Bitcoin (BTC) is the first decentralized digital currency or cryptocurrency. The Bitcoin network is peer-to-peer and transactions take place directly between users, without an intermediary. Transactions are verified by a network of nodes and included in a public ledger, called a blockchain, through a process called mining. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.
How to use Bitcoin with Trezor
|Firmware (device) support||Trezor One, Trezor Model T|
|Available in Trezor Wallet?||Yes|
|Third-party wallets||Electrum (active), Mycelium (active), ArcBit (watch only), Blockonomics (watch only), Sentinel (watch only)|
Trezor device was originally designed as the safest wallet for holding bitcoins, support for alternative cryptocurrencies came in later updates. The best way to use Bitcoin with Trezor is with its native wallet called Trezor Wallet. It is also possible to use it with third-party wallets, eg., Electrum.
Bitcoin is integrated into Trezor Wallet. It is, therefore, possible to use it in the standard interface.
- Plug in your Trezor device.
- Go to wallet.trezor.io.
- Select Bitcoin in the top-left corner of the screen (see Getting to know Trezor Wallet#Switching cryptocurrencies (1)).
- Work with Trezor Wallet as usual. For more information, see User manual.
Other compatible wallets
Trezor users can also use Bitcoin with the following third-party wallets:
- Electrum (active)
- Mycelium (active)
- ArcBit (watch only)
- Blockonomics (watch only)
- Sentinel (watch only)
Bitcoin had several predecessors which had the same goal but weren't successful. Most of them had an impact on bitcoin technology and are used in it.
B-money was an early proposal created by Wei Dai for an "anonymous, distributed electronic cash system". Satoshi Nakamoto referenced b-money when creating Bitcoin. In his essay, published on the cypherpunks mailing-list in November 1998,
Hashcash is a proof-of-work system used to limit email spam and denial-of-service attacks, and it is also used in bitcoin (and other cryptocurrencies) as part of the mining algorithm. Hashcash was proposed in 1997 by Adam Back.
Nick Szabo designed Bitgold in 1998. It is a mechanism for a decentralized digital currency he called "bit gold". Bit gold was never implemented but has been called "a direct precursor to the Bitcoin architecture. In bit gold structure, a participant would dedicate computer power to solving cryptographic puzzles.
Some of the other technology innovations had a big impact on creating bitcoin such as the design of a secure timestamping service with minimal trust requirements from 1999, Merkle's Protocols for public key cryptosystems from 1980, etc.
See also Bitcoin whitepaper
A blockchain is a shared database secured by cryptography, it stores all the bitcoin transactions with timestamps that were made since its beginning. It is possible to distinguish it from the classic database with its immutability - it is not possible to change data already stored in it and decentralization - the database is stored in many locations in the world so the correctness is easily auditable. Block creation also allows bitcoin software to determine when a particular bitcoin was spent, which is needed to prevent double-spending.
Proof of work
A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashcash proof of work system. Hashcash proofs of work are used in bitcoin for block generation. In order for a block to be accepted by network participants, miners must complete a proof of work which covers all of the data in the block. The difficulty of this work is adjusted so as to limit the rate at which new blocks can be generated by the network to one every 10 minutes.
Mining is a record-keeping service done through the use of computer processing power. Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes. Each block contains an SHA-256 cryptographic hash of the previous block, thus linking it to the previous block and giving the blockchain its name.
The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees. Every block new bitcoins are created but this reward decreases in time in the beforehand determined process called bitcoin halving. Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins will be reached in 2140.