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

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.

August 1, 2017

The Bitcoin network forks into Bitcoin (BTC) and Bitcoin cash (BCH)

The controversial hardfork of Bitcoin and Bitcoin Cash into two separate blockchains occurs on block 478558. The split results from an inability of the Bitcoin community to resolve debates over a proposed increase to the 1megabyte limit on the maximum block size. Bitcoin Cash increases the block limit to 8MB and removes segregated witness.

Bitcoin and Bitcoin cash blockchain forks

May 19, 2017

Bulgarian officials seize 213,519 bitcoins worth more than their national debt

The bitcoins are seized from a criminal group. The rapidly growing price of BTC makes the estimated value of those Bitcoins approximately $3.3 billion dollars on Dec 7, 2017, more than Bulgaria's annual national debt.

May 12, 2017

WannaCry ransomware attack

The WannaCry ransomware attack cryptoworm infects computers worldwide. Payment in Bitcoin is required in order to restored data encrypted by the attack. Marcus Hitchins discovered a kill switch that shut down the software before it executes simply by registering a specific domain.

2017

Bitcoin hits its record high of $19,666 on cryptocurrency exchange Bitstamp, the high water mark of a frenzied year that sees bitcoin climb by more than 1,300 percent as retail investors scramble to buy.

January 25, 2016

The Bitcoin network hash rate exceeds 1 Exa hash per second

The Bitcoin network exceeds 1 Exa Hash/s, making the Bitcoin network around 300 times more powerful than the worlds fastest supercomputer at the time tianhe-2.

January 20, 2015

Coinbase raises record $75M funding round for its bitcoin exchange

The round includes notable investors such as Andreessen Horowitz, Tim Draper, Union Square Ventures, and others.

October 2, 2013

FBI seizes and shuts down the online black market called the Silk Road

The Silk Road, an online marketplace best known for selling illegal materials like drugs, is shut down by the FBI. The operation to catch the owner of Silk road named Ross William Ulbricht, using the pseudonym Dead Pirate Roberts, is called Operation Onymous. The FBI seized approximately 26k BTC from the Silk Road.

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People

Name
Role
LinkedIn

Adam Back

Andreas Antonopoulos

BtcDrak

Cory Fields

Eric Lombrozo

Gavin Andresen

Gregory Maxwell

Hal Finney

Jameson Lopp

Jeff Garzik

Johnson Lau

Jorge Timon

Luke Dash jr

Michal Ford

Nicolas Dorier

Patric Strateman

paveljanik

Peter Todd

Pieter Wuille

Roger Ver

Satoshi Nakamoto

Suhas Daftuar

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

How the bitcoin protocol actually works

Michael Nielsen

Information Propagation in the Bitcoin Network

Christian Decker, Roger Wattenhofer

Academic paper

Seasonality and Interconnectivity Within Cryptocurrencies - An Analysis on the Basis of Bitcoin, Litecoin and Namecoin

Martin Haferkorn, Manuel Quintana Diaz

Academic paper

U.S. Bitcoin Futures Climb in First Day of Trade

Alexander Osipovich and Gabriel T. Rubin

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

Ever wonder how bitcoin (and other cryptocurrencies) actually work?

Jul 7, 2017

Life on Bitcoin

2017

The Bitcoin Doco

2014

The importance of layer two — an HTTP of bitcoin and blockchains

Aug 11, 2017

The Rise and Rise of Bitcoin

2014

What is Bitcoin? (v1)

Mar 22, 2011

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
Omar Faridi
July 5, 2020
Crowdfund Insider
Switzerland-based "one-stop" B2B InCore Bank has reportedly enabled fiat on-ramps for digital asset exchange Kraken.
Omar Faridi
July 5, 2020
Crowdfund Insider
Bitcoin (BTC) investments: UK millennials with £25,000+ in investable assets are increasingly investing in cryptocurrencies, a survey reveals.
Omar Faridi
July 4, 2020
Crowdfund Insider
Ampleforth, which claims to be "the best of Bitcoin and stablecoins," records over $1.8 million in AMPL/ETH 24-hour trading volume on Uniswap.
Omar Faridi
July 3, 2020
Crowdfund Insider
Criminal court in Russia refuses to recognize Bitcoin as legal property, won't help victim who lost nearly 100 BTC.
JD Alois
July 2, 2020
Crowdfund Insider
Click HERE to find out ⭐ Crypto Industry Slams Wirecard and Misplaced Funds: "You don't get what you expect. You get what you inspect." . | Crowdfund Insider: Global Fintech News, including Crowdfunding, Blockchain and more.
Omar Faridi
June 30, 2020
Crowdfund Insider
Here's why Ethereum, Tezos, Stellar, Chainlink are not yet legitimate Bitcoin (BTC) investment alternatives.
Omar Faridi
June 30, 2020
Crowdfund Insider
Bitcoin expert Andreas Antonopoulos acknowledges that Ethereum based DeFi protocols can be used to earn passively.
Tom Albright
June 29, 2020
AlleyWatch
The Pulse of New York Tech
Samantha Hurst
June 29, 2020
Crowdfund Insider
Click HERE to find out ⭐ HIVE Blockchain Announces Installation of Next Generation Miners at Green Energy-Powered Quebec Bitcoin Mining Facility. | Crowdfund Insider: Global Fintech News, including Crowdfunding, Blockchain and more.
Omar Faridi
June 28, 2020
Crowdfund Insider
P2P Bitcoin marketplace Paxful overtakes LocalBitcoins in BTC trading volume, considered one of the safest exchanges by Chainalysis.
Omar Faridi
June 28, 2020
Crowdfund Insider
US based Core Scientific, a blockchain hosting provider, to acquire 17,595 Antminer S19 Bitcoin mining machines from Bitmain.
Omar Faridi
June 27, 2020
Crowdfund Insider
Lars Brünjes, Director of Education at IOHK, a company supporting Cardano development, says DLT platform aims to be truly decentralized.
Omar Faridi
June 26, 2020
Crowdfund Insider
Graycscale Investments is buying 1,190 Bitcoins per day, on track to control 10% of BTC Supply by next halving in 2024.
JD Alois
June 24, 2020
Crowdfund Insider
Click HERE to find out ⭐ PayPal's Move Into Crypto: Affirmation that Traditional Payment Players Can No Longer Ignore Digital Assets. | Crowdfund Insider: Global Fintech News, including Crowdfunding, Blockchain and more.
Henry Pickavet
June 24, 2020
TechCrunch
The final week of a16z's Crypto Startup School kicks off with former Coinbase Chief Legal Officer Brian Brooks discussing "Token Securities Frameworks and Launching a Network." Brooks starts off calling crypto the "most perfect intersection of tech and finance," but he cautions that crypto builders must navigate traditional financial-services regulatory structures.
JD Alois
June 24, 2020
Crowdfund Insider
Click HERE to find out ⭐ London Stock Exchange Pushes Deeper into Digital Assets with its SEDOL Masterfile Service Incorporating 169 Different Digital Assets. | Crowdfund Insider: Global Fintech News, including Crowdfunding, Blockchain and more.
Omar Faridi
June 21, 2020
Crowdfund Insider
Fintech projects like Libra stablecoin initiative, digital yuan, COVID-19 are transforming money to an Extent "never before seen": report.
Omar Faridi
June 21, 2020
Crowdfund Insider
About 60% of Bitcoin is currently held by entities that have never sold morre than 25% of their BTC holdings: report.
Omar Faridi
June 20, 2020
Crowdfund Insider
Tech firms in developing economies to receive funding in Bitcoin (BTC) and other digital currencies from UNICEF's Crypto Fund.
Omar Faridi
June 19, 2020
Crowdfund Insider
Another $150,000 Bitcoin Core development grant awarded to BTC developer Amiti Uttarwar by BitMEX parent HDR Global and OKCoin.
SHOW MORE

References

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