Bitcoin for Beginners
What is Bitcoin (BSV)?
Bitcoin is this world’s first ever & currently, ONLY digital commodity
What is a commodity?
A commodity is something ‘common’, that has then been ‘itemised’ & ‘identified’ (common ‘it’ ‘y’). In other words, a common item that now has a unique identification. This item must have economic value because of its use case. A price can then be created through the economic market forces of supply & demand.
If something is useless, it is worthless & would not be able to generate demand in order to develop a price for use as a medium of exchange.
How can digital data be commoditised?
In order for digital data to be commoditised it must remain common to everyone in all aspects. It must therefore have these 5 principal constructs…
1) A fixed supply — so no one controls it
2) A locked Protocol — so anyone can use it without permission
3) Infinite scale — so not limits or restrictions can be manufactured
4) Economic competition — no barrier to entry by human intervention
5) Common accountability — A chain of digital signatures
How do digital commodity networks compete?
Digital commodity networks compete on their neutral growth & size. The start of the network must therefore allow an equal opportunity & provide a reasonable amount of time for anyone & everyone to start the network themselves. This is done by releasing all the information required to start the network to an open & fair market.
The Bitcoin white paper was released on 31st October 2008 on a cryptographic mailing list to a group of individuals who were very competent at understand the significance of the information contained within it.
The Bitcoin network was then started by a pseudonymous character called “Satoshi Nakamoto” (that the world now acknowledges was Dr. Craig S Wright) on 3rd January 2009. Being pseudonymous meant the Bitcoin network would then grow organically/neutrally without any central point of influence. The larger & more neutral the network, the more economic credibility it has, & the less chance there is of it ever being taken over & centrally controlled. It is therefore the most protected.
How can economic competition be introduced into a digital network pursuant to 4) above?
Economic competition within a digital commodity network is created by using a Secure Hash Algorithm 2^256 (SHA256). SHA256 is a cryptographic number meaning it is non-numeric. It therefore cannot be counted to as it has no numeric order. This is because it starts with a line of zero’s & is purely made up of 0’s & 1's. The only way to find SHA256 is to attempt as many different, random combinations as possible. The number of different, random combination attempts at SHA256 within 1 second is known as Hashrate per second.
The mining operation that provides the most Hashrate per second has the highest probability of finding SHA256, winning the block reward & profiting from creating optimum size blocks that contain volumes of transaction fees.
What is the block reward?
The block reward is the freshly minted/newly created Bitcoin that is programmed into the first bit of data that enters a new block following on from the previous block.
The block reward started off on the 3rd January 2009 at 50 Bitcoin’s per block & gets cut in half after every 210,000 blocks have been created.
What is the block fee?
The block fee is the accumulated total fees that are attached with each transaction contained in a block. The fee per transactions depends on the amount of data/memory that each transaction contains. Each transaction varies in size depending on how much data it carries with it e.g music, video, picture, text files etc. Mining operations compete to find SHA256 to win the block reward, but also compete to create an optimum size block to take advantage of the volume of transaction fees contained within it.
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