What is Bitcoin?

Bitcoin, the world’s first successful cryptocurrency, is a decentralized digital payment network developed by Satoshi Nakamoto. Users can make direct transfers without any financial institution or third-party intermediary.

Bitcoin is a decentralized digital currency that allows users to transact directly without any intermediaries. The foundations of Bitcoin can be traced back to a paper published by Satoshi Nakamoto in October 2008, Bitcoin: A Peer-to-Peer Electronic Cash System.

Bitcoin operates as a decentralized, secure and self-functioning electronic money system by simply creating nodes, verifying them with cryptography and recording them on a public distributed ledger called a blockchain. While the idea of decentralized digital money has been proposed before, Bitcoin is the first system to put this concept into practice and form the basis of the cryptocurrency industry. It has grown into a global community of tens of thousands of people, and over time has spawned many platforms, wallets, exchanges, travel services, online payments and games that can be used in the real world.

Bitcoin’s security, censorship resistance, anonymity and borderless nature have made it an alternative payment method in regions where access to financial services is limited. Since its total supply was limited to 21 million, it was also seen as a store of value over time and was referred to as “digital gold” due to its scarcity. Bitcoin holders identify with the value that this decentralized digital asset brings and see it as a long-term investment.

Despite its volatile price movements, Bitcoin is now widely recognized and continues to have a strong community of supporters as a decentralized digital asset that provides a hedge against inflation.

How does Bitcoin work?

Bitcoin works on the principle of a sequential chain of transactions and is defined as the transaction process of a token verified by a digital signature. The token itself is derived from previous transactions on the chain. For example, when A sends a Bitcoin to B, A’s balance is updated to -1 and B’s balance is updated to +1. This system creates a transparent and secure ledger structure that determines ownership of the currency by recording transactions.

Rai Stones, known as the first coins in history, were used with a system that showed the change of ownership by crossing out the name of the previous owner and writing the name of the new owner. This method allowed to keep track of the transaction history using a ledger logic. The practice of transaction logging was in use long before our time.

Every transaction on the Bitcoin network takes place by updating the ledger by verifying the tokens with a digital signature. During the transaction, the token is transferred to the new holder by signing the reference of the previous transaction and the public key of the next recipient. This process is included in a block that is broadcast to all nodes. The validity of the transaction is verified by nodes in the network, ensuring that the recipient receives the token seamlessly.

One of the biggest problems in a decentralized system is what is known as “double spending”. This means that the same token is spent more than once and the buyer is misled. To avoid this problem, it is necessary to establish a credible reconciliation mechanism.

This mechanism is called a Timestamp Server. The timestamp server seals a given set of data or multiple transactions with a timestamp by combining it with the hash value of a block. Each new timestamp references the previous timestamp, thus proving that the transactions took place in the correct order. This method helps to avoid double spending. Also, each newly added timestamp reinforces all previous timestamps, making it difficult to make retroactive changes.

In this system, the chain of blocks grows thanks to the hashing power generated by Bitcoin miners. With the expansion of the Bitcoin network, it becomes almost impossible to capture more than 51% of the hash power to perform a double-spending attack. Therefore, the security of the network is largely protected and the problem of double spending is highly unlikely to arise.

Timestamp Server

Proof of Work

Proof of Work (PoW) is one of the most fundamental consensus mechanisms in the blockchain world. Early projects such as Bitcoin, Ethereum and Litecoin adopted this model to ensure the consistency and immutability of blockchain ledgers.

The PoW model works simply as follows: All nodes in the network try to solve the same math problem, and the first node to solve the problem gets the right to update the ledger. In return, they are rewarded with new cryptocurrency created by the blockchain network.

The PoW mechanism is used to ensure that the decentralized timestamp server operates on a peer-to-peer basis. PoW is based on the Hashcash system invented by Adam Back. Hashcash was originally developed to prevent unnecessary emails by requiring computing power. Bitcoin extended this model based on Hashcash, making it a system that requires miners to expend computing power to verify transactions on the blockchain.

Bitcoin’s Proof of Work (PoW) mechanism is based on the principle that the hash value is a 256-bit binary number that is verified twice with the SHA-256 algorithm. First, a predetermined number is created, called the difficulty target. Then, a randomly generated hash value is calculated from 2²⁵⁶ possible combinations. The more zeros at the beginning of the hash value, i.e. the smaller the value, the more likely it is to be accepted. As a rule, the calculated hash value must be smaller than the set difficulty target.

The first miner to calculate the lowest hash value gets the right to publish the block. Once all validators have confirmed the validity of the block, it is added to the chain and miners start competing again for the new block. This process ensures the continuous growth of the blockchain. Validation, publishing and accounting are performed automatically by the Bitcoin protocol. Thus, all nodes have a synchronized and updated ledger.

The difficulty target on the Bitcoin network is automatically updated every 2016 blocks and adjusted according to the average mining power. The target is set so that each block can be removed in approximately 10 minutes. The miner who performs the most calculations per unit time increases the chances of finding the correct hash value and creating a block. This mechanism underpins Bitcoin’s Proof of Work consensus model.

The PoW model also solves the problem of “tyranny of the majority” that arises in decision-making processes based on majority power. Decisions in the network are based on the total hash power of the miners. According to the longest chain rule, the longest block chain is considered valid. If honest miners make up the bulk of the network’s hashe rate, the chain will be longer than others and malicious attempts will be neutralized.

What is Bitcoin Mining?

Bitcoin uses the Proof of Work (PoW) mechanism to verify transactions on the blockchain and secure the network. Bitcoin mining is the use of hardware that requires transaction verification and computing power to sustain this process. Miners synchronize the network by adding new transactions to the blockchain, and in return they receive Bitcoin rewards. Miners scattered around the world together secure the network without depending on a central authority.

Bitcoin mining is often compared to gold mining, but the main difference is that Bitcoin mining is a temporary mechanism that puts new Bitcoins into circulation and also provides incentives to miners to secure the network.

Miners try to get more computing power to get more computational rights (finding more answers) and Bitcoins (block rewards). First, the miner who calculates the smallest hash value wins the right to publish the corresponding block, and then the race for a new block begins. This is done by miners verifying the latest transactions using hardware that requires billions of Proof-of-Work calculations per second.

Miners can earn transaction fees by speeding up the transaction verification process and are rewarded with new Bitcoins based on a specific formula. However, since mining is a profit-making activity, more miners joining the network will increase the difficulty level. This difficulty level is adjusted approximately every 10 minutes, depending on the total hashing power on the Bitcoin network.

The PoW mechanism ensures that blocks are added in chronological order and it becomes almost impossible to change or undo any block. This is because to change one block, all subsequent blocks must also be recalculated. If a miner receives two different blocks at the same time, the block that does not belong to the longest chain is invalidated and all nodes in the network follow the longest chain to maintain synchronization.

CPU, GPU and ASIC Mining

Mining technology has changed dramatically over time, starting with the Central Processing Unit (CPU) and evolving to Graphics Processing Unit (GPU) and then Application Specific Integrated Circuit (ASIC) devices.

In the early years of Bitcoin, mining was done with CPUs and the total hashing power of the network was quite low. But with Bitcoin’s appreciation, more miners joined the network, making it harder to mine. In 2010, GPUs started to replace CPUs with CUDA Miner developed by puddinpop. GPUs have an architecture with more processing cores and can generate about 100 times higher hashing power than CPUs with specialized mining instructions.

Despite this development, GPUs have also become inadequate for mining over time. In 2013, a company developed ASIC chips, hardware specifically designed for mining. ASICs run about 200 times faster than GPU mining, providing a huge efficiency boost. This led to a fundamental transformation in the mining sector, significantly shaping the ASIC chip manufacturing and mining industry. Today, Bitcoin mining is largely done with ASIC devices and individual mining is becoming less and less profitable.

Mining Farms and Cloud Mining

Because the distribution of rewards in Bitcoin mining is random and unpredictable, miners have turned to crowdfunding to increase revenue and reduce costs. This process led to the emergence of mining farms shortly after the popularization of Bitcoin.

Mining farms are facilities that house large-scale mining operations. These facilities focus on optimizing electricity costs and increasing efficiency by hosting mining hardware that requires high processing power.

On the other hand, individuals can utilize cloud mining services instead of buying and operating their own hardware. Cloud mining platforms allow users to rent mining machines and mine without the need for technical knowledge. This system allows individual miners to avoid hardware purchase and maintenance costs, while creating a sustainable revenue model for cloud mining providers.

How Does the Bitcoin Network Work?

Here’s how the Bitcoin network works:

1. A new transaction is broadcast to all nodes in the network.
2. Each node includes the new transaction in its block.
3. Nodes perform the Proof of Work calculation by working on their own blocks.
4. When a node finds a valid hash value, it broadcasts its block to all nodes.
5. If all operations are valid, the other nodes accept this block.
6. The hash value of the accepted block forms the basis for the next block and the process continues.

The nodes only follow the longest chain. If two different nodes broadcast different blocks at the same time, the nodes in the network will continue to extend the chain by processing the block they received first and temporarily store the other block. However, when the next Proof of Work is completed and a new block is found, the chain becomes longer and nodes start following the longer one.

This process gives consistency to the Bitcoin network. If a node misses an updated version of the chain, it synchronizes with the network by requesting the missing block when it receives the next block. Thus, the Bitcoin network creates a trusted ledger by verifying transactions in a decentralized way.

Compatibility and Scalability

To maintain the global consistency of the Bitcoin ledger, the longest chain rule has been adopted. It is not possible to create a new chain or modify an existing chain because it has the largest hash power, which strengthens the immutability of the blockchain.

Nodes compete to extend the longest chain and record transactions from the first block until 2140. For the longest chain to form, at least %50% of the hash power must be provided by honest miners. From this point of view, an attack of 51% is almost impossible.

However, blockchains can fork when the network experiences significant delays or outages, or when disagreements arise where consensus cannot be reached. Before the bifurcation the ledger is consistent, but after the bifurcation it may vary due to different accounting methods.

Bitcoin’s First Fork: BTC and BCH

The Bitcoin Core development team has been at odds with proponents of a larger block size. The Core team advocated for solutions such as Segregated Witness (SegWit) and Lightning Network to move signature information out of the block, provide indirect scaling and distribute the flow. This method aimed to solve the scalability problem by keeping the block size at 1 MB. In contrast, the other group argued that the block size should be expanded directly.

The Core team suggested that directly increasing the block size could weaken decentralization. The other side argued that the Separated Witness and the Lightning Net were ineffective and not secure enough. As a result of this dispute, the two sides came face to face and Bitcoin’s first major fork took place.

Bitcoin Cash (BCH) was launched in August 2017 as an alternative with a larger block size. Its first block was recorded as 478559 and was about 1.9 MB in size, exceeding Bitcoin’s original 1 MB block capacity limit. All pre-fork Bitcoin holders were automatically allocated the same amount of BCH and BCH’s block capacity limit was set at 8 MB.

BCH has continued to evolve, adopting an orientation more in line with the concept of electronic cash conceived by Satoshi Nakamoto in his white paper. On the other hand, BTC has experienced different forks and has been positioned as digital gold over time.

Forking of the BCH: Emergence of BSV

Craig Steven Wright (CSW), who claims himself to be the real Satoshi Nakamoto, has proposed removing BCH’s block size limit altogether and fixing the underlying protocol to meet the demands outlined in the white paper. As a result of this difference of opinion, Bitcoin SV (BSV) was separated from BCH and formed as a separate chain.

Bitcoin’s Three Main Bifurcations

As of now, BTC, BCH and BSV are the three main forks of Bitcoin, which continue to evolve with different visions.

What is Bitcoin Halving?

Bitcoin’s halving cycle, which occurs every four years, is based on a supply and demand mechanism. The halving process helps protect Bitcoin’s value, as unlimited supply can cause the currency to depreciate and the price to fall.

The exit mechanism is based on two basic rules:

1. Bitcoin blocks are created approximately every 10 minutes, and with each new block, new Bitcoins are minted as a reward to miners.
2. The reward amount is reduced once every 210,000 blocks.

Mathematically, the formula (210,000 × 10) / (24 × 60 × 365) ≈ 4 indicates that each 210,000 blocks took about four years to create. Therefore, Bitcoin block rewards are set to halve about every four years.

Bitcoin is projected to go through 32 halving cycles in total, lasting until approximately 2140. At this point, miners will not be able to earn new Bitcoins and will only receive their income from transaction fees. As a result, the total supply will be limited to 21 million BTC.


https://www.bitcoinblockhalf.com/

Bitcoin Prices

Bitcoin has experienced significant price fluctuations in the nearly ten years since its launch in 2009. At the time of writing, Bitcoin has seen five major price peaks and has maintained its uptrend over the long term, although occasional declines in excess of 50% have worried investors.

Compared to the Nasdaq 100 Index and gold, two strong assets in the traditional market, Bitcoin’s long-term price growth has outpaced both. The compound annual growth rate is calculated at about 200% and is therefore considered by many to be an “endless bull market”.

While some traditional investment institutions see Bitcoin as a bubble or a scam and consider it worthless, investors see it as the treasure of the information age and digital gold. While there is constant disagreement in the market about Bitcoin’s price trend, different analysis methods and perspectives can be used to determine whether the price is reasonable before making a decision.

Fundamental Analysis:

Fundamental analysis examines the intrinsic value of an asset to determine whether its market price is reasonable. In this type of analysis, various factors are evaluated, such as the Bitcoin network’s daily transaction volume and hash rate, the number of unique addresses holding Bitcoin, the amount of rewards per block, the number of businesses accepting Bitcoin, and general economic conditions. It is particularly suitable for long-term investments as it focuses on observing long-term trends and is less sensitive to short-term fluctuations.

Technical Analysis:

Technical analysis attempts to predict future trends by studying past price movements and trading data. This method of analysis is based on the assumption that all market information is reflected in prices. It is very popular in the cryptocurrency market due to its ease of use and wide applicability.

Sentiment Analysis:

Sentiment analysis uses various indicators to measure investors’ interest in an asset. When the price of Bitcoin rises and trading volume increases, it can be assumed that the market is optimistic about the future and is actively buying. For example, an increase in searches for “buy Bitcoin” or a rise in the Fear and Greed Index could be interpreted as such signals.

Bitcoin’s price is influenced by many factors that change over time. The main reason for the high volatility in the early years was investors’ emotional reactions to news and speculation. When the Bitcoin mainnet went live in early 2009, its price was zero and could not be exchanged for any legal tender or physical asset. Therefore, Bitcoin mining was initially unprofitable because not many people were willing to buy Bitcoin.

2010 - Bought 2 pizzas for 10,000 Bitcoins

On May 22, 2010, American software engineer Laszlo Hanyecz posted an advertisement on the Bitcoin forum Bitcointalk, announcing that he planned to use Bitcoin to buy a few pizzas and was willing to pay 10,000 Bitcoins to anyone who could order them for him. This transaction was recorded as the first real-world exchange with cryptocurrency with a ratio of 1 BTC \= 0.0002 pizza. From that day on, May 22 became known as “Bitcoin Pizza Day”.

This increased interest in Bitcoin and contributed to the rapid growth of both exchange platforms and the number of Bitcoin users.

Source: Bitcointalk

2011 - Bitcoin surpasses $1 for the first time

The California-based Electronic Frontier Foundation (EFF) announced in early 2011 that it began accepting Bitcoin donations. This development contributed to Bitcoin’s significant appreciation over the next six months. In February, Bitcoin surpassed $1 for the first time, followed by several weeks of sharp rises on Mt. It reached 30 dollars on the Gox exchange.

In June, however, the Electronic Frontier Foundation changed its mind and announced that it had stopped accepting Bitcoin donations. In a statement, they said they do not endorse the value of Bitcoin and urged people to learn about this new currency in a rational way. This severely shook market confidence and sent Bitcoin into its first major bear market. Over the next six months, the price of Bitcoin plummeted by over 90 percent.

First half of 2013 - First halving triggers $1,100

November 28, 2012 was the date of Bitcoin’s first halving. Reduced supply and the Electronic Frontier Foundation’s renewed acceptance of Bitcoin donations made 2013 the year of the highest return on investment in Bitcoin history.

Bitcoin, which was at the level of $13 at the beginning of the year, reached a historical peak of $ 1,100, despite a sharp decline of 70% during the year. This price was equivalent to the price of an ounce of gold at the time. At the same time, Bitcoin’s market capitalization surpassed $1 billion for the first time, attracting more investors on a global scale.

2013 ~ 2014 - Second bear market and cyber attacks

In late 2013, the FBI shut down Silk Road, the most popular online black market and darknet marketplace for online Bitcoin payments. Shortly after, another anonymous marketplace, Sheep Marketplace, suffered a hack attack worth 96,000 Bitcoin.

In late February 2014, the largest Bitcoin exchange at the time, Mt. Gox went bankrupt after losing 850,000 Bitcoins. This event was recorded as one of the biggest exchange scandals in Bitcoin history. A succession of negative news and a serious shakeup in investor confidence has sent Bitcoin into its second major bear market.

2016 - Second halving

The second Bitcoin halving took place on July 9, 2016, and the Bitcoin price once again surpassed its all-time high of $1,100, continuing its uptrend.

In mid-April 2017, the price of Bitcoin surpassed the price of 1 ounce of gold, debunking rumors that “1 BTC could never be worth more than 1 ounce of gold”. This further strengthened Bitcoin’s position as digital gold.

2017 - A new bull round begins

Bitcoin started appreciating rapidly in 2017, reaching nearly $20,000 by the end of the year.

This dramatic rise has attracted more investors. Some bought Bitcoin directly, while others opted to invest in equipment as miners. However, from the end of 2017, the mining challenge increased rapidly. At the same time, hardware costs and electricity costs rose. This has led miners to sell their mined Bitcoins to cover the huge depreciation and high electricity bills.

As a result of this selling pressure and negative developments in the market, the price of Bitcoin dropped to as low as $3,000 in November 2018 and a major correction period took place.

Bitcoin’s hash power from 2017 to 2018, Source: BitInfoCharts

2020 - Impact of COVID-19 on global markets and the third halving

The coronavirus disease (COVID-19) has severely impacted world economies since March 2020. One government after another has implemented liberalized monetary policies, leading to a strong rally in traditional exchanges and the cryptocurrency market.

During this period, in May 2020, Bitcoin experienced its third halving and block rewards dropped to 6.25 BTC. At the same time, the rapid rise of the decentralized finance (DeFi) concept has given the market a new narrative. The development of the DeFi ecosystem has given a huge boost to the crypto market and increased investor interest.

2021 - Market boom with institutional funds

As the third Bitcoin halving took place on May 18, 2020, large institutional investors such as MicroStrategy, Tesla, Galaxy Digital Holdings and Square led the market by investing in Bitcoin. With institutional interest on the rise, Bitcoin hit an all-time high of $68,000 in November 2021.

In the process, more and more people realized Bitcoin’s long-term investment potential and began to see it as a store of value. Institutional investments have further cemented Bitcoin’s place in the financial markets.

2022 - Fall again due to war and interest rate hikes

In early 2022, capital began to withdraw from the highly volatile crypto market due to international conflicts such as the Russia-Ukraine War, growing concerns over inflation and expectations of interest rate hikes by the Central Bank.

The collapse of the LUNA and UST ecosystem in May and the resulting institutional liquidations caused a sharp drop in the value of Bitcoin. Bitcoin price fell to its lowest level at $17,000.

With the growth of its market capitalization and the maturity of its trading market, Bitcoin’s price has increasingly become more closely correlated with the traditional financial market and the general economic environment, and has become more sensitive to macroeconomic factors.

Blue line: Bitcoin, Orange line: Nasdaq 100 Index

2024 - ETFs, Fourth Halving, US Presidential Elections and Bitcoin ATH

The year 2024 saw many important developments for the cryptocurrency industry. On January 11, 2024, the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETF applications from major firms such as BlackRock, Fidelity and Ark Invest. These ETFs have attracted a lot of attention in the market, attracting more than $36 billion in total investments since their launch.

On April 19, 2024, the Bitcoin network experienced its fourth halving event, with block rewards dropping from 6.25 BTC to 3.125 BTC. This event reduced the supply of Bitcoin, creating an expectation of a rise in its price.

In November 2024, Donald Trump won the US presidential election. During the election campaign, Trump announced his intention to create a strategic Bitcoin reserve. The election victory created a positive mood in the cryptocurrency market and Bitcoin prices increased.

Bitcoin, which entered 2024 at $42,000, exceeded the $100,000 level for the first time on December 5, 2024 with the effect of these developments.

Bitcoin’s short-term price movements are difficult to predict and are often the subject of discussion in different sectors and economic news. However, tracking the long-term trend can be made easier by using certain analysis methods and indicators.

Logarithmic Regression:

Logarithmic Regression is one of the first Bitcoin price predictions, introduced in October 2014 by a Bitcointalk blogger named Trolololo. At the time, the price of Bitcoin was only $300. But Trolololo boldly predicted it would reach $10,000 in 2017 and $70,000 by the end of 2020, based on two previous price rallies and significant levels.

This model has become a classic for Bitcoin price models due to its great accuracy over time, and has formed the basis for subsequent prediction models.

Logarithmic regression, Source: Bitcointalk

Stock-to-Flow (S2F) Model:

The Stock-to-Flow (S2F) model compares Bitcoin to precious metals such as gold and silver, arguing that the long-term price is determined by the total circulating supply (stock) and the annual production (flow). Since the total supply of Bitcoin is limited, the gradual decrease in the amount of new Bitcoins mined each year causes the price to rise.

A KOL (Key Opinion Leader) on Twitter, known by the nickname PlanB, applied this model in 2019 when the Bitcoin price was below $4,000 and predicted that the third halving would push the Bitcoin price to $55,000. The fact that this prediction was largely accurate has made it popular in the cryptocurrency community.

However, once Bitcoin’s mining is complete and new supply approaches zero, the stock-to-flow model will cease to function. Because in this case, Bitcoin’s stock-to-flow ratio would give infinite price forecasts and the model would no longer be sustainable.

S2F Model, Source: Buy Bitcoin Worldwide

Metcalfe’s Law

Metcalfe’s Law is one of the fundamental principles that explain the value and growth of the Bitcoin network. This law suggests that if there are N nodes in a network that can communicate, the value of the network is proportional to N². That is, the value of the Bitcoin network is directly proportional to the number of users.

Bitcoin’s long-term trend and Metcalfe value can be estimated by examining factors such as active on-chain wallet addresses, number of transactions and trading volume. The price of Bitcoin is directly linked to on-chain user activity, and this relationship is evident in historical data.

As a result, as the number of Bitcoin users continues to grow, Bitcoin’s long-term price trend will continue to be bullish.

Bitcoin’s network value is directly proportional to the number of users, Source: Fidelity

Bitcoin Myths and Facts

Bitcoin, the most well-known representative of cryptocurrencies, has been criticized by many institutions and traditional investors and has been subject to various restrictions. However, its rising price and growing popularity have proven Bitcoin’s long-term value and potential to create financial innovations.

Despite Bitcoin’s achievements in various fields, it is still misunderstood by many, making it difficult for potential users to adopt it. Below are some common myths about Bitcoin and their true explanations.

Myth 1: Bitcoin is Anonymous

On the surface, Bitcoin users are thought to be completely anonymous, but in reality the Bitcoin network works like a transparent public ledger. Every Bitcoin transaction is recorded on the blockchain and anyone can view these transactions through tools called blockchain explorer. Each Bitcoin is linked to a specific address and its history can be tracked.

A Bitcoin wallet address is a string of random letters and numbers and is not directly associated with the identity of its owner. Therefore, it is more accurate to say that Bitcoin users are pseudonymous rather than completely anonymous. However, users can be identified through data such as IP addresses, transaction parties or other communication records. Therefore, rather than being anonymous, the use of Bitcoin has a traceable level of privacy.

Myth 2: Bitcoin is Not Safe

The Bitcoin network is managed by millions of miners and its open source code is constantly scrutinized by countless communications security experts and IT researchers. Attacking the blockchain would require capturing at least 51% of the total hashing power of the network, which is economically almost impossible given the size of Bitcoin.

Bitcoin is the first cryptocurrency to solve the problem of double-spending and enable “trustless” peer-to-peer transactions. To date, it has never been hacked and the basic security of the system has been preserved. However, Bitcoin transactions cannot be reversed. In case of incorrect transfers or loss of the wallet, Bitcoins become irretrievable and completely inaccessible. Therefore, it is of utmost importance that users store their wallets and private keys securely.

Myth 3: Bitcoin is not regulated and not backed by governments

It is true that some countries still ban or restrict the use of Bitcoin and other cryptocurrencies. However, there are many countries that officially recognize and regulate Bitcoin and ensure that the companies and individual investors involved comply with strict regulations.

El Salvador and the Central African Republic have recognized Bitcoin as an official currency. The United States, the European Union and many other countries are developing comprehensive laws and rules to regulate Bitcoin. In Turkey, a regulation published in 2021 banned the use of cryptocurrencies as a means of payment and obliged crypto exchanges to know their customers. In 2024, the new crypto asset law adopted by the Parliament aimed to protect investors and regulate the market by requiring exchanges to obtain a license. With these regulations, Turkey aims to increase transparency in the crypto asset market and secure the investment environment.

As Bitcoin’s popularity grows, more countries are expected to take regulatory steps and implement measures to support the cryptocurrency market.

Myth 4: Bitcoin is useless

Bitcoin skeptics criticize its slow transaction speed as a currency. But Bitcoin is one of the most secure, transparent and immutable databases in human history. As a pioneer in the cryptocurrency world, it has successfully proven the possibilities of blockchain.

Bitcoin adoption has gradually increased in recent years as regulation has improved. Besides trading and long-term investments, more and more businesses are accepting Bitcoin as a payment method. Moreover, the ability to be used as debt collateral makes Bitcoin a viable asset in the traditional financial world. Some institutions have purchased small amounts of Bitcoin to hedge their portfolios.

Myth 5: Bitcoin is a bubble

To say that Bitcoin is a bubble is to focus only on those who bought it for speculative gain, and this perspective is one-sided. A bubble is when the price of an asset rises unsustainably far above its true value, then collapses in a sudden drop.

As Bitcoin is a new type of asset, it is difficult to determine its true value with certainty. However, the early vertical ascents are no longer as common as they used to be, thanks to the steady growth in market capitalization. Moreover, Bitcoin is becoming more and more associated with traditional financial markets, helping the public to better understand its value.

Myth 6: Bitcoin is used as a money laundering tool

According to a study by the Massachusetts Institute of Technology, only about 3% of Bitcoin transactions are associated with criminal activity. According to the report by Chainalysis, this rate decreased to 0.34% as of 2020. This is mainly because Bitcoin is completely transparent and the flow of funds can be easily tracked.

According to the United Nations, about $1.6 trillion of fiat money is linked to money laundering and other illegal activities each year. This is equivalent to approximately 2.7% of global GDP and more than 50 times the amount of illegal Bitcoin transactions. In other words, the use of Bitcoin for criminal purposes is both much smaller in scale than fiat money and declining over time.

Myth 7: Bitcoin has no value because it has no backing

Just because Bitcoin is not backed by any asset does not mean it is worthless. Bitcoin is designed with a limited supply to avoid inflation and is produced by spending energy and equipment costs in the mining process. The “proof of work” mechanism is an integral part of this process.

Compared to fiat currencies, Bitcoin has a different structure. After the US abolished the Bretton Woods system in 1971, fiat currencies ceased to be backed by gold reserves and could be printed without limit, subject to the control of central banks. This led to hyperinflation in some countries.

Bitcoin’s value, like fiat currencies, is based on user trust and demand. Its acceptance by market participants is the key factor that makes it valuable. It has achieved significant success in many areas such as peer-to-peer payments, value retention, hedging and financial services for the unbanked.

Pros and Cons of Bitcoin

We all look at the same work of art, but our interpretations are different. This is exactly the case with Bitcoin. Opponents argue that Bitcoin is causing environmental destruction, has driven many investors to financial ruin through constant speculation and hype, and is the biggest scam of the century. Its supporters believe that Bitcoin offers a solution to the inequality and corruption in the current financial system and will bring true financial freedom to humanity. Here are the pros and cons of Bitcoin.

Pros of Bitcoin:

• Limited Supply

Bitcoin is designed so that its total supply is limited to 21 million. To generate new Bitcoins, hashing power must be provided, and it is not possible for any person or organization to arbitrarily increase the supply of Bitcoins and lower their value.

• Decentralization

The Bitcoin network runs on nodes powered by miners around the world and is managed entirely by program code. It is not under the control of any person or organization. Anyone can run a Bitcoin node and participate in the management of the network. This distinguishes Bitcoin from traditional currencies controlled by banks and authorities.

• Security

Bitcoin adopts the Proof of Work mechanism and is secured by the hashing power provided by miners. In order to manipulate the network, an attacker would need to control 51% of the total hash power, which is almost economically impossible. To date, it is considered the most secure cryptocurrency.

• Peer to Peer Transactions

Bitcoin transactions take place directly between individuals without the need for the approval of any bank or financial institution. Accounts cannot be frozen and transactions cannot be censored. This directly provides individuals with the right to property as set out in Article 17 of the Universal Declaration of Human Rights.

• Unlimited Use

Bitcoin can be used by anyone, anywhere in the world, at any time. While local regulations may differ, anyone can convert Bitcoin into their own currency. This makes Bitcoin a global currency.

• Portability

Bitcoin is a fully digital asset and can be stored in a variety of ways. It can be carried with a cold wallet (a USB-sized device), a hot wallet (a phone or computer app) or a private key on a physical piece of paper.

• Transparency and Immutability

Bitcoin transaction records are publicly viewable on the blockchain and cannot be changed once verified. Anyone can check their transaction history using a blockchain explorer, but the identity of users remains anonymous.

• Scarcity and Anti-Inflation

Bitcoin’s total supply is limited to 21 million, and this number is fixed in the source code. The halving process, which takes place every four years, reduces the supply of new Bitcoins, and by 2140 the production of new Bitcoins will stop altogether. This makes Bitcoin resistant to inflation and positions it as digital gold.

• Long Term Value Increase

Bitcoin is the pioneer of cryptocurrencies and changes in its price affect the entire market. Bitcoin has made great progress in recent years in terms of market capitalization and entered the top 10. This proves how much Bitcoin is valued and accepted.

Source: CompaniesMarketCap.com

Cons of Bitcoin:

• High Mining Costs

Bitcoin miners consume large amounts of energy to ensure the hashing power and security of the network. A total of 138.53 terawatt-hours (TWh) of electricity was consumed in 2021, equivalent to 13.853 billion kilowatts. This consumption has even exceeded the annual electricity use of some countries (e.g. Argentina and Ukraine).

• Environmental Impacts

In 2021, the Bitcoin network produced an estimated 77.27 million tons of carbon emissions. In addition, depreciation and refurbishment of mining machinery generated around 34,570 tons of electronic waste. This is equivalent to the annual production of small-scale electronic waste in the Netherlands.

Source: Digiconomist

• High Volatility

Although Bitcoin is the largest cryptocurrency by market capitalization, its price fluctuations are much sharper than in traditional financial markets. Bitcoin investors could therefore face large losses in value in a short period of time.

• Slow and Expensive Transactions

The Bitcoin network can only process an average of 7 transactions per second. In contrast, credit card networks like Visa can process more than 2000 transactions per second. This makes it difficult to use Bitcoin as a global payment network. Furthermore, on-chain transaction fees can vary widely depending on the market, sometimes exceeding $60 for a single transaction.

Source: YCharts

• Lack of Reimbursement and Protection Mechanisms

Bitcoin transactions are unmediated and irrevocable. This means that users are fully responsible for transactions. Refunds are impossible in case of transfer errors, disputes or transaction accidents. More importantly, there is no legal mechanism to impose account freezes, economic sanctions or restrictions against individuals or organizations that use Bitcoin for illegal purposes.

• Asset Loss Risk

In order to own Bitcoins, it is necessary to have the private key of the respective wallet. If the private key is lost, all Bitcoins in the wallet are also lost forever. Previously, some miners were unable to access their Bitcoins because they lost or destroyed the hard drives where their private keys were stored.

• Limited Area of Use

Bitcoin is seen as a store of value and a medium of exchange, but its high volatility makes it difficult to use for everyday spending. Most countries and major financial institutions still do not officially accept Bitcoin. Moreover, the number of physical and online stores that support Bitcoin payments is quite limited. Therefore, users often have to convert Bitcoin into local currency on exchanges in order to spend it.

The Impact of Bitcoin

Bitcoin was born out of distrust of the traditional financial system. As the first cryptocurrency in human history, it pioneered the blockchain industry and, like other major innovations in the history of technology, has had a profound impact on society and thinking. Here are some of the subcultures, slang, myths and value shifts that have emerged with Bitcoin.
1 BTC \= 1 BTC
This is a concept that emphasizes the immutable nature of Bitcoin. It gained popularity with a chart shared by Pierre Rochard on Twitter, which reads “One Bitcoin is exactly equal to one Bitcoin”. This seemingly meaningless mathematical equation describes the inflation-proof nature of Bitcoin. In contrast, 1 USD does not have the same purchasing power as 1 USD in the past due to the constant printing of money by the US Federal Reserve.

Source: Elements by Visual Capitalist

HODL

HODL is a strategy that refers to holding a cryptocurrency for the long term and not selling it despite price fluctuations. The term appeared in a post on the Bitcointalk forum by a user named GameKyuubi, in which he stated that he felt helpless and nervous in the face of Bitcoin’s falling price, but that he still wouldn’t sell. He accidentally typed HODL when he meant to type HOLD in the original, and this typo quickly became popular in the community.

Due to the volatile nature of the cryptocurrency market, the concept of HODL has started to be interpreted as “Hold On For Dear Life” over time. Thus, it has evolved into a philosophy that encourages investors to hold crypto assets without being influenced by short-term price movements. Whatever happens, just hold on!

Source: Reddit

When in Doubt, Zoom Out

The phrase comes from a quote that comedian Reggie Watts used in an interview to describe his outlook on life. Initially, it had no direct connection to Bitcoin, but over time it was adopted and popularized by the Bitcoin community.
Bitcoin holders use it to reassure new traders and encourage them to remain calm in the face of short-term price fluctuations. It has become a reminder to focus on the bigger picture when price movements are confusing or stressful.
Source: https://thelittlehodler.com

Laser Eyes

Laser eyes are a common avatar symbol in the crypto community and are especially common on the social media profiles of Bitcoin advocates. This phrase humorously represents the idea that knowledge of Bitcoin gives people the ability to see the chaos and uncertainty in financial markets.

Laser eyes symbolize power and awakening in many animated films and movies; they are often used in moments when heroes discover their special powers. In the context of Bitcoin, this symbol is considered a metaphor for Bitcoin’s potential to awaken people to financial realities.

Source: Coin Bureau
While Bitcoin has experienced a massive rally in the 2020-2021 bull market, public interest and awareness has also increased along with the price increase. A survey found that in 2021, 65% of the US population %wants to buy investment goods for Christmas. One of the most popular options has been cryptocurrencies, making Bitcoin gift cards an interesting and popular gift of the era.
Before 2020, almost all investment firms and hedge funds described Bitcoin in terms like “hype, fraud, bubble”. In recent years, however, this perspective has begun to change, with more and more organizations taking a neutral or even supportive approach to Bitcoin.

Goldman Sachs: A New Asset Class

Goldman Sachs, the 10th largest asset manager in the world, managing more than $2 trillion in assets, was a typical Wall Street firm that was initially skeptical about Bitcoin.

In 2017, then-CEO Lloyd Blankfein stated that he did not believe the technology would succeed, saying that Bitcoin was “a tool to commit fraud”. In May 2020, Goldman Sachs declared in a presentation that Bitcoin is not “an asset class” or a “suitable investment”.

By 2021, however, the bank began to gradually change its attitude towards Bitcoin. In February 2021, he took a more moderate approach, stating that “Bitcoin is not yet an investable asset”. In May 2021, he took a completely different line, saying “Bitcoin is now considered an investable asset”. Around the same time, they published their report “Crypto: A New Asset Class”, providing detailed research on Bitcoin’s technology and demand.

So why did Goldman Sachs change direction? Mathew McDermott, President of Digital Assets Group, gave a very clear answer to this question: “Customer demand.” Initially skeptical, the bank was increasingly forced to embrace Bitcoin due to growing investor interest and market dynamics.

JP Morgan: Blockchain is real

JPMorgan Chase, which ranks seventh among global asset managers and manages more than $2.5 trillion in assets, has long taken a hard line against Bitcoin. The bank’s CEO, Jamie Dimon, publicly called Bitcoin a “fraud” in 2017 and warned his employees not to trade Bitcoin. He even took a firm stance by saying, “If I have an employee who trades Bitcoin, I will fire him in a second.” He argued that Bitcoin “will not end well, governments will target it sooner or later”.

However, JPMorgan’s stance has changed over time. Ironically, the bank later issued a blockchain-based digital currency called JPM Coin, which was criticized for going against the principle of decentralization. In later years, Jamie Dimon admitted that he regretted calling Bitcoin a fraud and acknowledged the importance of this technology, saying “Blockchain is real”.

Dimon’s main reservation about Bitcoin was based on the idea that if it grew beyond the control of governments and threatened fiat currencies, governments could take steps to ban or restrict it. But with the growing adoption of Bitcoin and blockchain technology, JPMorgan has begun to move towards a more flexible approach.

Bridgewater Partners: Bitcoin is a great invention

Ray Dalio, who runs Bridgewater Associates, the world’s largest hedge fund, was initially skeptical of Bitcoin. In a previous interview, he stated that “Bitcoin has problems such as difficult transfers, volatility and regulatory uncertainty”, and that he did not think cryptocurrencies lacked the necessary structure for widespread adoption.

However, just two months later, in early 2021, Dalio changed his mind and said that “Bitcoin is a terrific invention”. According to him, it was a great achievement to create a new currency with a computer-programmable system that had been in operation for nearly a decade, rapidly gaining popularity both as money and as a store of value.

In May of the same year, Dalio took his interest in Bitcoin a step further, saying, “I have some Bitcoin. Personally, I prefer Bitcoin over bonds,” he said, explaining that he finds Bitcoin more attractive than traditional financial instruments. Thus, it has become an example of Bitcoin becoming increasingly accepted in the traditional financial world.

AllianceBernstein Bitcoin should be given a place

The profit opportunities that come with a price surge are not the only reason why Wall Street institutions are changing their stance on Bitcoin. AllianceBernstein is a good example. The firm rejected it as an investment asset in January 2018, just after Bitcoin hit an all-time high of around $20,000.

However, when the price of Bitcoin dropped to $17,000 in 2020, the firm changed its stance. Noting that Bitcoin’s significantly reduced price volatility makes it more attractive for both individual and institutional investors, he suggested including Bitcoin as part of an investment portfolio between 1.5% and 10%. They justified this by the growing acceptance of Bitcoin as both a store of value and a medium of exchange.

Conclusion

Bitcoin is an important milestone in the evolution of human civilization. It has created a decentralized, secure and peer-to-peer payment network that enables individuals without access to the banking system to access financial services directly and without the need for an intermediary. Eventually, Bitcoin’s success laid the foundation for the cryptocurrency ecosystem, whose market capitalization exceeds one trillion dollars.

Bitcoin, known as digital gold, is considered valuable due to its limited supply and can be purchased in a variety of ways. Its total supply is limited to 21 million units, but there is no limit on the quantity of purchases. Purchased Bitcoins can be stored on the exchange or withdrawn to a personal cold wallet.

Although the media and the public have repeatedly proclaimed “the end of Bitcoin”, Bitcoin has survived countless ups and downs, bans, manipulations and bear markets. Despite hard forks and regulatory crackdowns, it remains the cryptocurrency with the largest market capitalization and the strongest consensus.

With the proliferation of blockchain technology, the number of Bitcoin holders is constantly increasing. Governments and financial institutions are also gradually changing their view of Bitcoin and are beginning to consider it as a new asset class and financial instrument. While the future price of Bitcoin is uncertain, it is predicted that as the cryptocurrency market grows and matures, Bitcoin will remain in a prominent position and continue to lead the blockchain revolution.