Bitcoin can be defined as a distributed digital monetary system. It operates without the intervention of a central authority such as a bank. This protocol uses its own native currency whose total issuance is consensually limited to 21 million units.
According to its founder, acting under the alias of Satoshi Nakamoto, Bitcoin is a peer-to-peer electronic cash system. But what does that really mean? What is bitcoin?
What is Bitcoin? Bitcoin is the cryptocurrency of a distributed digital monetary system. It operates without the intervention of a central authority such as a bank.
This new payment system, which is both innovative and already deeply developed, has numerous advantages in its use. Its different characteristics push us towards new monetary paradigms. In this article, I present to you what Bitcoin is through its three pillars: the peer-to-peer network, the protocol and the currency.
These three concepts are homophonic, they can all be referred to as “Bitcoin”. In general, when talking about the network or protocol, “Bitcoin” is written with a capital letter. On the other hand, when talking about electronic money, “bitcoin” is written with a lowercase letter.
The Bitcoin network
Bitcoin does not have a single officer or director. It's a truly peer-to-peer payment network. In other words, each participant has the same rights and the same power as all the others. No user has more privileges than their peers.
The Bitcoin network is a group of computers, called nodes, that build consensus on the status of a ledger of accounts. We thus speak of a distributed register since each user keeps their own version in memory. This ledger of accounts is what is sometimes called Blockchain.
Thanks to its peer-to-peer network, Bitcoin is often presented as indestructible. To put an end to this payment system, it would be necessary to be able to shut down all the nodes of the network simultaneously. We can't really know how many there are to date, because the majority of them are undetectable. However, some estimates still count between 40,000 and 100,000 spread across the world.
The distribution of this network also ensures one of the essential characteristics of Bitcoin: incensurability. Anyone who can access a node will still be able to broadcast their transactions. Nobody has the technical capacity to ban this.
The Bitcoin protocol
All these computers that communicate need to agree on rules. They therefore run software, which specifies the functioning and mechanisms of the network. This is called the Bitcoin protocol.
The main implementation of this protocol is done by the software Bitcoin Core, which you can freely download in order to participate in the network.
If a user unilaterally decides to change the protocol rules, they will automatically come out of consensus. It will then no longer be part of the Bitcoin network.
When many people decide to change the rules of the game, without having a consensus, we can see a split in the system. For example, it is this mechanism that led to the creation of “Bitcoin Cash” (BCH), another isolated and minority payment network, with another cryptocurrency, which has standards different from Bitcoin.
Unlike the banking system or other cryptocurrencies, Bitcoin is not managed by any central authority. It is really peer-to-peer. Users agree on this system thanks to a disruptive mechanism: the Nakamoto consensus. How it works in detail will be the subject of a future article.
Since any monetary system must have a unit of account, the Bitcoin system uses bitcoin.
Bitcoin is thus the digital asset used within the Bitcoin network to carry out payment transactions. Moreover, it is native and specific to the protocol. This means that you can't take it off the network.
One of the remarkable particularities of the Bitcoin unit of account is that its total emission is consensually limited to 21 million units. This characteristic is ensured by the operation of the protocol. That is, the limitation of the offer is based on the consensus of the users. These same users will most likely never increase this limit since this would be tantamount to amputating part of the value of your savings yourself, which is deeply illogical. So the bitcoin supply is rare.
Unlike state currencies, on Bitcoin, no central authority will be able to unfairly devalue the value of your currency by printing money. The monetary issue is defined in advance, maintained by consensus, and limited to 21 million bitcoins.
These units can be divided on the main network up to 100 millionth, called the “satoshi” or “sat”, in reference to the founder of the monetary system. Therefore, you do not have to acquire an entire bitcoin, it is obviously possible to buy tiny fractions of it.
Unlike the banking system where each unit of currency account is associated with a user by identification, bitcoins are associated with a pair of cryptographic keys. The distributed account register thus lists which bitcoins belong to which keys. To spend bitcoins, a user does not have to justify his identity, but to prove to the rest of the network that he is aware of a certain key. It is this information that constitutes the property of a bitcoin.
This operation means that bitcoin is currently one of the only assets for which private ownership is not ensured by force, but by the knowledge of certain information.
Literally, the word “Bitcoin” can be broken down into two parts: “bit” and “coin.” A bit is a unit in a binary number system that can take one of two values: 0 and 1. It is the contraction of “binary” and “digit” that can be translated into French as “binary number”. So this evokes the digital nature of Bitcoin. The word “corner”, in the second part, can be translated as “room.” This highlights the monetary aspect of Bitcoin.
Bitcoin: what is it for?
Bitcoin simply makes it possible to transfer value, thanks to its peer-to-peer network and protocol, through the vehicle of its currency: bitcoin.
These transactions take place without any trusted intermediaries, at any time of the day, and are incensurable. With Bitcoin, there is no need for Visa, Mastercard, various banks and the numerous intermediaries in the payment industry. Everything is managed by the Bitcoin network, directly between users.
All these exchanges take place in Bitcoin, a rare digital asset whose total issuance is consensually limited.
Finally, Bitcoin allows anyone to have access to a healthy monetary system and a fair, free and efficient payment network.
In an inflationary context, as more and more people around the world are losing faith in government currencies, maybe bitcoin has a role to play.
Conclusion
Bitcoin is primarily a peer-to-peer payment network that operates without the intervention of any central authority. It is established on a distributed register, for which each user keeps a version of it, and which defines an overview of all user accounts.
Bitcoin is also the name of the protocol that determines the rules of operation of the network. It is the software used by the nodes in order to take part in the payment system.
Bitcoin, on the other hand, represents the digital asset exchanged within this network between users. It is a native asset that cannot be taken out of the system, that allows value to be stored efficiently over time thanks to its limited supply, and that can be traded in an incensurable manner.
