HOW BITCOIN WORKS
Bitcoin Book
1 – 2 – 3 – 4 – 5 – 6 – 7 –8
Bitcoin is digital power and is internet money.
TAKE AWAY
- We are now in the very early stages of decentralized money and financial settlement that takes seconds, and there is no bank involved.
- We don’t need Credit Cards anymore
- We don’t need to get a loan from the bank anymore.
- Proof of Work not Proof of Stake
- Cryptocurrency does business 24 hours a day, 7 days a week and don’t have to wait for settlement which happens in seconds.
- If you are of a generation that does not understand what these topics are about, commit to 60 hours of study, or you never will.
- Bitcoin is already the world reserve currency and used by governments, businesses, and people worldwide.
- American Banks, Wall Street, and American politicians cannot kill bitcoin.
- Governments of the world could agree with each other to ban allowing bitcoin to be exchanged for their national currency but it wouldn’t matter because people will want to use bitcoin, because they don’t want fiat.
- If you are they type of person that doesn’t like to think about “negative” things and very uncomfortable if your fiat wealth is not guaranteed then stop reading.
- If you are the type of person that believes it is important to have hope then continue reading.
You will never understand any of this unless you are willing to actually do the work.
“Everyone is their own Federal Reserve Bank. If you own Bitcoin,
it’s your money. If you put money in Citibank or JP Morgan, it’s
their money.”
Yan from Swan explains: Bitcoin’s difficulty went down by 27.94%.
But what is difficulty in the first place?
Bitcoin mining is the process of throwing darts randomly at a dartboard as big as the number of atoms in the universe. The bullseye size is auto adjusted every 2016 hits so that we hit one bullseye every 10m on average. Too many hits, bullseye shrinks. Not enough, bullseye grows.
Dartboard has 2A256 landing places
Miners use specialized dart throwing machines
The machines use bitcoin transactions, prior bullseyes, and randomness to generate a throw
To win, you must show what data was used to generate the throw and where you landed
Miners can invest in more machines and burn more electricity to throw more often
Bullseye is resized to get a hit on average every 10m, over a two week (2016 block) period
Difficulty is a measure of the expected hashing work the Bitcoin network will perform for each valid block it finds. The difficulty is a crucial value in Bitcoin’s consensus process: we cannot have some nodes accept blocks that other nodes reject.
Difficulty adjusts every 2016 blocks. We call such a block sequence with the same difficulty a “difficulty period”. I surmise that 2016 was picked via 14d/10min=2016.
Each adjustment resets Bitcoin’s difficulty such that a stable hashrate would give an expected block interval of 10 minutes in the upcoming period.
If blocks are found faster than 10 minutes in average, difficulty goes up. If blocks are slow, difficulty goes down.
Why ten minutes? We can only guess how Satoshi decided that, but it seems to be at a sweet spot between too fast and too slow.
REMEMBER TIC TOCK NEXT BLOCK
There are new businesses focused on non-custodial, permissionless, and decentralized financial services. “Its primary focus is #Bitcoin.” The financial revolution should be Open Source— no questions that this is a necessary initiative .