Bitcoin has seen a turbulent time recently, this makes one question where does it come from and where will it go, the future of bitcoin is uncertain, but we look forward we need to see what has is in the past.
Bitcoin is a cryptographic based currency and worldwide monetary system. It is decentralized which means that the system is not backed by any government and has no central bank controlling the currency it is in sted based on a peer-to-peer network, the same type of network which has been used for file sharing services such as Bearshare, and torrent clients.
To secure the currency, it is based on a technology known as blockchain, in short, the blockchain technology is a continuously written ledger which can only be augmented not changed. One of the most prominent security features in the blockchain technology is that it is decentralized, so the ledger is distributed over many computers, and if one person changes their version of the ledger, it will be rejected by the network.
New bitcoins are created as a reward for the users to keep track of the network and validate transactions these users are also known as miners.
The creator of Bitcoin is known under the name Satoshi Nakamoto, whether or not it’s a man, woman or group is not known, many people have claimed to be the creator, and many people have been accused of being the creator, but we still have no evidence of who Satoshi Nakamoto is.
Bitcoin as a word first appeared on the 18th of August 2008, when the domain Bitcoin.org was first registered, on November that year a paper called “Bitcoin a peer-to-peer cash system” authored by someone named Satoshi Nakamoto. A name we to date don’t know who is behind. Was posted to a cryptographic mailing list. As of January 2009, the Bitcoin network came into existence with the genesis block being mined that January
One of the first supporters, adopters, and contributors to bitcoin was the receiver of the first bitcoin transaction, a programmer named Hal Finney. Finney downloaded the bitcoin software the same day as it was released and received 10 bitcoins from Nakamoto in the world’s first bitcoin transaction. Other early supporters we know of was Wei Dai, creator of a bitcoin predecessor b-money, and Nick Szabo, creator of a bitcoin predecessor bit gold.
In the early days, Nakamoto is estimated to have mined 1 million bitcoins. In 2010, Nakamoto handed the control of the Bitcoin Core code repository over to Gavin Andresen, who later became lead developer at the Bitcoin Foundation. Nakamoto subsequently disappeared from any involvement in bitcoin. Andresen stated he then sought to decentralize control, saying: “As soon as Satoshi stepped back and threw the project onto my shoulders, one of the first things I did was try to decentralize that. So, if I get hit by a bus, it would be clear that the project would go on.” This left an opportunity for controversy over the future development for bitcoin.
The value of the first bitcoin transactions was negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s.
On 6 August 2010, a significant vulnerability in the bitcoin protocol was spotted. Transactions were not properly verified before they were included in the blockchain, which let users bypass bitcoin’s economic restrictions and create an indefinite number of bitcoins. On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a single transaction and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol.
The blockchain behind bitcoin is a public ledger technology that records all bitcoin transactions. A solution that accomplishes this without any trusted central authority: the maintenance of the blockchain is performed by a network of communicating nodes running bitcoin software.Transactions will look something like this person A sends X amount of bitcoins to person B it is then broadcasted to the network using person A’s wallet software application. Network nodes can validate transactions, based on an earlier transaction to verify the amount in the wallet, then adds them to their copy of the ledger, and then broadcast these ledger additions to other nodes.
Blockchain technology is a distributed database technology that achieves multiple independent verifications of the chain and of ownership for any and every bitcoin, each network node stores its own copy of the blockchain ledger. Approximately six times per hour, a new group of transactions are accepted, that’s called a block, and the block added to the end of the blockchain ledger, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary to prevent double-spending, this creates an environment without central oversight, and without needing to trust the sender, thereby creating a trustless transaction.
Transactions are defined using a Forth-like scripting language. Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to what address in an output. To prevent double spending, each input must refer to a previous unspent output tied to the bitcoin address.
Paying a transaction fee is optional. Miners can choose which transactions to process and prioritize those that pay higher fees. Fees are based on the storage size of the transaction generated, which in turn is dependent on the number of inputs used to create the transaction. Furthermore, priority is given to older unspent inputs.
The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees included in that block, As of 9 July 2016, the reward amounted to 12.5 newly created bitcoins per block added to the blockchain. To claim the reward, a special transaction called a coinbase is included with the processed payments. All bitcoins in existence have been created in such coinbase transactions. The bitcoin protocol specifies that the reward for adding a block will be halved every 210,000 blocks (approximately every four years). Eventually, the reward will decrease to zero, when the reward hits zero bitcoin will have reached its maximum created amount of 21 million bitcoins. current estimates say we will reach that around 2140; the record keeping will then be rewarded by transaction fees only.
In other words, bitcoin’s inventor Nakamoto set a monetary policy based on artificial scarcity at bitcoin…