pizza Day
In fact, when Bitcoin was first created, because there was no way to circulate and convert it into cash, Bitcoin had no real price. The Bitcoin mined by miners using computers could only be stored in their own Bitcoin client wallets.
It was not until May 18, 2010 that a programmer named Laszlo Hanyecz posted a message on the bitcointalk forum, expressing his hope to exchange 10,000 bitcoins for two pizzas. Then on May 22, a guy named Jercos exchanged two Papa John’s pizza coupons for 10,000 bitcoins! Bitcoin also completed its first transaction in history.
This day is also called "Bitcoin Pizza Day", and the two pizzas are also jokingly called the most expensive pizzas in history. At the peak of Bitcoin last year, the price of these two pizzas was about 460 million yuan, which could buy several courtyard houses in Beijing. The programmer who bought the pizza was also called "the most unlucky foodie" who lost hundreds of millions for a bite of food. This is also one of the enduring jokes in the blockchain world. But we still have to thank this programmer for establishing this milestone event.
Later, every year on May 22nd, Bitcoin Pizza Day, Bitcoin enthusiasts around the world would hold celebrations on this day, eating pizza and partying together to celebrate the first time Bitcoin was given value. This also became the first festival in the blockchain world.
Conclusion
Well, that’s all for this issue. Welcome to continue to pay attention to Uncle Wu’s series of 100 essential knowledge points about the Web3 Metaverse. In the next video, Uncle Wu will talk to you about smart contracts and the birth of the famous Ethereum. Welcome to continue to pay attention.
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