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The Origin Of Bitcoin:

Since its creation in 2009, Bitcoin and many other digital currencies have rapidly gained popularity. Today, all over the world, it's not uncommon to overhear people chatting about digital currency or related topics.

The SpaceTech Learning portal is an excellent starting point. Here, we've gathered useful info about the basics of digital currency to help SpaceTech Profits newcomers and complete beginners satisfy their curiosity and orientate themselves about the digital currency phenomenon. Each article can be read in isolation and explains one concept about digital currency. After reading the Learning Portal, you should feel more comfortable with digital currency and hopefully better equipped to join the conversation.

What is Bitcoin?

Bitcoin is a digital currency built on a distributed ledger, also known as the blockchain. The network is entirely peer-to-peer, this makes transactions censorship-resistant. Transactions are directly between users and verified by miners that utilize a proof-of-work protocol. Subsequently, these transactions are relayed to all participating nodes and stored in an immutable and public viewable ledger. No single entity controls the network, and the code is entirely open-source. This architecture makes sure that Bitcoin has no single point of failure and no attack surface. To this day, it remains the only digital asset that is truly decentralized and leaderless.

Who decides what a bitcoin is worth?

The price of Bitcoin fluctuates constantly and is determined by open-market bidding on Bitcoin exchanges, similar to the way that stock and gold prices are determined by bidding on exchanges.

Currently, the average price of one Bitcoin is about $8,636.69, according to, a news and data site.

Break down of Bitcoin

Many people believe Bitcoin to be very complicated, when in fact it’s a lot more simple and intuitive than what most people think. This series aims to help everyone get a grasp of the basics, and over time also present further learning opportunities for those that want to know more.

Bitcoin is often explained by comparing it to something specific people already know, but this is often what creates a lot of confusion. Bitcoin is a new technology that is unlike anything we have seen before, so a better way to think of it is as a combination of a few different things we are already used to:

Firstly, because it allows you to move money so easily, Bitcoin functions as a payment system, similar to bank transfers or credit cards, only a bit better.

Second, Bitcoin is in some sense similar to gold - that is why many people even refer to it as ‘digital gold’ or ‘Gold 2.0’. Think of it as using gold for money, except it also very easy to move.

Third, Bitcoin is like the internet in that no single person or entity controls it, so anyone can pretty much use it as they like. This gives it some very unique characteristics.

How does Bitcoin work?

With traditional money, transferring funds from one account to another requires some intermediary authority or middleman. Even with hand-to-hand cash transactions, the issue, value and fiscal policy of money is controlled by a trusted centralized authority (such as a bank, agency or government). Bitcoin operates differently in that no middleman is required in transactions as the trust between actors is derived from computer science and cryptology, rather than trust in a central establishment. It also means that Bitcoin is transferred directly from the sender to the receiver, with absolutely no intermediaries.

A key point to note is that because of this lack of central issuing body, cryptocurrency is created and transferred with the help of a process called “mining”. This process requires an extremely powerful computer to crunch down the billions of calculations required to solve cryptological functions.

In reality, the mining process is extremely complex and technical. Despite its complexity, the process is transparent and open for review due to the open-source nature of Bitcoin.

What are the strengths and weaknesses of Bitcoin?

Bitcoin is the first decentralized and uncontrolled currency. Since no central body owns the process for issuing new units, new coins are created at a fixed, predetermined rate. Unlike many government-issued currencies, this means that Bitcoin is immune from inflation, and is in fact a deflationary currency. Bitcoin also has the un unique property of “transparent anonymity”- meaning that despite all transactions and wallets being public through the Blockchain, all actors in a transaction are only identified by their bitcoin wallet address. Thousands of addresses are generated daily – this means that the user stays anonymous until they register both their personal details and their bitcoin wallet address somewhere (for example on a Bitcoin exchange). Bitcoin’s unique makeup also creates other strengths from the users perspective- the digital nature of Bitcoin makes it highly divisible and the lack of a central authority ensures that transaction fees are near-zero.

Bitcoin’s digital nature and lack of central body also shape Bitcoin’s weaknesses - lost Bitcoins are non-recoverable (meaning that if you lose your private key or the hard drive with your wallet gets corrupted or if you lose your bitcoin wallet seed, those Bitcoins are lost forever!).

What is mining?

Bitcoin is really three things. First it is a protocol (or set of rules) that defines how the network should operate. Second it is a software project that implements that protocol. Third it is a network of computers and devices running software that uses to protocol to create and manage the Bitcoin currency.

Mining is defined in the protocol, implemented in software, and is an essential function in managing the Bitcoin network. Mining verifies transactions, prevents double-spending, collects transaction fees and creates the money supply. Mining also protects the network by piling tons of processing power on top of past transactions.

Mining verifies transactions by evaluating them against the transactions that happened before. Transactions cannot spend bitcoins that do not exist or that were spent before. They must send bitcoins to valid addresses and adhere to every rule defined by the protocol.

With a frequency that is targeted at every 10 minutes, mining. creates new blocks from the latest transactions and produces the amount of bitcoins defined by the current block reward. Miners also verify blocks produced by other miners to allow the entire network to continue building on the blockchain.

Finding blocks?

To find a valid block, the miner builds a list of recent transactions and calculates some summary information about the proposed block. This summary is combined with a number called a nonce to create a block header. The hash of the block header is then calculated and to see if it is small enough to win at the current difficulty. If not, the nonce is changed and the new hash is calculated and tested.

There is no way to create a valid block except by a brute force search. Brute force means the miner tries one nonce, then another, and another, repeating the process until it gets lucky. During that search, the miner cannot predict if the next nonce will give a smaller hash than the last.

Since it is a brute force process, the only way to increase your chances of winning are to increase the speed with which you can try nonces. The more processing power you have at your disposal, the faster you can search and the more likely you will be to find a winning block.

Once a valid block has been generated, it is broadcast to the network and quickly verified by the other nodes in the network. The difficulty of finding a winning number is adjusted every 2016 blocks so blocks are generated on average, every 10 minutes.

Creating new Bitcoins

When a miner finds a new block, it includes a new address to which new bitcoins and any transaction fees are to be awarded. This reward is the monetary incentive for people like you and me to run miners. If the conditions are right, you can put mining hardware to work, paying for your time and electricity and make a profit by selling the resulting bitcoins that you were awarded.

As this guide is being written, 50 bitcoins are awarded to the miner who finds each block. This will continue until block 210,000 is found at which time the block reward will halve to 25 bitcoins. The reward will then halve again every 210,000 blocks thereafter. This means the number of Bitcoins ever created will top out at around 21 million (estimated to occur in near 2040).

Where do these bitcoins come from? They are literally created by the network as part of the Bitcoin protocol. This is the same process that created any bitcoins you will ever own or use.

How to store Bitcoin

Before owning any bitcoin, you need somewhere to store them. That place is called a "wallet." Rather than actually holding your bitcoin, it holds the private key that allows you to access your bitcoin address (which is also your public key). If the wallet software is well designed, it will look as if your bitcoins are actually there, which makes using bitcoin more convenient and intuitive.

Actually, a wallet usually holds several private keys, and many bitcoin investors have several wallets.

Wallets can either live on your computer and/or mobile device, on a physical storage gadget, or even on a piece of paper. Here we'll briefly look at the different types.

Electronic wallets
Electronic wallets can be downloaded software, or hosted in the cloud. The former is simply a formatted file that lives on your computer or device, that facilitates transactions. Hosted (cloud-based) wallets tend to have a more user-friendly interface, but you will be trusting a third party with your private keys.

Software wallet
Installing a wallet directly on your computer gives you the security that you control your keys. Most have relatively easy configuration, and are free. The disadvantage is that they do require more maintenance in the form of backups. If your computer gets stolen or corrupted and your private keys are not also stored elsewhere, you lose your bitcoin.
They also require greater security precautions. If your computer is hacked and the thief gets a hold of your wallet or your private keys, he also gets hold of your bitcoin.
The original software wallet is the Bitcoin Core protocol, the program that runs the bitcoin network.

Online wallet
Online (or cloud-based) wallets offer increased convenience – you can generally access your bitcoin from any device if you have the right passwords. All are easy to set up, come with desktop and mobile apps which make it easy to spend and receive bitcoin, and most are free.
The disadvantage is the lower security. With your private keys stored in the cloud, you have to trust the host's security measures, and that it won't disappear with your money, or close down and deny you access.
Some leading online wallets are attached to exchanges (such as Coinbase and Blockchain). Some offer additional security features such as offline storage (Coinbase and Xapo).

Mobile wallets
Mobile wallets are available as apps for your smartphone, especially useful if you want to pay for something in bitcoin in a shop, or if you want to buy, sell or send while on the move. All of the online wallets and most of the desktop ones mentioned above have mobile versions, while others – such as Abra, Airbitz and Bread – were created with mobile in mind.

Paper wallets
Perhaps the simplest of all the wallets, these are pieces of paper on which the private and public keys of a bitcoin address are printed. Ideal for the long-term storage of bitcoin (away from fire and water, obviously), or for the giving of bitcoin as a gift, these wallets are more secure in that they're not connected to a network. They are, however, easier to lose.
With services such as WalletGenerator and BitcoinPaperWallet, you can easily create a new address and print the wallet on your printer. Fold, seal and you're set. Send some bitcoin to that address, and then store it safely or give it away. (See our tutorial on paper wallets here.

Are Bitcoin wallets safe?
That depends on the version and format you have chosen, and how you use them.
The safest option is a hardware wallet which you keep offline, in a secure place. That way there is no risk that your account can be hacked, your keys stolen and your bitcoin whisked away. But, if you lose the wallet, your bitcoin are gone, unless you have created a clone and/or kept reliable backups of the keys.
The least secure option is an online wallet, since the keys are held by a third party. It also happens to be the easiest to set up and use, presenting you with an all-too-familiar choice: convenience vs safety.
Many serious bitcoin investors use a hybrid approach: they hold a core, long-term amount of bitcoin offline, while having a "spending balance" for liquidity in a mobile account. Your choice will depend on your bitcoin strategy, and your willingness to get "technical."
Whatever option you go for, please be careful. Back up everything, and only tell your nearest and dearest where your backups are stored.

What is an ICO?

ICO stands for "initial coin offering," and refers to the creation and sale of digital tokens.

In an ICO, a project creates a certain amount of a digital token and sells it to the public, usually in exchange for other cryptocurrencies such as bitcoin or ether.

The public could be interested in the tokens on offer for either or both of the following reasons:

  1. The token has an inherent benefit – it grants the holder access to a service, a say in an outcome or a share in the project's earnings.
  2. The benefit will be in increasing demand, which will push up the market price of the token.

Tokens, especially those of successful sales, are usually listed on exchanges, where initial buyers can sell their holdings and new buyers can come in at any time.

As a type of digital crowdfunding, token sales enable startups not only to raise funds without giving up equity, but also to bootstrap the project's adoption by incentivizing its use by token holders.

Buyers can benefit from both the access to the service that the token confers, and from its success through appreciation of the token's price. These gains can be realized at any time (usually) by selling the tokens on an exchange. Or, buyers can show their increasing enthusiasm for the idea by purchasing more tokens in the market.


The first token sales appeared in 2014, when seven projects raised a total of $30 million. The largest that year was ethereum – over 50 million ethers were created and sold to the public, raising over $18 million.

2015 was a quieter year: Seven sales raised a total of $9 million, with the largest – Augur – collecting just over $5 million.

Activity started to pick up in 2016, when 43 sales – including Waves, Iconomi, Golem and Lisk – raised $256 million. Included in that total is the infamous sale of tokens in The DAO, an autonomous investment fund that aimed to encourage ethereum ecosystem development by allowing investors to vote on which projects to fund. Not long after the sale raised over $150 million, a hacker siphoned off approximately $60 million worth of ether, leading to the project's collapse (and a hard fork of the ethereum protocol).

The DAO's failure did not deter the increasingly ebullient enthusiasm for the new asset type, and in December the first fund dedicated to token investment got significant backing from old-school venture capitalists.

2017 saw an explosion of activity – 342 token issuances raised almost $5.4 billion – and thrust the concept to the forefront of blockchain innovation. Sales selling out in increasingly shorter periods of time fuelled the frenzy, and in the haste to get "in on the action," project fundamentals became less important to would-be investors.

Along with increased attention came increased scrutiny, and concern about the legality of token sales came to a head when the U.S. Securities and Exchange Commission (SEC) put out a statement saying that, if a digital asset sold to U.S. investors had the characteristics of a security (ownership rights, an income stream or even expectation of a profit from the efforts of others), it had to abide by U.S. securities laws.

By the middle of the year, ICOs had overtaken venture capital as the main source of funds for blockchain startups as they flocked to what appeared to be an easier and faster way to raise a huge amount of money without sacrificing equity in the company.


To the Issuer:
1. Access to seed funding, much faster and with fewer restrictions than via the venture capital route
2. The opportunity to create new, decentralized business models.
3. A base of participants incentivized to use and test the service, and a boot-strapped ecosystem
4. No loss of equity in the project (unless the tokens stipulated ownership sharing).
5. A faster funding process.
6. More arbitrary limits to the amounts collected.

To the token Holder:
1. Access to an innovative service.
2. Possible gain through an increase in the token's price.
3. Participation in a new concept, a role in developing a new technology.


For the Issuer:
1. Uncertain regulation (possible post-issue clamp-down, fine or even sentencing).
2. Unstable investment (a sell-off by disgruntled users could affect the token price and the viability of the project).
3. Little idea of who the token holders are (unlike shareholders).

For the Holder:
1. No guarantee the project will get developed.
2. No regulatory protection (investment at risk).
3. Often scant information about underlying fundamentals.
4. Little transparency on token holding structure.


At time of writing, the growth in initial coin offerings looks set to continue. As the technology matures and the market gains more experience with the concept, and as investors become more sophisticated, the quality of the tokens and the viability of the business models are likely to improve.

Regulators will most likely pay more attention to token sales as the next few years unfold, perhaps even passing blanket laws – or amending existing ones – to protect investors from flimsy or fraudulent sales.

Meanwhile, new types of business models will continue to emerge, fuelled by a new funding system and operating structure. The infrastructure that supports token sales will also continue to grow, with reputable advisors morphing into the "investment banks" of the sector, and new dedicated platforms increasingly enhancing the user experience.


The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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