what is bitcoin and how does it work
In this post, we will look at the reasons and principles of Bitcoin's birth and the countries of use.
If you look at the end of the post, you will be able to understand bitcoin more easily.
[Posting order]
1. what is bitcoin
2. how does it work
3. Countries recognized as a means of payment for Bitcoin
4. Bitcoin split
What is bitcoin
Bitcoin is not a currency used in real life, but a virtual currency used in online transactions.
it is a term that combines the digital units 'bit' and 'coin'
A programmer named Satoshi Nakamoto first developed Bitcoin in 2009 with the idea of creating a new currency to replace the existing legal tenders such as a dollar and yen.
in particular, 2009 was a period in the midst of the financial crisis that originated in the United States,
and is the year when the Federal Reserve Systme(FED) printed enormous amounts of dollars and supplied them to the market.
The process of making bitcoin is called mining in relation to the mining industry, and the person who makes bitcoin in this way is called a miner.
You can either mine bitcoins by solving math problems with a computer program or buy them in the market where the mined bitcoins are traded.
Bitcoin is traded completely anonymously, and anyone can open an account with just a computer and the Internet.
For this reason, it is also abused for crime and tax evasion. As the money supply is strictly limited, the total issuance is set at 21 million.
If the circulation exceeds a certain standard, the amount that can be mined at a time decreases and the problem becomes difficult, and scarcity increases.
Recently, it has become an issue once again through Ellen Musk. The reason is that in the US, you can buy Tesla with Bitcoin.
How does it work
Blockchain tech. applied to Bitcoin
Blockchain is a decentralized ledger record database technoloy developed to record digital currency transactions.
In financial transactions, it is a transaction system that does not have a bookkeeper, and is also referred to as a public transaction ledger.
It is not that the centralized bank keeps and is responsible for the transaction records on the centralized server.
Everyone participating in this trading system will keep the same ledger.
Whenever a new transaction occurs, the information is made into a separate block, and this block is linked to the existing ledger.
Since the distributed ledgers are compared with each other every time a transaction occurs, it is extremely difficult to manipulate the ledgers, thus maintaining strong security.
This blockchain is applied to Bitcoin, a representative online virtual currency.
Bitcoin transparently records transaction details in a ledger that anyone can read,
Several computers using Bitcoin verify this record every 10 minutes to prevent hacking.
Countries recognized as a means of payment for Bitcoin
in 2013, Germany recognized bitcoin as a payment method and Japan also recognized bitcoin as a payment method in 2017
Bitcoin split
Fork is a technology that upgrades the blockchain,
which is the basis of virtual currency, and fork originally means that a branch occurs in one place.
Forks are divided into Soft Fork and Hard Fork depending on their compatibility.
A hard fork is an impossible upgrade. If the hard fork is applied, the previous version of the blockchain cannot be used,
so the majority of users who developed and mined in the previous version must approve the upgrade.
Since August 2017, Bitcoin has been divided into Bitcoin and Bitcoin Cash (BCC, BCH).
The splitting of bitcoin is due to the different positions of developers and miners over the issue of the capacity of the blockchain in which bitcoins are traded.
Blockchain can generate and trade 1 megabyte (MB) of blocks per 10 minutes, allowing 7 transactions per second.
However, due to the rapid increase in transaction volume, there was a problem because the transaction could not be processed in a short time.
Accordingly, the developer proposed the introduction of Segwit, which increases processing capacity by separating complex signatures from blocks.
However, miners decided that SegWit would make it difficult to mine, so they opposed the introduction and eventually launched a new cryptocurrency Bitcoin Cash (BCH).
Since then, Bitcoin Gold (BCG) in October and Bitcoin Diamond in November have been separated from Bitcoin one after another.