EN | RU | ZH


Your questions about cryptocurrency answered

What is Bitcoin: Introduction to Blockchain Technology

What is Bitcoin: Introduction to Blockchain Technology

If you want to learn what Bitcoin is, you’ve come to the right place. Below we explain everything you need to know and we uncover the most common Bitcoin myths.

If you want to learn what Bitcoin is, you’ve come to the right place. Below we explain everything you should know and we uncover the most common Bitcoin myths.

New users often ask us, what is Bitcoin? What is blockchain and how does it work? We will bring you the answers to these and similar questions in a simple and understandable way.

We will explore this topic, which is abstract for many, in more detail and clarify numerous unknown facts.

Read on to learn what Bitcoin is and why it is popular all over the world. If certain terms we mention below are unclear to you, take a look at our dictionary of crypto terms.

The history of Bitcoin

Before we answer Bitcoin is, let’s go back to the bare beginning and the events before Bitcoin’s creation. The inventor of Bitcoin – Satoshi Nakamoto (pseudonym) managed to apply the accessible technologies in practice for the first time and create the first real cryptocurrency. Some of the cryptographic foundations of Bitcoin that Satoshi exploited were created by David Chaum and Stefan Brands.

The forerunners of Bitcoin were created by Wei Dai and Nick Szabo, though their versions of electronic money did not come to life due to various problems.

Bitcoin is the first wholly successful version of electronic money, or rather the first successful cryptocurrency to pass the test of time and put blockchain technology into practice.

It all started one afternoon when Satoshi sent out the Bitcoin whitepaper to the crypto mailing list. This was back in 2008, and the email contained the whitepaper and a brief description of Satoshi’s brilliant idea.

“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

Shortly after, in early 2009, more precisely on 08.01.2009, the first version of the software that runs Bitcoin was released. Mining began and all interested parties could join the network and in this way support and strengthen their work. The first Bitcoin block, the so-called.

Genesis Block, was established by Satoshi a few days prior to that, with new blocks not being created before the time of its release.

This claim and key dates are easiest to verify via the Bitcoin block search engine, Block 0 (Genesis) and Block 1. The Bitcoin Genesis Block contains the following message:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.

We leave the interpretation of the message to you. Explore and learn the interesting piece of the never put together puzzle of the mystical Satoshi Nakamoto.

A few days after the first Bitcoin block, the first transaction was created on the Bitcoin network Bitcoin. The sender was Satoshi Nakamoto and the receiver was Hal Finney.

Bitcoin Pizza

In May 2010, the user of BitcoinTalk forum (Laszlo Hanyecz) paid two pizzas in the amount of 10,000 BTC, namely at that time the value of a BTC coin was around $ 40, however, today. best check for yourself. If you don’t believe us, the entire discussion is still available on the forum.

These two pizzas have become the most expensive pizzas in the world over time, and 05/22 is celebrated as Bitcoin Pizza Day.

The person who delivered the pizzas is celebrated as the man who made the first purchase with Bitcoin coins – this person claims that he has no regrets about using up the coins for the pizzas. What happened to the recipient of the coins and in what way they were consumed is unknown.

Satoshi Nakamoto

The person you see in the photograph is not Satoshi Nakamoto. It is a person who is not associated with bitcoin, nor does he know what bitcoin is (by his own admission), but has the identical first and last name, so for a while it was believed to be the real Satoshi.

Satoshi is also not Craig Wright, who in recent months has been at pains to prove otherwise and is enjoying some undeserved media attention.

Various theories and speculations exist about the identity of this mysterious person, but one thing is certain. It is not known who Satoshi Nakamoto is, nor whether it is a single person or a group of people.

Given the fact that we haven’t heard from Satoshi since the beginning of the last decade, the question is whether he is even alive.

Satoshi is the founder of BitcoinTalk forum – the most popular and important crypto forum. You can see the initial posting here, where you can find Satoshi’s BitcoinTalk profile, which has been inactive for the entire millennium, here. His posts represent a unique insight into the early days of Bitcoin itself.

Satoshi’s wealth

Based on various blockchain analyses, it is envisioned that Satoshi is the owner of around one million Bitcoins, which is around 5% of the total number of Bitcoins that will ever exist.

For those who want to explore the particulars in more detail, this BitcoinTalk topic is a good first step. Given that Sahotshi’s BTC was mined at the bare beginning and has remained dormant throughout the decade, the question is whether Satoshi (or his heirs, as the case may be) still have the access keys to the listed denominations of money.

More likely, the keys have long since been lost, as bitcoin had no value at the time and the entire process was in its trial phase.

The exact number of Bitcoins owned by Satoshi Nakamoto is unknown, as can be seen from the list of richest Bitcoin wallets, which you can find here. We can see that among the top 100 wallets, there is not a single wallet that has been inactive for 10 years. Why? You will find out in the following.

Satoshi’s purses are distributed at many different addresses that contain 50 BTC. At that time, things were much different than they are today.

There were no mining pools, specialized miners and the like. Every single interested person could mine with the simple bitcoin processors (CPU mining). The price for finding a block was a considerable 50 BTC, the value of which today is almost 3 million kuna, back then barely a few kuna if you could find an interested buyer.

Satoshi is the main miner of most early BTC blocks. Since Satoshi used several different wallets, these coins were divided from the block prices to many different addresses.

Therefore, no single address exists that we can keep track of and hope for Satoshi’s return. Nevertheless, advanced blockchain analytics exist today that would automatically oversee the circulation of the coins and quickly detect the movements of Satoshi’s coins and alert the public.

Should Satoshi ever return and begin using his coins, this information would be quickly relayed.

What is Bitcoin?

After a lengthy introduction and history lesson on Bitcoin, it’s time we answer the question of what Bitcoin is. Below we list some descriptive definitions of Bitcoin that explain its features and benefits.

Bitcoin is a decentralized digital currency that enables the secure transfer of value without intermediaries.

Bitcoin is a decentralized database, designated to respond to the question of who is the owner of certain coins and at what time (eliminates the problem of duplication of the same coins).

This database has been designated to be resistant to censorship and not require permission to use from the central institution.

Anyone can connect to the Bitcoin network, at any time around the clock.

Bitcoin is a cryptocurrency based on blockchain technology.

Bitcoin is neither issued nor supervised by the central bank or the state. Therefore, formally speaking, Bitcoin is not money. Bitcoin is an alternative means of payment.

Bitcoin represents an alternative to banks and the standard currency system we know.

Bitcoin allows the transfer of unlimited value from one side of the world to the other, in just about ten minutes.

In third world countries, where inflation makes the saved money of its inhabitants disappear overnight, Bitcoin represents the border between life and death.

Bitcoin connects people who do not have access to banking infrastructure with the rest of the world.

Bitcoin allows you to be the sole owner of your own money, which no one can either pawn or deny you access to.

Bitcoin allows you to be your own independent bank.

Bitcoin is neither controlled nor manipulated by the centralized institution.

Bitcoin cannot be cancelled by anyone because of its decentralized nature.

Bitcoin is a volatile cryptocurrency that deposits daily movements of even 40%.

Bitcoin is an instrument that offers high earnings to speculators, as well as large losses.

Bitcoin is the first cryptocurrency that has started an unexpected revolution.

As a final answer to the question of what is Bitcoin, we can say the following. Bitcoin is digital money, without physical manifestation. It is based on blockchain technology.

Because of its decentralized nature, there is no central institution that manipulates with the circulation and price of Bitcoin. This is controlled by clearly defined laws that cannot be changed without global consensus.

What is Bitcoin – Explanation for Children

Young generations are the main target group of the revolution that bitcoin and other cryptocurrencies have brought. It is easy to imagine that the future generations will not know the so-called “green banknotes” that are currently rustling in our pockets. All transactions will be carried out digitally.

Which is logical when we consider the advantages that Bitcoin and other cryptocurrencies offer us.

Opening a Bitcoin account (wallet) is quite simple, this can be opened from the comfort of home, without much bureaucracy and request for personal data that require the standard bank accounts.

Under the supervision of parents, the child can independently install the Bitcoin application on his phone and start using Bitcoin within 10 minutes. But how do you explain what Bitcoin is to children in a clear, pictorial way?

Bitcoin can probably be most easily compared to a special kind of savings bank that is secure and cannot be stolen or broken by anyone.

The Bitcoin savings bank is accessible anytime, anywhere. The cash lives in a cloud, far from the eyes of thieves. It allows direct saving, buying or selling (of toys) and so on.

Blockchain technology

Blockchain is a technology that enables decentralized record keeping. The blockchain is actually a public ledger or a record of all transactions and exchanges of units of money on the Bitcoin network. It consists of many different bocks that are interconnected to form a block chain – the blockchain.

The security of the blockchain comes from this feature – to change any transaction block, it is necessary to change all the blocks after it.

In the case of bitcoin, this is an expensive endeavor that is difficult to execute in practice. According to current estimates, a successful attack on the Bitcoin network would cost around $200 million. Therefore, all transactions crowded with enough blocks are considered final and unchangeable.

Thanks to blockchain technology, we can be sure that each Bitcoin is unique. The blockchain has no central location where the data is kept and stored.

All participants of the Bitcoin network have the identical Blockchain copy and participate in the update of the public ledger. Currently, more than 10,000 computers worldwide participate in the Bitcoin Blockchain update. Therefore, we can say that Bitcoin is a decentralized cryptocurrency.

Bitcoin does not rattle under the fingers and is therefore worthless

“How can Bitcoin have value if it doesn’t exist, or rather, I can’t feel it under my fingers?” Similar questions often go through the minds of ignorant users. Traditionally, we are used to money having a physical form, usually paper. But why do we consider that money has value in paper form?

Paper on which banknotes are printed has no value in itself; after all, it’s just colored paper. The value comes from the fact that most people are willing to accept these paper bills as a substitute for goods or services.

We will not get into the discussion of monetary policy consisting of paper coins or fiat currencies, respectively, nor whether it is good or bad.

The money manifestation itself, however, or whether this is tangible or virtual, is less important for its value. Important are the characteristics of the money. The monetary policy, the cover, acceptance and so on. The value of Bitcoin comes from the possibilities it offers as well as the carefully planned, unchangeable currency policy.

Bitcoin underlies the Proof Of Work (POW) consensus, and it is necessary to apply significant labor (electricity) to create new, tightly controlled money. On the other hand, fiat currencies underlie the Proof Of Print (POP) consensus and the new value (bills) is printed in large quantities without scruples. Obviously, we have trivialized the issue, however, we are not far from the truth.

Bitcoin pollutes the environment

Bitcoin consumes large amounts of electricity, on an annual basis compared to Belgium’s consumption. Interesting visual comparisons can be found on the pages of the University of Cambridge.

The huge energy consumption is the main source of security (resistance to change) of the Bitcoin network and transactions offered to Bitcoin users.

The criticisms refer to the use of fossil fuels and coal, which pollute the earth. In practice, however, things are different. Bitcoin mining is in any case one of the most competitive professions and a constant race to see who will acquire the most effective miners and make the better agreement with power producers.

Cost optimization is necessary for any serious Bitcoin miner who wants to be successful in business.

Therefore, most miners tend to use the surplus energy that comes from renewable energy sources because of the significantly lower prices.

It is believed that more than 75% of energy comes from environmentally friendly sources that do not pollute the environment or have a significantly lower impact on the environment than traditional energy sources.

Hydroelectric power plants are among the more common energy sources that Bitcoin miners use to stay in the plus.

Comparisons of the Bitcoin network’s consumption with related industries provide a better representation of its share in global energy consumption.

All figures should be taken with a grain of salt, as it is quite difficult to accurately assess the consumption of each sector on a global scale.

You can read some comparisons here and the table comparison here. In itself, it is clear that Bitcoin is only a small part of related industries, with the potential to replace them or serve as an alternative.

Bitcoin Cash is Bitcoin

Bitcoin Cash (BCH) is a fork (copy/clone) of Bitcoin (BTC) that is trying hard to take over the primate through manipulative marketing. The Bitcoin.com website and wallets present BCH as BTC, leaving many inexperienced users confused.

Bitcoin is just one, don’t be fooled. Various clones are looking to take some of the profit and fame acquired from BTC instead of building their brand themselves.

BCH is not BTC by any means. The same is true for the preponderance of various BTC forks, such as Bitcoin Gold (BTG) and Bitcoin Diamond (BCD). Bitcoin Satoshi Vision (BSV) is hard to speak of, this coin and its founders have nothing to do with the real Bitcoin.

Bitcoin is too expensive

Users often tell us that Bitcoin is too expensive and they can’t afford it. However, this is wrong, because it is not necessary to buy a whole bitcoin. Bitcoin is divisible up to the eighth decimal place. It has become established to call the smallest Bitcoin unit Satoshi.

In the Bitcoin Store exchange office, the Bitcoin is available from as little as HRK 250. At the time of writing, the amount of HRK 250 will get you 0.00387666 BTC or 387,666 Satoshis.

Beginners often direct their focus on the unit price of a particular coin, which is actually immaterial. A much better picture is provided by the total value of all coins in circulation and an even better one is provided by the liquidity of a particular coin, more about that another time.

Bitcoin is money for criminals

Skeptics often say that Bitcoin is actually money designated for criminals. This statement is identical to saying that the telephone was designated for communication between criminals or that a steam engine was designated for transportation by criminals.

However, let’s go back to Bitcoin and let’s explain why Bitcoin is actually less suitable for illegal activities compared to existing means of payment, especially cash.

All Bitcoin transactions are public and available to all. Every single Bitcoin can be tracked from the time it was created to the last transaction.

The coins used for illegal transactions can be flagged and any shifting can be tracked. A bitcoin transaction that has already been confirmed cannot be cancelled and therefore a fraudster cannot take back the money through fraud and cause you a loss.

Bitcoin is used by different user groups, just like any other technology. It is neither possible nor desirable to influence this, especially since the nature of Bitcoin is decentralized.

In any case, Bitcoin is not suitable for illegal use, which the responsible institutions have demonstrated over the years. All major illegal operations known to the public that used Bitcoin as a means of payment were quickly shut down and the actors arrested.

Paying with Bitcoin

Users often ask us where they can pay with Bitcoin. The number of stores accepting bitcoin is constantly increasing. You can pay with bitcoin in various places, from bakeries to various information technology stores, such as Futura IT.

If you need a new pair of glasses, you can buy them with the Bitcoin in Vision Optics.

You can also use various cryptocurrencies to pay for your accommodation on Booking through the Travala platform. The Bitcoin Store has in its offer the POS solution that allows merchants to easily accept Bitcoin and Ethereum.

We expect a continuous growth of the merchant network accepting Bitcoin and other cryptocurrencies. You too can help expand the cryptocurrency network. Start accepting bitcoin when you sell something or as a replacement for your services.

Advantages of Bitcoin

Bitcoin boasts numerous advantages in relation to the existing currency systems. The advantages are divided into two categories. From the advantages and disadvantages below, it can be easily read what Bitcoin is.

Bitcoin advantages in relation to standard fiat currencies include

  • Secure transfer of value without intermediaries
  • Relatively fast and secure transfer, regardless of the distance between participants
  • Pre-defined, invariable inflation
  • Defined level of anonymity
  • There is no central institution controlling the price and circulation of the coins
  • The price is determined solely on the basis of supply and demand
  • Global currency whose inflation cannot be manipulated
  • Excellent preservation of value through a long period of time
  • Has passed the most difficult test – the test of time
  • Transparent transactions – no possibility for malversation
  • Open system that anyone can access and participate in transaction processing

Bitcoin advantages in relation to gold and silver

  • Immeasurably easier, faster and more secure transfer of value
  • Lower, tightly controlled constantly falling inflation
  • Limited supply