Bitcoin’s Life Cycle
Bitcoin today is one of the most closely watched cryptocurrencies that has had incredible success over the last ten years, particularly with its last bull run that broke all kinds of records. The last record was a price of $60,000, and it’s expected the bull cycle to continue well into 2021. This made Bitcoin the most valuable and largest cryptocurrency on the crypto market, with a market cap of over $1 trillion.
Hence, there is an influx of new investors that are looking to add BTC to their investment portfolios. With that being said, if you’re just starting out, here we cover everything you need to know about Bitcoin’s life cycle as an investor.
Before we explain more about Bitcoin’s life cycle, we will provide a short overview of blockchain technology, which is the underlying technology that powers Bitcoin and affects its life cycle as well as its price movement.
The blockchain network is simply defined as a digital record of transactions that is structured as a decentralized peer-to-peer-based database. It is called a ‘blockchain’ because each block of transactions after its registered the network is impossible to be changed, and it’s linked to a previous set of blocks of transactions via cryptography.
The main difference between a decentralized and centralized database is that there isn’t a central authority (central point) that is responsible for the control of the processes in the network. Here, the processing of BTC transactions is facilitated by the miners that work on computer systems (nodes) that act as individual servers because it’s a peer-to-peer-based system.
Beyond obtaining BTC on the blockchain network as miners, most users obtain BTC through online trading sites. Since the first trading platform was developed in 2010, online trading has become an essential part of Bitcoin’s ecosystem.
It provided an opportunity for Bitcoin owners to trade BTC, buy, sell, or exchange it for fiat currencies and other altcoins. If you also want to obtain BTC on an excellent automated trading site, make sure to check out the thebitcoinsystem.io. This is an automated trading platform that is based on AI technology which generates trading signals that help users make a daily ROI of up to 60%. You can create an account by depositing $250.
The new BTC is generated via the Bitcoin mining process on the network. Each miner is in charge of auditing the legitimacy of the BTC transactions. For example, when a new user makes a BTC payment, it is sent to the blockchain network, where the transaction enters a so-called memory pool.
From there, the miner chooses the BTC transactions that have higher transaction fees first because there is a limit to the number of transactions that can be added to 1 block of transactions. More specifically, each block of transactions is worth 1 MB. The next step is mining the block based on the consensus algorithm.
This algorithm is also known as the proof of work when each miner on the network tries to solve a computational puzzle. The first one to solves the puzzle receives a block reward ( the block reward is 6.25 BTC in 2021), in addition to the transaction fees for verifying the block of transactions.
After the block is filled with transactions, it is added to the network, and it is publicly broadcasted that a new block of transactions is registered to the network. This is an important feature of Bitcoin as everything remains transparent in the network except for the identity of the users.
Afterward, the other party receives the BCT payment, and the processing time for one transaction might last up to 10 minutes, which is the average processing time for one block of transactions.
As a Bitcoin owner, you can register on online trading sites; as we said earlier, it’s a viable option to exchange BTC for other cryptocurrencies or fiat currencies, for example. Or, you can use it to purchase goods and services because there is an increasing number of well-respected companies that are accepting BTC payments. In this case, the same process is completed again on the blockchain network.