Want to be familiar with the principles of Bitcoin? Do you understand the four processes of Bitcoin?

Golden Finance News - Bitcoin is no stranger to everyone. It was once remembered for its "roller coaster" price. For a while, trading Bitcoin was like gambling.

Bitcoin was once remembered for its "roller coaster" price. Image source: Golden Finance

However, people actually do not understand the principles behind this type of virtual currency. In fact, we can give a simple explanation of the principles of Bitcoin.

Step 1: Mining

Bitcoin mining is the process of creating Bitcoin. You can imagine yourself in a string of code, and suddenly an algorithm composed of code appears in front of you - this is FROM.

Bitcoin "mining" is the process of creating Bitcoin. Image source: Golden Finance

In the Bitcoin system, this FROM becomes the first "bill" and is attached to the blockchain. Everyone starts to calculate whether this "bill" is correct. If you are the first to calculate it, you can get 25 Bitcoins.

However, it is not just one person who calculates the FROM, but the entire network together, so the user must have a sufficiently powerful PC, which is called a "mining machine" and its purpose is to calculate faster than others.

Step 2: Bitcoin Transaction

In Bitcoin mining, starting from FROM, there are "transaction bills" one by one. The "bill" mainly includes the following contents:

From FROM, it is a "transaction bill" Picture source: Golden Finance

"Box 1" contains the transaction FROM and past bill contents.

The currentTXs in "Box 2" is the accounting process of this bill. The newBlock covers the amount of the next Bitcoin transaction.

The blockHash in "Box 3", also known as scriptSig, is the seller's "key". Only the buyer can unlock it and complete the transaction.

——The Bitcoin transaction process is as follows: A wants to sell 25 Bitcoins to B. People on the entire network will calculate three questions based on FROM: whether A exists, whether A has 25 Bitcoins, and whether B exists, and then confirm. After confirmation, B releases the seller's key and purchases 25 Bitcoins, completing the transaction. This transaction continues to remain on the public ledger.

Step 3: Bitcoin is a double-edged sword for money laundering

Money laundering and gambling are a double-edged sword for Bitcoin, both its problem and its resilience.

Many arms dealers and terrorists in the world rely on Bitcoin to launder money. Image source: Golden Finance

Suppose there is a scenario like this: a drug buyer A wants to pay drug dealer B, and they are on the left and right sides, with countless innocent people in between.

After the police seized the seller's account, they had to question each person on the "bill" one by one to trace the source of the funds. One person would involve another group of people, repeating the operation hundreds of times, and there would be foreign citizens among them. Therefore, it was very difficult for the police to track down the buyer.

Based on this, the Bitcoin ETF was rejected by the US Securities and Exchange Commission, after which Bitcoin plummeted by $315 to only $968. However, Bitcoin continued to climb back to today's high of around $1,283.

This resilience is also due to the role of "money laundering", because many arms dealers, drug lords and terrorists in the world rely on Bitcoin to "launder money". In addition, they are part of the active people in the recent geopolitical tensions, and the higher demand for "money laundering" has pushed up the rise of Bitcoin.

Step 4: Bitcoin is the emerging safe-haven currency

Because Bitcoin has its own system, it is relatively stable in the face of huge market fluctuations. Moreover, it is also moving towards a more legalized goal, and may replace gold as an emerging safe-haven currency in the future.