Demystifying Bitcoin: A personal odyssey
What Odyssey?
In October 2020, amidst the Covid19 pandemic, youths in Nigeria were fighting for their rights through the #ENDSARS protests.
Individuals pooled funds together to fund the protests (food, drinks, medical treatments, etc), and the protests that started in Lagos, spread to numerous states in the country.
Seeing that the youths were not going to back down, the government froze all local accounts that donations were being made to fund the protests.
FemCo, one of the leading supports during this period started taking donations in Bitcoin.
This sparked my interest in Bitcoin and I was astonished and grateful for this mystery(bitcoin) that gave power back to the people when the government was determined to suppress them. I transitioned into tech one month later and forgot about it.
One year later, I came across Qala — a program designed to train the next generation of African Bitcoin and Lightning developers. This rekindled my interest in Bitcoin, and I resumed my quest to demystify the ‘mystery’ (to me) — that was Bitcoin.
Walk with me on this journey.
Bitcoin — History, Mining, and Use Cases
History
Bitcoin was invented by Satoshi Nakomoto in 2008. According to newscientist.com, “Bitcoin is a digital currency which operates free of any central control or the oversight of banks or governments. Instead, it relies on peer-to-peer software and cryptography.”
Bitcoin is based on decentralized finance, such that there is no known hierarchy or point of control, rather there exists a distributed, peer-to-peer system.
Before now, several forms of digital cash were invented, but they all failed because they were operating with centralized systems.
Bitcoin leverages decentralization and some of the ideas from these failed digital cash systems to function today.
Mining
Bitcoin is decentralized, thus the Bitcoin Network consists of distributed peer-to-peer nodes. These nodes independently run a Bitcoin implementation and they validate blocks and transactions. Each block in the blockchain is mined by a node.
Bitcoin mining involves the process of using specialized computing systems equipped with special chips to compete in solving a complex mathematical puzzle. Proof of work (PoW) — which is a form of cryptographic proof in which one party (the prover) proves to others (the verifiers) that a certain amount of a specific computational effort has been expended is used to ensure that the mining process is fair and trustless.
The mining process ensures that transactions are recorded on the blockchain and new bitcoins are created as a reward for miners.
Use Cases
1. Bitcoin’s principal use case as written by Satoshi Nakomoto in the whitepaper is for online payments to be made without going through a financial institution. This is the feature that makes Bitcoin censorship-resistant, as there is no central authority.
2. Bitcoin also enable users to carry out transactions pseudonymously. Transacting on the blockchain does not require users’ details but their bitcoin addresses.
3. Because of the limits of the blockchain size, Lightning — a layer two protocol was introduced to expand the applications of bitcoin, and scale the network. The lightning network has enabled payment channels, using bitcoin as its currency. This facilitates fast transactions with low fees.
Bitcoin still has a lot to offer than it currently does and I am excited to be on this journey.
Interested in bitcoin development? Apply to Qala here.
Also, feel free to tell me what you think about Bitcoin by leaving a comment on this page, or reaching out to me on Twitter.
Cheers!
For further reading:
https://bitcoin.org/en/bitcoin-paper
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