Akachukwu CC's Key Ideas from Attack of the 50 Foot Blockchain
by David Gerard

Traditional banking is convenient but it has its own limitations which include card readers breaking, bank fees piling up and compromisation of financial privacy and a host of others.

All these obstacles constitute what digital cash aims to overcome, providing a secure and direct form of online payment that doesn’t rely on a central authority.

When you “own” bitcoins, what you possess is actually a Bitcoin address (akin to a bank account) and a unique private key (like a PIN).

This private key is what makes your Bitcoin truly yours, ensuring only you have control over your funds.

So in actual sense, you don't own a “coin” per se sitting on a Blockchain somewhere.

A Bitcoin wallet stores your private keys. Typically, it’s a program that generates and manages your addresses, keeps track of balances, and enables transactions.

You can create new addresses and their associated keys whenever you wish for added security. Notice that a wallet does not store your “bit-COIN” but your keys.

There are two main types of Bitcoin —I’d rather say “crypto”— wallets: hot wallets, which are connected to the internet (think of them like a checking account for quick access), and cold wallets, which are stored offline for added security (similar to keeping cash in a safe).

Cold storage can involve storing keys on USB devices or even on paper, minimizing the risk of online theft. Most of the time, hot wallets are used interchangeably with software wallets and cold wallets synonymous with hardware wallets.

Losing your private key means losing access to your bitcoins forever, as there’s no way to recover it. If any other individual gets your key, they control your bitcoins.

Transactions are also irreversible, so any mistakes—such as sending to an incorrect or nonexistent address—are permanent. Many people entrust their bitcoins to exchanges, despite the security risks, for ease of use.

On the other hand, remember, “not your keys, not your coins” as Andreas Antonopoulos eloquently put it highlighting that leaving your cryptocurrencies with custodial Exchanges is quite risky.

Bitcoin transactions are grouped into blocks, each with a unique cryptographic hash, a number that serves as a secure “check value” for the data in that block.

Any change in the block’s data will produce a completely different hash. This concept secures Bitcoin, as every block is linked to the one before it, forming a chain (hence, blockchain, a chain of blocks).

This structure creates a tamper-evident, public ledger that is "secured by math."

The Bitcoin blockchain holds every confirmed transaction from 2009 onward, growing continuously. By June 2017, it reached over 120 gigabytes, expanding by about 4GB per month.

A new block is created, carrying a reward for the miner (currently 3.125 BTC after halving in April this year, 2024), approximately every ten minutes.

The reward halves every four years, and mining will eventually stop in 2140, when the maximum supply of 21 million bitcoins is reached.

This reward, along with transaction fees, incentivizes miners to maintain the network.

Miners bundle transactions into blocks, add the hash of the previous block, and include an arbitrary “nonce” value.

What is a nonce value?

Just think of it as that unique value that miners compete with each other to find in the Blockchain which will allow them to add a block in the chain of blocks.

They then calculate the hash for the new block. If the hash meets the required difficulty level, the block is valid and broadcast to the network. If not, miners try a new nonce until they succeed.

By June 2017, Bitcoin miners collectively processed 5.5 quintillion (5.5x10^18) hashes per second—an immense computing effort securing the network. This number is enormous, really.

Many early adopters, like Roger Ver, were drawn to Bitcoin for its philosophical potential as a currency that will not depend on government control, projecting a world where individuals had financial autonomy.

Initially, Bitcoin aligned with the dot-com ideal of building wealth by creating something innovative.

However, as its popularity grew, Bitcoin also became a means of speculation, where users could "get in early" and potentially amass wealth, even without building a product or service.

Though this idea is liable not to work in our time, in my own personal opinion, we have returned to Bitcoin's innate dot-com idealism especially in Nigeria and Africa. For me this is more sustainable.

Before Bitcoin, there were other digital payment systems like PayPal, e-Gold, and Liberty Reserve.

These platforms aimed for private, sometimes anonymous transactions but eventually faced regulatory hurdles with some failing completely as they latched tightly onto their idealism and others like PayPal continuing to thrive by letting go of their initial drive.

Bitcoin drew lessons from these systems, creating a decentralized model free from centralized control.

David Chaum pioneered the idea of cryptographic money in the early 1980s, founding DigiCash in 1990.

Later, concepts like Hashcash and BitGold by Cypherpunks —tweak of “cyberpunks”— like Adam Back and Nick Szabo laid the foundation that Satoshi Nakamoto would build upon to create Bitcoin.

Although, it suffices to say that Satoshi Nakamoto started building Bitcoin without prior knowledge of these individuals and their innovations until later on.

Bitcoin’s "secured by math" framework aims to eliminate central control, even at the cost of massive electricity consumption for mining.

This is also another form of Cryptoeconomic security because it will cost a decent amount of money to purchase mining machines like ASICs and the rest.

However, mining has naturally centralized over time, with large pools controlling significant portions of mining power. Security on Bitcoin depends not only on cryptography but also on maintaining decentralization and user vigilance.

..pseudonymous. Every transaction is recorded on the blockchain, meaning law enforcement can trace transactions if motivated as already been seen with some cases of crime with Bitcoin. Services like coin mixers or converting between cryptocurrencies can increase privacy, but they come with risks.

Although initially promoted as "no-fee" and instant, Bitcoin's scalability is limited. Its 1-megabyte block size restricts transaction capacity, causing delays and high fees during peak periods. The segregated witness saga and the introduction of layer 2s like the Lightning Network aim to address....

...these issues.

Being your own bank means assuming full responsibility for securing your Bitcoin. While Bitcoin’s cryptography is solid, managing a wallet securely requires technical knowledge that can be daunting even for IT professionals.

As a result, many users store their Bitcoin on exchanges, despite the risks of hacks and poor security.

Plot twist, Bitcoin and cryptocurrency wallets are already being tailored to be easy to use, plus the fact that there are tons of tutorials for using crypto and Bitcoin wallets media platforms like YouTube, TikTok, X etc.

Bitcoin's maximum processing capability is around 7 transactions per second (TPS), vastly lower than Visa’s 56,000 TPS or PayPal’s 115 TPS.

Proposed solutions like off-chain systems are being implemented and while they offer solutions to the scalability challenges of Bitcoin, they still face their own challenges.

Bitcoin’s ecosystem has evolved considerably, but the core vision of a decentralized, digital currency with a trustless public ledger remains a transformative concept in finance.

Despite its complexities and limitations, Bitcoin has redefined the idea of money, inspiring new technologies and movements within the digital world.

DYOR

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