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Bitcoin

Bitcoin

Bitcoin is a cryptocurrency and a digital payment system invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto. It was released as open-source software in 2009.

The system is peer-to-peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain. Since the system works without a central repository or single administrator, bitcoin is called the first decentralized digital currency.

 

Besides being obtained by proof-of-work (PoW) "mining", bitcoins can be exchanged for other currencies, products, and services.

 

As of February 2015, over 100,000 merchants and vendors accept bitcoin as payment. According to a research produced by University of Cambridge in 2017, there were 2.9 to 5.8 million unique users actively using a cryptocurrency wallet, most of them using bitcoin.

History

Pioneering work on digital currencies prior to bitcoin was done by David Chaum, who published on blind signatures as the basis for untraceable electronic cash and mail throughout the 1980’s. Wei Dai proposed B-money in 1998, which contained the idea of generation of money through the solving of computational puzzles as well novel methods for reaching consensus among network participants. Adam Back introduced the Hashcash algorithm. Hal Finney later utilized Back’s hashcash when he introduced a reproducible proof of work (RPOW) token in 2005. Nick Szabo proposed Bit gold in 2008, a digital currency which utilizes a proof of work puzzle that is securely timestamped and contains links between transactions.

On October 31st 2008, an individual or group of individuals under the pseudonym Satoshi Nakamoto published the bitcoin whitepaper called “Bitcoin: A Peer-to-Peer Electronic Cash System". The open source code for bitcoin was released on January 9, 2009. The identity of Satoshi Nakamoto remains unknown, however they are thought to retain the largest known bitcoin wallet containing approximately 1 million bitcoins. No bitcoins have ever been transferred from this account to date.

CBOE launched Bitcoin futures trading on December 10, 2017. After experiencing a surge in price almost immediately the exchange halted trading for two minutes due to the volatility. CME group announced on October 31, 2017 that it intends to launch bitcoin futures in the fourth quarter of 2017. The futures will be based on the CME Bitcoin Reference Rate and will be cash settled.

Architecture
Public Key cryptography

Control of the Bitcoin currency BTC is governed by a pair of cryptographic digital keys known as the public and private keys. The public key is open to the public and can be used to create a unique Bitcoin Address where individuals may receive funds. The private key represents control and ownership over these funds enabling the private key holder to produce a digital signature which is essential for the transfer of bitcoins.

Private keys are a number chosen at random from numbers between 1 and 2256. The method used to generate this random number must not be reproducible by another party or the security of the key could be compromised. Good sources of entropy include the getnewaddress command on the Bitcoin Core client or flipping a coin. Pseudorandom methods, which appear to produce randomness but are created by a deterministic algorithm which can be reproduced and are not appropriate for private key generation.

Public keys are generated utilizing an elliptic-curve cryptography based multiplication of the private key. It is practically impossible to reverse engineer the private key from the public key without trying all 2256 possible values. Finally, the Bitcoin address is created by performing a one-way cryptographic hashing. The SHA256 hash is used on the public key, followed by a RIPEMD160 hash and then a base58 encoding. This outputs the Bitcoin address itself, which is a string of 34 numbers and letters which can safely be made available to the public. Anyone can send Bitcoin directly to this public Bitcoin Address.

Transactions

The creation & validation of transactions on the Bitcoin blockchain, along with the appending of these transactions to the Bitcoin blockchain, is the core feature of the Bitcoin network and most cryptocurrency in general. Transactions are created by the owner of the bitcoins, who generate a specific digital signature using the private keys to create a valid transaction. Any transaction broadcast to the network without a valid digital signature will not be validated and propagated by the honest nodes in the network and will fail to be added to the blockchain. All transactions in the Bitcoin blockchain are globally and publicly visible.

UTXO

The Bitcoin transaction system is based on the unspent transaction outputs (UTXOs) model. A new UTXO is created each time a transaction is created in a new Bitcoin block with a new output. The UTXO is eliminated when the owner of the keys initiates a transaction which empties all of the Bitcoin.

Security

There are a variety of assumptions made by the Bitcoin protocol with regards to transaction security and validity. The double spend attack or majority attack is possible when the attacker controls a larger portion of the mining power in the network, most effective at >50%. To date, no double spending attacks have occurred on Bitcoin, however multiple attacks on smaller chains such as Bitcoin Gold, Zencash, monacoin, and others have been successful. During the time that the attack controls this ability they are able to reverse specific arbitrary transactions by re-mining blocks with those transactions excluded. Thus cryptocurrency exchanges and others who accept large Bitcoin transactions typically wait for additional confirmation of blocks before relying on payment, as the cost to rewrite a transaction becomes larger the further back in the blockchain history it lies. The economic incentives for whether or not miners will benefit from attacking the network through a double spend rely on a number of factors and are actively debated.

In addition to the majority attack, there are lower thresholds of mining power required potentially only 33% of the network has rate to to perform other attacks such as selfish mining.

Timeline

April 27, 2021
Bitcoin rose after Tesla Inc. reported a $272 million gain on "digital assets" after its $1.5 billion investment in the cryptocurrency.
April 26, 2021
Bitcoin rose as much as 12% Monday morning to trade at almost $54,000, the biggest intraday gain since early February.
April 14, 2021
Bitcoin surges to an all-time high near $65,000 ahead of the Coinbase IPO.

Bitcoin hit an all-time high for the second day running on Wednesday as excitement around the direct listing of exchange Coinbase helped push the cryptocurrency close to $65,000.

February 4, 2021
Bitcoin rises above the threshold in Thursday trading before sinking back below $37,000 later in the day.

The token traded 1% higher from 24 hours ago, at $38,065.03, as of 10:10 a.m. ET Friday.

The positive momentum and new demand place bitcoin on track for another run at the $40,000 level, Ed Moya, senior market analyst at Oanda, said Thursday.

January 7, 2021
Bitcoin crosses $40K mark, doubling in less than a month
January 3, 2021
Bitcoin hit a new all-time high of $34,800 (£25,672) but subsequently dropped to below $30,000 (£22,131).
January 2021
The digital currency Bitcoin rocketed to a record high this month above $35,000 a coin.
December 10, 2017
Bitcoin futures start trading

The Chicago Board Options Exchange (CBOE) launches Bitcoin futures trading, enabling investors to speculate on the price of BTC without actually owning Bitcoins themselves. After experiencing a surge in price almost immediately the exchange halted trading for two minutes due to the volatility.

December 2017
Bitcoin got close to $20,000 in December 2017 in a retail-led bubble that grabbed the attention of investors worldwide.
October 24, 2017
Bitcoin Gold (BTG) forks from Bitcoin (BTC)

The Bitcoin Gold forks on block 491406 from the Bitcoin network.

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People

Name
Role
LinkedIn

Adam Back

BtcDrak

Cory Fields

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Further reading

Title
Author
Link
Type
Date

Bitcoin-NG

Ittay Eyal, Adem Efe Gencer, Emin Gun Sirer, Robbert van Renesse

Academic paper

Bitcoin: A Peer-to-Peer Electronic Cash System

Satoshi Nakamoto

Bitcoin’s academic pedigree

Arvind Narayanan and Jeremy Clark

CABRA — Comprehensive Academic Bitcoin Research Archive

Christian Decker

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Documentaries, videos and podcasts

Title
Date
Link

Banking on Bitcoin

2016

Bitcoin - Proof of work by Khan Academy

May 1, 2013

Bitcoin Halving Vs Bitcoin Cash Halving Price Prediction 2020 Forecast

April 7, 2020

Bitcoin in Uganda - Empowering People

May 16, 2014

Bitcoin Paper Annotated/Explained

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Companies

Company
CEO
Location
Products/Services

Bittrex

Bill Shihara

Nevada, US

Cryptocurrency exchange

Coinbase

Brian Armstrong

San Francisco, US

Cryptocurrency exchange

Gemini

Tyler Winklevoss

New York, US

Cryptocurrency exchange

LocalBitcoins.com

Nikolaus Kangas

Finland

In person bitcoin exchange

News

Title
Author
Date
Publisher
Description
By The Associated Press
December 6, 2021
AP NEWS
___Trump media venture gets scrutiny from US market regulatorsNEW YORK (AP) -- Regulators are asking questions about the deal to bring Donald Trump's new social media company to the stock market, one that has attracted both legions of fans of the former president and people looking to make a quick profit.
By KEN SWEET
December 6, 2021
AP NEWS
NEW YORK (AP) -- Craig Wright, a computer scientist who claims to be the inventor of Bitcoin, prevailed in a highly publicized trial Monday that will allow him to hold onto a hoard of Bitcoins worth tens of billions of dollars.
November 29, 2021
AP NEWS
STAMFORD, Conn. (AP) -- A firm that invests in Bitcoin and blockchain technology companies is relocating its headquarters from New York City to Stamford and is expected to create more than 300 new jobs over the next five years, Gov.
November 19, 2021
AP NEWS
SANTA ANA, Calif. (AP) -- A Southern California man was sentenced to three years in federal prison for operating an unlicensed business that exchanged at least $13 million in Bitcoin and cash, the U.S.
By HALELUYA HADERO
November 15, 2021
AP NEWS
As the biggest cryptocurrencies flirt with record high values, they're increasingly becoming bigger sources of revenue for charities. However, the number of charities accepting the virtual currencies, known for their volatility, remains limited.
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References

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