Bitcoin Explained: The Peer-to-Peer Electronic Cash System, Mining, Scarcity, and Problem of Trust

Описание: Dive deep into the revolutionary technology of Bitcoin, the world’s first decentralized digital currency. Based on the principles laid out by Satoshi Nakamoto in the 2008 white paper, discover how Bitcoin enables online payments to be sent directly from one party to another without relying on centralized financial institutions.
What is Bitcoin?
Bitcoin (BTC) was created as a purely peer-to-peer electronic cash system. Emerging in the wake of the 2008 financial crisis, the system was designed to replace institutional trust with mathematical certainty. Bitcoin is a currency native to the internet that allows transactions across the globe more quickly and cheaply than traditional systems.
The Technology Behind Trustlessness
The core infrastructure of Bitcoin is the blockchain, a shared, immutable public distributed ledger. This ledger records every transaction ever made using Bitcoin. Unlike a bank's ledger, the Bitcoin blockchain is decentralized and distributed across the entire peer-to-peer network, meaning no single entity controls it.
Solving Double-Spending with Proof-of-Work
The system's security centers on solving the fundamental double-spending problem, where a digital coin might be spent multiple times. Bitcoin achieves this using the Proof-of-Work (PoW) consensus mechanism.
• Mining: Miners confirm pending transactions by grouping them into a block and competing to solve a complex cryptographic hash puzzle. The winner broadcasts the block, adding it to the chain.
• Security: This process timestamps transactions by hashing them into an ongoing chain, forming a record that cannot be changed without redoing the extensive computational work. The longest chain represents the most computational effort invested, serving as the agreed-upon, definitive transaction history.
Digital Scarcity and the Halving
Bitcoin’s monetary policy is defined by its absolute scarcity, enforced by a hard-coded supply limit of just 21 million total units. To control the issuance rate of new coins, the network uses the Halving mechanism.
• Halving Event: This event reduces the reward given to miners for successfully creating a new block by 50%. It occurs approximately every four years, specifically after every 210,000 blocks are added.
• Long-Term View: The issuance rate drops predictably, enhancing scarcity and positioning Bitcoin as a potential long-term store of value. After the final issuance around 2140, miners will rely solely on transaction fees for compensation and network security.
Using Bitcoin
A Bitcoin user interacts with the network via a wallet that stores pairs of public and private keys.
• The public key (or the address derived from it) can be shared to receive funds.
• The private key is secret and is used to digitally sign transactions, proving the owner has authorized the transfer. For faster, cheaper transactions, the Lightning Network (a Layer 2 solution) allows for instant settlement and higher throughput while leveraging the security of the Bitcoin base layer.

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