In the digital world, we are confronted with the latest inventions in a timely manner, because in the digital world, an idea does not require materials or other hardware. Your idea can be implemented quickly in the digital world . The first and most successful digital currency is Bitcoin . Moreover, Bitcoin was created in 2009 and its inventor introduced a new type of currency. Bitcoin was invented by Satoshi Nakamoto, which is a nickname. But nobody knows him.
Blockchain technology is a series of blocks connected by chains.
Each block contains information such as account number, account name, etc. These blocks are connected by chains.
The hash is a code for each block that is unique based on the block information, for example:
If the block information of A changes, the hash will also change. With chain technology , if the hash code of a block changes, the other blocks should confirm this change because the hash code of the block of B also contains the hash code of the block of A. With chains, this change is linked to the other blocks; in fact, all blocks should approve this change.
The hash is calculated according to mathematical rules and every change in the block is converted into the hash code . Then if anyone changes the block information, the other blocks will reject this change because this block information does not match the next and previous hash code. With this technology, the security is very high and it is very difficult to hack the system and change the information.
How does Bitcoin work in blockchain technology?
Bitcoin is a peer-to-peer system . When a sender sends money to the receiver, there is no induction coil between the sender and the receiver. On the other hand, in the normal financial market, when a sender wants to send $1 to the receiver, the money is transferred through a bank or financial institution. Moreover, in a peer-to-peer system, the bank or financial institution receives the fee from the sender or receiver. The money goes directly from the sender to the receiver’s account without the involvement of a merchant.
In a peer-to-peer system, the fee is paid to the miners. The miners are not a specific person or company. Anyone with a Bitcoin account can be a miner and receive the fee.
How is money transferred in Bitcoin in blockchain technology ?
All financial markets require security and the biggest and most important challenge is transaction security . In cryptocurrencies, the transaction is secured by blockchain technology.
You may be wondering what happens if a hacker changes the block information and then writes different information on the other blocks.
Because in blockchain technology, the data is not sorted on one server and all the information is copied to many different servers. The hacker would have to change all the system information and that is extremely difficult and maybe impossible. For example, let’s say you are in a group with B blockchain contract and this group has 10 users.
You get a piece of information from one user in the blockchain system, and all other users have a copy of it and must approve it. If you or a hacker changes that piece of information, the other 9 users can see that it is a fake piece of information and the system will reject the new piece of information because it does not match their piece of information.
Blockchain technology is one of the most innovative security ideas. Hashing means receiving an input chain of any length and issuing an output of fixed length.
Bitcoin uses the SHA-256 (Secure Hashing Algorithm 256) system. With the SHA-256 algorithm, the hash information is fixed at a length of 256 bits. This hashing system is different from the ones mentioned above.
Why does Bitcoin use this algorithm?
The answer is simple. If you use a simple hash algorithm, the hash code will be extra large for each new block.
What is Bitcoin mining?
Currently we understand how Bitcoin works and we have found that Bitcoin is not sorted on one server and the Bitcoin information is a distribution across many user systems.
If a block wants to change the difficult algorithm, it must be solved and approved by the system. Then these changes will require a lot of computers. In fact, you know that in the digital world, CPUs and GPUs are the computers.
The new super idea is that Bitcoin users are allowed to calculate the transaction in this system. They call it SOLVE THE BLOCK. The miners allow this system to use their CPU or GPU power to calculate the complex mathematical algorithm. In return, they receive Bitcoin as a reward or fee.
If the miner’s CPU has more power, he/she can help the system more and earn more rewards, in fact, miners rent their system power to the Bitcoin system.
When Bitcoin first started, the Bitcoin price was less than $0.05 per bit and now you have to pay more than $6000 to get 1 bit! If you had invested $100 in Bitcoin in 2009, you would now have $12,000,000!
Bitcoin is a new type of technology. Bitcoin is not backed by any company or controlled by any government and this is the most important advantage of Bitcoin and this advantage paves the successful path for Bitcoin.
Why do we only have 21 million Bitcoins and can’t get more?
Bitcoin is called digital gold because Bitcoin is not unlimited, just like real gold! Real gold is mined from the ground and Bitcoin is mined from the digital worlds! And both are not unlimited.
When the miners share their CPU power in this network, they try to solve complex algorithms to unlock the blocks and for each block the miners have a limited reward and at the moment the reward is 12.5 BTC.
The hard cap is the core of Bitcoin and cannot be changed. Bitcoin creator, Satoshi Nakamoto, formulated Bitcoin with a maximum supply of 21 million.
The Bitcoin mining rate is 25 coins per 10 minutes and will halve every 4 years until October 2140. All remaining coins will be mined . To extract each coin, miners should solve 6 blocks, which means 6 blocks * 24 hours * 365 days * 4 = 210240 Bitcoin per year. The reward for solving blocks will decrease every 4 years in the ratio 50 – 25 – 12.5 and so on.
If you calculate these numbers, you have a maximum of 100 lines, which means the maximum available bitcoins are 100*210240 = 21,024,000.
Bitcoin is not new now. There are a lot of other digital or cryptocurrencies out there right now and they all take their ideas from Bitcoin and try to improve that idea and offer new innovations. You might be wondering, “Is it good to invest in cryptocurrencies or not?”
My answer is yes if you like risky markets .
