Bitcoin and blockchain technology dominate conversations, yet remain enigmatic to many. While complex, understanding the fundamentals is achievable. Here’s a breakdown of key terms and concepts.
Understanding Bitcoin (BTC)
Bitcoin (BTC) is a decentralized digital currency, merging "bit" (binary unit) and "coin." Its supply is capped at 21 million, with 19.5 million already mined.
Key Bitcoin Metrics:
- Satoshi: The smallest unit (0.00000001 BTC).
- Lost Bitcoins: ~20% of mined BTC are irrecoverable due to lost keys, hacks, or errors.
- Satoshi Nakamoto: Bitcoin’s pseudonymous creator allegedly holds 1.1 million BTC, now inaccessible.
👉 Discover how Bitcoin mining works
Blockchain Technology Demystified
A blockchain is a decentralized public ledger recording all transactions chronologically.
How Blockchain Works:
- Blocks: Store batches of transactions.
- Chain Formation: Full blocks are added sequentially using cryptographic hashes.
- Decentralization: Distributed across nodes (networked computers), ensuring no single entity controls the network.
Node Types:
- Full Nodes: Validate transactions and store the entire blockchain.
- Light Nodes (SPV): Simplified wallets relying on full nodes for verification.
Mining and Halving
Proof of Work (PoW):
- Miners solve complex algorithms to validate transactions and earn block rewards.
- Hash Rate: Total computational power securing the network.
Halving Events:
- Rewards halve every 4 years to control inflation.
- 2024 Halving: Will reduce rewards to 3.125 BTC/block.
Crypto Wallets: Hot vs. Cold
Hot Wallets (Online):
- Pros: Convenient for frequent transactions.
- Examples: Exodus, Electrum (desktop/mobile).
Cold Wallets (Offline):
- Pros: Enhanced security against hacks.
- Examples: Ledger (hardware), paper wallets.
Multisig Wallets:
- Require multiple private keys for transactions, ideal for shared funds.
Enhancing Privacy and Scalability
Coinjoin Transactions:
- Mixes funds with others to obscure transaction trails.
- Tools: Wasabi Wallet.
Lightning Network:
- Enables instant, low-fee transactions off-chain.
- Benefits: Scalability (~unlimited TPS), privacy.
Buying and Using Bitcoin
Purchase Options:
- Crypto Exchanges: SEPA transfers (e.g., Bitstamp).
- Credit Cards: Higher fees (e.g., Crypto.com).
Spending Bitcoin:
- Retailers: Map via BTCMap.
- Vouchers: Platforms like Bitrefill convert BTC to gift cards.
FAQs
1. Is Bitcoin anonymous?
No—it’s pseudonymous. Transactions are public but linked to addresses, not identities.
2. How energy-intensive is Bitcoin?
Debated. Proponents claim >50% renewable energy use; critics highlight environmental concerns.
3. What’s the best wallet for beginners?
Exodus (user-friendly) or Ledger (secure cold storage).
4. When’s the next Bitcoin halving?
April 2024, reducing rewards to 3.125 BTC/block.
5. Can I recover lost Bitcoins?
No—if private keys are lost, funds are permanently inaccessible.
6. What’s the Lightning Network?
A layer-2 solution for fast, cheap BTC transactions.
Adapted from PC-WELT. Original content in German.