Bitcoin is an intangible currency, or cryptocurrency, that allows its holder to purchase goods and services over the Internet or in real life. Unlike conventional currencies, Bitcoin, like all virtual currencies, does not have a central bank or any central body or financial institutions to regulate it. Instead, Bitcoin relies on a vast over-the-counter network on the internet.
Bitcoin is in a way the result of the marriage between the idea of a P2P (over-the-counter) network, cryptographic techniques and the concept of money. As a result, Bitcoin, and in its wake, other cryptocurrencies, may be bringing about a new kind of financial system, a completely decentralized, completely free alternative monetary system.
The underlying technology of Bitcoin is the blockchain or blockchain system. It consists of storing and transmitting data in a secure, transparent and inviolable manner. Each transaction is a block that adds to the others in an ever-growing blockchain that keeps track of all transactions.
This blockchain lives on a network of computer nodes that makes it possible to use Bitcoin as a decentralized peer-to-peer digital currency. Any computer or device that connects to the Bitcoin interface can be considered a node. It communicates with other nodes by transmitting transaction and block information.
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WHO CREATED THE CRYPTO CURRENCY CALLED BITCOIN?
Bitcoin is the work of a genius who calls himself Satoshi Nakamoto. That’s all we know. It could be a man or a woman. It could even be several people, no one knows.
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HOW MANY BITCOINS ARE IN CIRCULATION IN THE WORLD?
You may be wondering how many Bitcoins there are in the world. At the end of 2019, around 18 million Bitcoins circulated in the world (compared to 16 million Bitcoins in 2016 and 10 million Bitcoins in 2013), for a money supply of around 66 billion, against 229 billion in 2018 (year of all records), $ 6 billion in 2016 and $ 1 billion in 2013. Thus, more than about 85% of Bitcoins are already in circulation. When asked how many Bitcoins are left to be mined, the answer is therefore just under 3 billion.
The amount of Bitcoins in circulation is set automatically by a network of computer servers, called miners, scattered around the world. They are responsible for confirming transactions and adding them to a decentralized transaction log. The volume of Bitcoins in circulation will reach precisely 21 million units in 2140. This is what the algorithm predicts.
A victim of its own success, the Bitcoin network, in its current configuration, will soon saturate, which risks causing both traffic jams and a degradation of service. Faced with this danger, a solution seems to be in order: introduce technical innovations in order to allow the network to absorb more traffic.
Moreover, it was in 2017 to try to find an alternative, the fork, which gave birth to Bitcoin Cash, created from a secondary chain keeping a common core with the main blockchain. The latter makes it possible to validate the blocks of transactions carried out much faster, at a lower cost, but it also mobilizes a much greater computing power than that required by Bitcoin.
HOW ARE BITCOINS PRODUCED?
This is where it gets a little technical - and a little weird.
Bitcoins are "excavated", following a predefined algorithm. They come in sets of 25 units, and are a reward for computational efforts aimed at finding the solution to what strongly resembles a random mathematical problem. However, we are not talking about excavating or creating Bitcoins but rather of mining Bitcoins.
Those who make Bitcoins are therefore called miners.
The role of the algorithm is to ensure that the progress of the Bitcoin stock is slower and slower, halving the reward every four years. Thus, at the beginning of 2017, the reward fell to 12.5 units and then in 2020 to 6.25 units. At the same time, the level of difficulty of the math problems to be solved increases over time, causing the rewards to become more distant.
The algorithm was designed in this way so that Bitcoin behaves exactly like a scarce commodity whose exploitation offers diminishing marginal returns. A bit like gold or oil, for example (easy and cheap to find at first, then more and more difficult and expensive).
To mine Bitcoins, it takes more and more time and resources (computing power, hardware, developers). Result: Although virtual, the supply of Bitcoins is constrained. The algorithm thus gives Bitcoin immunity against inflation.
In this, Bitcoin is the complete opposite of the Linden dollar, the currency of the Second Life online virtual world (remember?). The latter is produced by a central authority, a de facto monopoly, at its will, without any limit.
The scarcity of Bitcoin is one of the elements that gives it value. Another element is its usefulness as a means of payment.
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WHAT IS BITCOIN HALVING?
Bitcoin halving refers to the phenomenon whereby the miners' reward is halved every 4 years or so, or every 210,000 blocks excavated. The last one took place on May 11, 2020, and two halvings had taken place previously: July 9, 2016 and, again before November 28, 2012. The halving of May 11, 2020 increased the miners' reward from 12.5 to 6 , 25 bitcoins.
Halving, due to the scarcity of Bitcoin it entails, tends to drive up the price of cryptocurrency.
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