A blockchain is a cryptographically reverse-chained list.
The list (database) consists of data blocks that store information about the transactions.
As time passes, this list becomes gradually longer, since its linear structure only allows for one valid history.
A block of data consists of transaction information about the senders and receivers, the amounts, and meta information such as a timestamp.
The network targets a time interval of 10 minutes for the generation of blocks. Approximately 144 blocks are generated per day on average.
More information about the creation of blocks is available in the chapter Mining.
Each transaction is stored permanently on the blockchain.
In its 15-year history, the Bitcoin blockchain has expanded to over 650 GB.
More than 1 billion transactions have been recorded so far.
Blockchain technology runs on thousands of computers simultaneously, so-called nodes, all around the world.
The network of distributed, equally privileged nodes is known as a peer-to-peer network (P2P).
There are currently about 10,000 active nodes.
Every node has its own copy of the blockchain in order to be able to verify the transaction data independently.
Due to the decentralized structure, the network is stable, highly available, and trustworthy.
If only a single Bit of a single transaction is changed, the modification triggers an avalanche effect.
The deeper a transaction is “anchored” in the blockchain, the more immutable it is.
For this reason, manipulation of the data in the Bitcoin blockchain is absolutely impossible.
Today most institutions use the so-called double-entry bookkeeping. In practice, it is implemented by comparing the assets and liabilities side.
Nevertheless, double-entry bookkeeping is prone to fraud due to conflicts of interest.
The introduction of triple-entry bookkeeping solves this problem.
Unlike the traditional system, it allows the addition of cryptographic signatures, which are recorded in the public ledger.
The blockchain thus provides a mathematical receipt as proof.
Blockchain technology empowers every user to participate in a global and decentralized accounting network.
The trust that previously had to be outsourced to institutions can be increased or even substituted by the digital notary, the Bitcoin blockchain.
The term mining is a reference to the process of obtaining gold - gold mining.
Gold mining is an expensive process, which often led to enormous environmental contamination in the past.
Just the production of one gold ring leads to 20 tons of rubble and the release of large amounts of highly toxic mercury.
Bitcoin mining is the production of digital gold.
The mining process involves the generation of new bitcoins and the securing of the network.
The miners perform a proof of work, for which they are rewarded with bitcoins.
Currently, the reward is 3.125 bitcoins per block.
Although there are more and more data centers for bitcoin mining being built worldwide, the total stock will not increase by this development.
To guarantee that the emission of new bitcoins remains constant, the network automatically adjusts the difficulty of computing new bitcoins.
This process is known as Difficulty-Adjustment.
To ensure that bitcoins can't be created “out of nothing”, miners have to perform work in the form of computations.
These computations cryptographically secure the network, making later manipulation increasingly expensive. The calculations are also called hashes.
Bitcoins or the bitcoin network are backed by energy.
Machines specially optimized for the bitcoin network repeatedly execute SHA-hash functions.
On average, the mining machines on the network perform about 700 Exahashes.
That is 700,000,000,000,
000,000,000 (700 Quintillion) calculations per second.
This gives the mining network a computational power that is unmatched even by supercomputers.
The energy consumed by the bitcoin network has been growing constantly for years.
Current estimates assume that the network consumes as much energy as the country of Denmark.
The Cambridge Bitcoin Electricity Consumption Index provides an estimate of energy consumption.
The bitcoin system not only offers several advantages but also reaches its limits in some areas.
Some problems are technical, while others are economic.
You will get a brief overview here.
Due to its decentralized structure, the Bitcoin network is limited to low transaction throughput.
In a 1MB block, only 3.8 transactions per second can be processed.
This problem is solved by the Lightning Network.
Payments with small amounts, e.g. shopping in a supermarket, are not suitable for everyday use as a result of slow transaction processing and relatively high fees.
Micropayments should therefore only be made with Lightning technology.
","title":"Low Amounts"},{"id":5265,"__component":"swipe.swipe-a","content":"Bitcoin acts as an autonomous system.
An influence on the money supply by politics and banks is in fact impossible.
From the government's perspective, the absence of the factor money in cyclical policy limits the possibility of interventionism.
The exchange rate of Bitcoin is extremely volatile.
Bitcoin is currently unsuitable as a short-term store of value.
However, over time its volatility decreases as a result of a disinflationary emission rate and higher market capitalization.