So what is bitcoin?

The concept of bitcoin (BTC) was first proposed by Nakamoto on November 1, 2008. In fact, it has two meanings. One is the familiar definition, bitcoin is a virtual encrypted digital currency; in fact, the other is the key, bitcoin is a point-to-point e-cash system.

According to the white paper of bitcoin, bitcoin's system can be directly initiated by one party and paid to the other party without any financial institutions. How to understand this sentence? For example, brother Niu transfers 100 yuan to a friend. On the surface, the money is transferred, and 100 yuan is transferred from brother Niu's account to a friend's account. The actual process is that Niu GE's transfer instructions are first sent to the bank accounting system (central node). After receiving the application, the bank begins to verify its identity. After checking, the bank accounting system modifies the account data of both parties, and the operation is completed.

In fact, the bank plays a central role, all accounting transactions are recorded by the bank accounting system. At this time, the bank accounting data must be fair and reliable, will not be tampered with, and will not disappear. If one day the bank accounting data disappear, everyone's money in the bank will no longer exist.

The birth of bitcoin is to break the centralized mode of banks and prevent the risk of over concentration of centralized data. Bitcoin is a blockchain network. In short, we don't want the boss to keep accounts alone. If something goes wrong, we can't make it clear. Now it's changed to all younger brothers to keep accounts together. Every transaction will be updated synchronously. In this way, we can directly point-to-point transactions, not every transaction through the boss transfer. This is the core concept of bitcoin: decentralization.

People who have heard of bitcoin will also hear another word "mining". What is mining?

Bitcoin mining can be simply understood as using the computing power of computers (mining machines) to maintain the accounting system of bitcoin, and bitcoin blockchain is a network composed of mining machines all over the world. Mining is not voluntary labor, but income. One part comes from the new bitcoin allocation generated by the system, and the other part is the service charge generated by bitcoin transaction. In short, the distribution method adopts the principle of fair distribution according to work. The greater the contribution of mining machinery to the system, the higher the probability of income.

Why is bitcoin so popular?

According to the design algorithm of bitcoin, the total number of bitcoin will not exceed 21 million. For example, in the mining mentioned just now, the block will generate a certain amount of bitcoin as a mining reward within a certain period of time. When the total number of bitcoins reaches 10.5 million, the block reward will be halved; when the total number reaches 15.75 million (1050 + 1050 * 50% = 1575), the reward will be halved again, and so on, the total number of bitcoins will be permanently limited to about 21 million.

With the continuous development of bitcoin, foreign e-commerce giants began to accept bitcoin payment. Later, some countries also recognized the legal status of bitcoin, which gave it the attribute of currency. Because of the limited amount, bitcoin, like gold, is regarded as an investment tool against inflation. Of course, this is not the real reason why bitcoin continues to be popular.

As we have just said, the core of bitcoin is decentralization. Decentralization means that it is not regulated by financial institutions in various countries. Due to point-to-point transactions, it is very difficult to monitor the flow of bitcoin. Because it is not easy to be monitored, in fact, bitcoin has become the main currency of black market money laundering tools and dark network transactions. Higher bitcoin prices are conducive to a larger scale of property transfer, which is also the reason why bitcoin has been continuously hyped in recent years.

(2021-4-14)