What is the Lightning Network and how does it enhance Bitcoin?

Answer: The Lightning Network is a second-layer protocol built on top of the Bitcoin blockchain. It aims to improve scalability and transaction speed by enabling off-chain transactions. By creating a network of payment channels, users can conduct faster and cheaper transactions without burdening the main blockchain. The Lightning Network enhances Bitcoin's capabilities by reducing transaction fees, increasing throughput, and enabling micropayments and instant payments.

What is the significance of the 21 million Bitcoin supply limit?

Answer: Bitcoin has a finite supply, capped at 21 million coins. This supply limit is an intentional design choice to create scarcity and preserve the value of the currency over time. The controlled supply reduces the risk of inflation and ensures that new Bitcoins are gradually introduced into circulation through the mining process. The 21 million supply limit is a fundamental aspect of Bitcoin's monetary policy and contributes to its store of value characteristics.

How does the Bitcoin network handle transaction confirmations?

Answer: When a transaction is broadcasted to the Bitcoin network, it becomes part of the mempool, where miners select transactions to include in the next block. Each subsequent block that is added to the blockchain provides additional confirmations for the transaction. As more confirmations are accumulated, the probability of a transaction being reversed or invalidated decreases significantly. While a few confirmations may be sufficient for small transactions, it is recommended to wait for multiple confirmations (typically six or more) for larger transactions to ensure their finality.

What is the role of private and public keys in Bitcoin?

Answer: Private and public keys are fundamental components of Bitcoin's cryptographic system. A private key is a randomly generated secret number known only to the owner and is used to sign transactions and prove ownership of bitcoins. Public keys are derived from private keys and are publicly shared to receive funds. They serve as the address to which others can send bitcoins. The relationship between private and public keys ensures secure transactions and allows for cryptographic verification without revealing the private key itself.

How does the process of confirming transactions through mining work?

Answer: Miners play a crucial role in confirming and adding transactions to the Bitcoin blockchain. They compete to solve complex mathematical problems, known as proof-of-work, using computational power. The first miner to find a valid solution broadcasts it to the network, along with the transactions they have chosen to include. Other miners verify the solution and, if valid, build upon the new block. This consensus mechanism ensures that transactions are processed and recorded in a secure and decentralized manner, maintaining the integrity of the blockchain.

What is the cryptographic algorithm used in Bitcoin?

Answer: Bitcoin uses the SHA-256 (Secure Hash Algorithm 256-bit) cryptographic algorithm for hashing, which is essential for mining and maintaining the integrity of the blockchain. SHA-256 ensures that each block in the chain is uniquely identified and linked to the previous block, providing the security and immutability Bitcoin is known for.

How does the Bitcoin network achieve consensus?

Answer: The Bitcoin network achieves consensus through a consensus mechanism called Proof-of-Work (PoW). Miners compete to solve complex mathematical puzzles, and the first miner to solve the puzzle adds a new block to the blockchain. This process requires significant computational power and ensures that no single entity can control the network. Consensus is reached when a majority of the network's participants agree on the validity of transactions and the order of blocks.

What are the advantages of Segregated Witness (SegWit) in Bitcoin?

Answer: Segregated Witness is a protocol upgrade implemented in Bitcoin to address scalability and transaction malleability issues. By separating transaction signatures from the transaction data, SegWit reduces the size of transactions, allowing more transactions to be included in each block. This improves transaction throughput and lowers fees. Additionally, SegWit enables the implementation of second-layer solutions like the Lightning Network, which further enhances scalability and efficiency.

What is the role of the mempool in Bitcoin?

Answer: The mempool (short for memory pool) is a storage area within each Bitcoin node where unconfirmed transactions are held. When a transaction is broadcasted to the network, it enters the mempool until it is included in a block by a miner. Miners select transactions from the mempool based on factors such as transaction fees and transaction size. Transactions with higher fees are generally prioritized, as miners have an incentive to include them in blocks.

How does Bitcoin address double-spending?

Answer: Bitcoin prevents double-spending through the consensus mechanism of the blockchain. Once a transaction is confirmed and included in a block, it becomes a part of the blockchain and is considered irreversible. Miners ensure that transactions are not double-spent by validating the entire transaction history and confirming the ownership of bitcoins being transferred. This makes it extremely difficult for malicious actors to tamper with the transaction history or spend the same bitcoins more than once.

Can Bitcoin be forked? What are the implications?

Answer: Yes, Bitcoin can be forked, resulting in the creation of a new blockchain and potentially a new cryptocurrency. Forks can be either soft forks or hard forks. Soft forks introduce backward-compatible protocol upgrades, while hard forks result in incompatible changes, leading to a split in the blockchain. Forks can occur due to differing opinions on protocol changes, governance issues, or other technical considerations. Forks can create new opportunities and challenges for the Bitcoin ecosystem, but they can also cause temporary disruptions and uncertainty in the market.

How is Bitcoin more inclusive and equitable compared to other cryptocurrencies?

Answer: Bitcoin operates on a decentralized network, which means it is not controlled by any central authority or government. This decentralization enables equal access and participation for anyone with an internet connection, irrespective of their location, background, or financial status. Unlike some other cryptocurrencies, Bitcoin does not require users to meet specific criteria or possess special permissions to participate in its network.

What makes Bitcoin more equitable than Central Bank Digital Currencies (CBDCs)?

Answer: CBDCs, being issued and regulated by central authorities, may introduce certain restrictions and requirements, potentially excluding certain individuals or communities from accessing and using them. In contrast, Bitcoin's decentralized nature allows for borderless transactions and ownership, empowering individuals to have control over their finances without the need for intermediaries or central governance. This inclusivity and equity are foundational principles of Bitcoin.

How does Bitcoin address the issue of financial exclusion?

Answer: Bitcoin's open and decentralized nature enables financial inclusion by providing an alternative financial system accessible to anyone with internet access. Traditional financial systems may have barriers such as minimum balance requirements, lack of banking infrastructure in certain regions, or limited access for marginalized communities. Bitcoin offers a borderless and permissionless solution, allowing individuals to store, send, and receive value without relying on traditional financial intermediaries.

Can Bitcoin be used as a means of empowering economically disadvantaged communities?

Answer: Yes, Bitcoin has the potential to empower economically disadvantaged communities by offering them a secure and censorship-resistant store of value and medium of exchange. Bitcoin's peer-to-peer nature eliminates the need for intermediaries, reducing transaction costs and enabling direct financial interactions between individuals. This can facilitate financial empowerment and economic independence for communities that may have limited access to traditional banking services.

How does Bitcoin ensure equitable distribution of wealth?

Answer: Bitcoin's distribution of wealth is determined by the market, based on individual participation and investment decisions. Bitcoin mining, for example, allows individuals to earn Bitcoin based on their computational power and participation in securing the network. Additionally, anyone can acquire Bitcoin through various means, such as purchasing or accepting it as payment for goods and services. However, it's important to note that wealth distribution in any asset, including Bitcoin, can still be influenced by external factors and individual investment strategies.