Bitcoin originated from a financial crisis in the United States in 2008. At that time, a large number of U.S. borrowers were unable to repay on time, causing banks to fall into a liquidity crisis. The U.S. government continued to print dollars to try to rescue the market, which eventually intensified the collapse of the "trust foam", leading to the outbreak of the financial crisis. The event fully exposed the fatal shortcomings of the centralized model: the central institution between the two parties to the transaction may not always play a positive role.
On November 1 of the same year, Satoshi Nakamoto, the founder of Bitcoin, released a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System. In the paper, he first mentioned an e-currency whose design is based on cryptography and relies on blockchain technology, which can solve the problem of transaction trust. He called this digital currency "Bitcoin".
How does Bitcoin (BTC) Work?
Unlike traditional finance, Bitcoin is completely "decentralized". Anyone in the world can directly conduct Bitcoin transactions at any place as long as they are connected to the Internet, without any intermediary or individual.
Behind Bitcoin is a completely decentralized and highly consensus network, and the blockchain technology that supports the Bitcoin network. In the Bitcoin network, each node is responsible for maintaining the security of the system and the effectiveness of transaction information. Meanwhile, it records transactions and broadcasts the transaction information to share the ledger information to the whole network.
In the whole Bitcoin network, everyone (node) can keep accounts and broadcast bills, and each transaction will be recorded in a chain composed of many blocks. Since the capacity of each block is limited, if the transaction information in the previous block is saturated, a new block will be generated to record the new transaction information. At this time, the latest "to be validated" transaction will determine the bookkeeping right of the new block through the "problem-solving speed" of many miners (nodes). Nodes (i.e. miners) participating in the competition for bookkeeping rights need to use powerful computer hardware to solve very complex mathematical problems. The first miner who solves the problem will receive Bitcoin rewards and subsequent handling fees. This process is also known as "mining". The mechanism that nodes compete for the bookkeeping rights of new blocks by solving workload is also called PoW (proof of work consensus mechanism).
According to the setting in the white paper, Bitcoin cannot be generated indefinitely through mining. Its algorithm stipulates that for every 210,100 blocks (approximately four years), the block reward of Bitcoin will be halved. Presently (2022), the reward of Bitcoin blocks is 6.25. It is expected that the fourth reward will be halved in May 2024, and Bitcoin will be halved from 6.25 to 3.125 at that time. It is expected that all of Bitcoin will be "dug up" in 2140.
What is Bitcoin (BTC) ?
Bitcoin is a revolutionary digital asset. It breaks the central position of central banks in the traditional financial system and returns the trading / issuance rights to everyone.
We can understand Bitcoin as a payment system, which is similar to the online payment means used in our real life. The difference is that Bitcoin is decentralized, without any central server, and is completely interwoven by Bitcoin holders and global node networks. There is no issuer in the Bitcoin network. Because there is no guarantee and endorsement from an intermediary, it can better resist the occurrence of trust crisis and inflation.
Bitcoin (BTC) Crypto Wallet
In addition to placing BTC in the Gate.io exchange to facilitate trading, Bitcoin can also be placed in the crypto wallet.
Cryptocurrency wallets are different from wallets in daily life. Crypto wallets do not store cryptocurrency, but store the address used to trade Bitcoin and the private key matching the address. The address is used to store cryptocurrency. The private key is used to confirm the transaction. The cryptocurrency wallet can be simply understood as a data package that stores bank cards and bank card passwords.
According to different network environments, cryptocurrency wallets can be roughly divided into "cold wallets" and "hot wallets". Cold wallets are offline wallets, which refer to local offline wallets that are not connected to the Internet. Because the cold wallet is not connected to the Internet, it can better resist hacker attacks and has more advantages in saving cryptocurrencies. On the other hand, the cold wallet also has the shortcoming that once the account password and other information to log in the wallet are lost, the wallet can no longer be used or the cryptocurrency can be retrieved. Hot wallet, also known as online wallet, refers to the cryptocurrency wallet connected to the Internet. When using the hot wallet, you need to enter the local login information, and you can enter the wallet only after the server authentication. In the Internet environment, the hot wallet can carry out cryptocurrency transfer, collection and other operations at any time, which is more convenient and faster than the cold wallet, but it is also vulnerable to hacker attacks.