Bitcoin (BTC) The Original Cryptocurrency

A peer-to-peer version of electronic cash developed pseudonymously by Satoshi.

DWR Score:
10/10

Analysis by Dani B. | #002 | December 10, 2021

Table of Contents

Research Summary

Development

A pseudonymous developer set out to
disintermediate banking institutions; by creating a peer-to-peer version of
electronic cash called bitcoin. Presently, bitcoin is being used as a store of
value and a transaction medium online. Being an open-source project, a
comprehensive roadmap is not available for the project’s ongoing development.

Tokenomics

Bitcoin was first generated through a decentralized mining process on January 3rd, 2009. No ICO was conducted. Currently 90% of all bitcoins that will ever exist are in circulation. Additional coins are added to the total supply through mining at a rate of 1.77% annually.

Community

The bitcoin ecosystem consists of millions of participants, with the cryptocurrency sitting at the top of its niche. However, Ethereum (ETH) is a strong competitor. Ethereum has a sizeable network effect in the smart contract sector particularly. It is believed that bitcoin may absorb the technologies of its competitors over time, but this has yet to be realized.

Development

Documentation

What is the URL of the official cryptocurrency project website?

https://bitcoin.org/en/

Are there any obvious errors on the website (broken links, misspelling, grammar, etc.)? 

No obvious spelling, grammar, etc. mistakes were found on the official website pages.

Is comprehensive documentation available for the project?

The official cryptocurrency project website has direct links to FAQs and Resources that provides additional insight to developer guides, references, examples, and a glossary.

Project Use-Case and MVP

What problem is the project trying to solve?

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another, without going through a financial institution. 

Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. Satoshi Nakamoto proposed using a peer-to-peer network as the solution to the problem.

What is the project’s solution to the problem the project aims to solve (aka use-case)? 

Bitcoin uses peer-to-peer technology to operate, with no central authority or banks. Managing transactions and the issuing of bitcoins is carried out collectively by the network. 

Bitcoin is open source, its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.

Is there a working product (MVP)?

Free bitcoin wallets are available for all major operating systems and devices. You can install an app on your mobile device for everyday use or you can have a wallet only for online payments on your computer. You can get Bitcoin by accepting it as a payment for goods and services.

There are also several ways you can buy Bitcoin. You can process payments and invoices by yourself, or you can use merchant services and deposit money in your local currency or bitcoins. Most point of sales businesses use a tablet or a mobile phone to let customers pay with their mobile phones. Merchants often deposit and display prices in their local currency. In other cases, Bitcoin works similarly to a foreign currency.

The Team

Is there a known development team for the project?

Bitcoin was invented by the pseudonymous computer programmer, Satoshi Nakamoto. David Harding, Cornelius Schumacher, and Wladimir J. van der Laan were named as top contributors to Bitcoin Core full node software.

Where is the development team headquartered?

Bitcoin is a distributed network that also has a decentralized method of making updates at the layer one level. As a result, multiple independent developers work on the protocol around the world.

Are there known sustainable incentives to grow/retain developers?

Bitcoin rewards participants by paying out bitcoins in exchange for computing power. These participants are called “miners” and they sell this bitcoin into the open market for profit, where the bitcoin are then used as a nascent store-of-value and virtual currency.

It is also worth mentioning that there will only ever be 21,000,000 coins mined. The rate of supply issuance is hardcoded into the blockchain and is publicly known. This creates a positive feedback loop within the network that fuels growth and innovation within the bitcoin ecosystem.

Audits and Recent Issues

Has the codebase undergone a 3rd party audit by a reputable company/extensive public testing?

Bitcoin has been operational for over a decade as an open-source project, with billions of dollars being invested into the ecosystem. It is likely that the code has been audited by multiple entities. 

Does the project have any known, recent (within the last 6 months) technical issues?

There were no recent technical issues identified for the network.

Roadmap

Is there a clear roadmap for development?

Being an open-source project, the project does not have a well-defined development roadmap. 

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Tokenomics

Coin Use-Case

What is/are the intended use(s) of the project coin within the project?

Bitcoin is the name of the currency of the Bitcoin protocol. Bitcoin is created as a reward for nodes expending CPU power to support the network. Bitcoin is also used to cover transaction fees.

Transaction Validation

How is consensus determined?

Bitcoin uses public-key cryptography, peer-to-peer networking, and proof-of-work to process and verify payments:

  1. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. 
  2. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. 
  3. After an hour or two on average, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain. 
  4. Bitcoin is created as a reward for nodes expending CPU power to support the network.

Coin Origination

When was the project’s coin launched?

January 3, 2009

Initial Coin Offering (ICO)

Was there an Initial Coin Offering (ICO)?

An ICO was not conducted, as Bitcoin is made available through the mining process. As a result, bitcoin is not classified as a security. 

Coin Supply

How do coins come into public circulation?

Mining reward recipients sell bitcoin into the open market through public exchanges and private deals. This is the only way new bitcoin is added to the circulating supply.

When the cryptocurrency was launched, the reward for confirming a block of transactions was 50 bitcoins. In 2012, it was halved to 25 bitcoins, and it went down to 12.5 in 2016. In May 2020, miners stood to earn 6.25 bitcoin for every new block. Block rewards for Bitcoin miners will continue to be halved every four years until the final bitcoin is mined. Current estimates for mining of the final bitcoin put that date somewhere in February 2140.

Bitcoin has a hard cap of 21 million coins set by its anonymous creator Satoshi Nakamoto. This limitation is written in Bitcoin’s source code and enforced by network nodes. The hard cap on Bitcoin is critical to its value proposition as a currency and an investment tool.

What is the yearly inflation rate of the coin?

Bitcoin’s inflation rate per annum is currently 1.77%.

Are most of the coins in circulation (>50%)?

90% of the maximum total supply has been mined.

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Community

Social

Which industry or community does the cryptocurrency project aim to serve?

There are a growing number of businesses and individuals using Bitcoin around the globe, as there is no barrier to usage.

What is the size of the official project social media pages (Reddit, Telegram, Twitter, YouTube)?

Bitcoin’s community consists of forums, meetups, internet relay chats (IRC) and non-profit organizations in various countries throughout the globe.

Bitcoin’s community also has a large social media presence.

  • As of December 10, 2021, 963K people are posting about #bitcoin on Facebook.
  • Also, the project’s twitter page has 3.9M followers and has been active since August 2011.

Are the social media posts and reactions related to the project recent and do they appear organic? 

The posts related to the project are recent and the community appears to be organic.

Are community members generating their own independent content to promote the project (YouTube, TikTok, Etc.)?

There appears to be independent YouTube creators generating content for the project as well as various podcast series.

Partnerships and Investors

Does the project have any notable partnerships?

Metric not included in the current Dark Paper for the project. Check back for an updated version.

Does the project have any notable investors?

Metric not included in the current Dark Paper for the project. Check back for an updated version.

Governance

What is the project’s governance process (if any)?

While it is believed that the governance of the bitcoin protocol is in the hands of the Bitcoin Core development team, this assumption would be incorrect. Bitcoin is governed by the users, developers, and miners in the ecosystem. Bitcoin is “open”, meaning that there are no unique requirements to join the network — outside of following the protocol as written. 

There are several bitcoin node software implementations that you could use, including several variations (or forks) of these implementations. The most used implementation of the bitcoin full node software is Bitcoin Core. 

Bitcoin Improvement Proposals (BIPs)

Bitcoin’s code is upgraded using Bitcoin Improvement Proposals (BIPs). These proposals are created by individuals in the ecosystem, publicly debated and tested with the aim of having a majority approval for the proposal from the community. 

After consensus is reached, the BIP is integrated into the Bitcoin Core client software. This is the role of one of a few ‘core developers’ who have the ability to upload the updated code to the publicly recognized code repository. At this point, users (aka nodes) have the option to install this new version of the node software. Having this optionality allows users to retain control.

Competitors

What are the most prominent directly competing projects?

Bitcoin is the first cryptocurrency and remains the dominant cryptocurrency in the space by market capitalization. It is believed that overtime bitcoin could even adopt technology of competing projects.

Ethereum (ETH) appears to be the largest competitor currently, with a market capitalization of ~$454b on December 13, 2021. In comparison, Bitcoin (BTC) had a market capitalization of ~$890b.

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DWR Score

Based on the research conducted, the project appears to be fundamentally strong. 

View the full Bitcoin (BTC) fundamental analysis package for the scoring criteria.

Fundamental Analysis Package

Get the full Bitcoin (BTC) Fundamental Analysis Package #002

The package contains the following original documents in high definition:

  • The Dark Paper (.pdf) – project fundamental analysis and research
  • Scoring Rubric (.xlsx) – project scoring and criteria
  • QC checklist (.xlsx) – peer-review criteria and scoring

Below are sample images of the Bitcoin (BTC) Dark Paper.

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