BIT TREASURY: Analysis of the Advantages and Characteristics of Bitcoin Technology and Introduction to Relevant National Policies

Abstract: In 2008, the subprime crisis swept across the world in the United States, and Satoshi Nakamoto launched Bitcoin. On January 3, 2009, the first block of Bitcoin was born, and in the following twelve years, Bitcoin became one of the hottest topics among people, with more and more people participating in the blockchain field. This article mainly introduces Bitcoin with blockchain as the underlying technology, analyzes the attitudes of various national policies towards Bitcoin, and looks forward to the future development of Bitcoin.

1、 The Birth of Bitcoin under the Subprime Crisis

At the beginning of the 21st century, the United States adopted some policies to stimulate the American people to buy houses in order to solve the economic regression caused by the "September 11" incident and the bursting of the IT industry foam. After the policy was issued, commercial banks and financial institutions kept providing loans to low credit groups to stimulate people to buy houses. These loans to low credit groups are subprime loans, so that the Congress finally allocated funds to help house buyers. Because of the continuous rise of house prices, even people with insufficient qualifications can repay loans by mortgage houses. In this environment, the American economy has indeed resumed growth.

The foam will burst one day. In January 2006, the number of newly built homes in the United States reached 2.3 million, and housing prices began to decline. The decline in housing prices caused many borrowers with insufficient qualifications to default, and the continuous occurrence of defaults also led to more houses falling into the hands of banks. In order to deal with these houses as soon as possible, a new round of housing price decline was triggered. However, the biggest trouble is that these frequent default events have caused many financial companies to have difficulty in capital turnover and have used bank credit, which also allowed the foam of real estate to be transmitted to the credit market, and the foam of the credit market to be transmitted to the capital market. Fear spread. For more than a year, this subprime crisis originated in the United States and then swept the world. In such a situation, a large number of countries have issued excess currency, leading to a continuous decline in assets in people's hands. People have faced a credit crisis with centralized banks, which has also stimulated the birth of Bitcoin.

On October 31, 2008, Satoshi Nakamoto released the "Bitcoin White Paper", which can be said to be the origin of blockchain. Satoshi Nakamoto stated that Bitcoin is an electronic trading system that does not rely on credit. Nakamoto Cong does not want Bitcoin to be integrated into the current financial system, but rather wants to make Bitcoin a system without top-down control, and let it be managed by a decentralized public. This decentralized autonomy is also the foundation of the early Internet. Each node on the network is an autonomous agent, communicating with other agents through sharing protocols.

The first Bitcoin transaction occurred on January 12, 2009, between Satoshi Nakamoto and Hal Finney, an early preacher and developer of Bitcoin. Nine months later, they set the first exchange rate for Bitcoin, which was 0.08 cents per Bitcoin, or 1 US dollar, to exchange for 1309 Bitcoins. At the end of 2010, Satoshi Nakamoto suddenly disappeared and cancelled the head block of Bitcoin, leading to a single point of failure. However, a network with thousands of access points and millions of users is still running.

The birth of Bitcoin did not cost a penny, it was born with open source technology. After the disappearance of Satoshi Nakamoto, Bitcoin triggered waves of improvement in the global financial system. After Bitcoin, countless Bitcoin derivatives were created, leading to the emergence of the terms "Blockchain 1.0", "Blockchain 2.0", and "Blockchain 3.0". At the same time, the country's attitude towards blockchain technology is becoming increasingly open, and many financial and technology companies have begun to accept this technology. This article mainly introduces the blockchain 1.0 technology - Bitcoin and related national policies.

Technical characteristics of Bitcoin

In the 12 years since the birth of Bitcoin, there has been constant controversy, and many well-known figures have mixed reviews of Bitcoin.

2.1 Asymmetric encryption [1]

The biggest feature of Bitcoin is its use of asymmetric encryption technology. Asymmetric encryption technology and peer-to-peer network architecture ensure the decentralization of Bitcoin.

We all know that centralization requires a central institution similar to a bank to verify transactions, while decentralization allows all nodes to verify the authenticity of transactions, relying on asymmetric encryption technology.

If encryption and decryption use a single key, it becomes symmetric encryption. The insecurity of symmetric encryption is that if everyone uses the same key, the key loses its security.

For asymmetric encryption [2], simply put, when A sends information to B, both A and B must have a public and private key. The public key is used for decryption, while the private key is used for encryption. During the process of sending messages, the private key of Party A is kept confidential, and the public key is shared with Party B; B's private key is kept confidential, and the public key can be disclosed to A. When A sends a message to B, A encrypts the information with B's public key, and B decrypts A's message with a private key after receiving the message. Other people who receive this message cannot decrypt it because only B owns this private key.

The public key and private key exist in pairs in asymmetric encryption mechanisms, and both can verify each other. In the Bitcoin network, addresses can be understood as public keys, and the process of signing and entering passwords can be understood as private keys. Each miner can verify whether the public key and private key match when receiving a transfer transaction. If they match, the transaction is legal. This way, each person only needs to keep their own private key, know their own Bitcoin address and the other party's Bitcoin address, and can safely transfer Bitcoin.