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On January 3, 2009, Satoshi Nakamoto introduced the bitcoin blockchain. The genesis block heralded the beginning of a peaceful, neutral, and decentralized alternative to central banking. Thirteen years later, Satoshi’s discovery is more relevant, robust, and needed than ever.
Bitcoin offers hope
Satoshi Nakamoto’s discovery is more prevalent in the thirteenth year of bitcoin’s life than ever. As a digital form of money, where increasing the supply is impossible, bitcoin functions in a world where mountains of debt and money stocks are growing faster than ever before to rescue this policy.
In 2021, inflation in the United States rose by 6.8%. It is the highest percentage since 1982. However, this was less noticeable due to the high-interest rates at the time (about 13%). Therefore, inflation this year was mainly noticeable in the prices of goods. For example, house prices in the Netherlands rose by about 14.4%, and the Amsterdam AEX (Amsterdam Exchange Index) had a record year despite the corona pandemic. Incidentally, this was the case in the Netherlands and globally. It was a record year for many investors. On the other hand, a staggering 1.1 billion people in dozens of countries experienced double-digit inflation this year. To invest in bitcoins, visit ekrona trading.
The 13’th Birthday of Bitcoin
The consequences of this currency depreciation are challenging to explain concisely. Inflation leads to higher prices and, therefore, a reduction in the buying power of money. Because wages and interest rates do not rise at the same rate, people can buy fewer and less high-quality products. They are also indirectly punished when they save. Money set aside as a nest egg quickly loses its value. It motivates people to spend their money faster. In contrast, inflation rewards borrowers, investors, and homeowners. Therefore, the ‘printing’ of money leads to greater wealth inequality.
In other words, inflation (money depreciation) makes long-term saving more difficult. For a society, on the other hand, this vision and the build-up of prosperity are crucial. Security, peace, health, and a healthy economy are often determined by the choices made in daily life. When people value the future more, choices that influence the future will be better thought out.
Bitcoin does not know the problem of high inflation. Monetary policy is fixed and immutable. In principle, no one can change the rules of the protocol. Also, Satoshi Nakamoto, if they were ever to return, will have as much power over the bitcoin network as you and I.
The increasingly scarce nature of Bitcoin offers certainty. One bitcoin will always remain 1 of the 21 million bitcoins. This certainty ensures that it is a suitable means of savings. As a result, bitcoin offers hope and a way out of the current money system for many people. Bitcoin is a means of savings separate from central banks, corrupt governments, or rulers.
In the volatile 2021, the Bitcoin network has once again proven itself by being one of the most stable networks in the world. In 2021, as in previous years, Bitcoin had an uptime of 100%.
2021 was also the year that:
Due to energy consumption, Tesla bought billions in bitcoin and accepted the digital currency as a payment method, only to reverse it shortly after.
El Salvador grows into the first country to fully adopt bitcoin. Furthermore, before the construction of BitcoinCity, it issued the first bitcoin bonds ever, sidelining the International Monetary Fund (IMF). In addition, the first bit of bitcoin was mined with energy generated from a volcano.
Microstrategy, just like in 2020, bought billions in bitcoin. In total, the company holds ~ 124,391 bitcoins.
The price of bitcoin experienced both peaks and troughs. The current all-time high is about $69 thousand. The lowest point this year was around $28 thousand.
China officially banned bitcoin mining. As a result, the largest mining sector in the world suddenly pulled the plug and caused the hash rate to drop sharply. The ban kicked off a massive mining equipment move, leading to more decentralization. Popular destinations were Canada and some states in the United States, such as Wyoming, Texas, and North Dakota. Meanwhile, the hash rate has recovered, and the Bitcoin network’s computing power has already reached new heights.
The Bitcoin protocol underwent a long-awaited upgrade: Taproot. This improvement introduces a new type of bitcoin address, which increases transaction capacity on the network, lowers transaction costs, and provides more privacy.
Bitcoin’s taproot upgrade
Bitcoin got an upgrade this weekend: Taproot. This long-awaited improvement to the Bitcoin protocol introduces a new type of Bitcoin address, increasing transaction capacity on the network, lowering transaction costs, and providing more privacy.
This weekend Taproot, an improvement of the Bitcoin protocol, was activated on the Bitcoin network. It is the most significant upgrade of the Bitcoin protocol since the introduction of SegWit in 2017. The activation happened during block 709632, as determined half a year ago during the ‘Speedy trial’ activation method.
Does it know more?
We already wrote extensively about Schnorr signatures in an earlier article. We have also written extensively about Taproot, just like the Merkalized Abstract Syntax Trees (MAST) used with it.
Taproot improves Bitcoin in several ways. An essential part of it is Schnorr signatures, a more efficient way of dealing with digital signatures.
Several digital signatures are combined, after which a one-off signature is made with a kind of sum of the whole. This is mathematically easy to verify and does not reveal any information about the individual parts from which it originates.
This saves data, which saves the miner’s fees and increases the transaction capacity on the network. It also provides more privacy for the individual participants. Schnorr signatures are also faster to verify as only one verification is needed instead of several.
Taproot provides attractive benefits for scripts. Indeed, the nature and efficiency of Schnorr signatures allow for larger and more complex scripts, even with thousands of participants, with only one signature taking place. That is much cheaper than if each participant makes an individual transaction.
This significantly increases the possibilities for decentralized applications and complex smart contracts. For example, users can save transaction costs by bundling and signing once with a Schnorr signature. It could also contribute to the development of Lightning Channel Factories, where multiple Lightning payment channels are opened in one transaction.
In addition, Taproot improves the privacy of scripts because only the participants know that it is a script. Complex Taproot transactions look the same on the blockchain as any transaction signed with a Schnorr signature. So you do not see that there is an intelligent contract behind it, which conditions apply, and who participated because you only see and verify the Schnorr signature.
Multisig transactions and transactions to open or close Lightning channels are therefore indistinguishable from other bitcoin transactions. In addition to improved privacy, this also contributes to bitcoin’s convertibility ( fungibility ) – an essential property of sound money.
Thank you for reading!