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To cut through some of the confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you've got bitcoin-the-token, a snippet of code that represents ownership of a digital concept kind of like a virtual IOU. On the other hand, you've got bitcoin-the-protocol, a distributed network which maintains a ledger of balances of bitcoin-the-token.
The machine enables payments to be sent between users without passing via a central authority, such as a bank or payment gateway. It's created and kept electronically. Bitcoins arent printed, like dollars or euros theyre made by computers all around the world, using free software.
It was the first example of what we call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, together with verification based on cryptography.
A pseudonymous software programmer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, as an electronic payment method based on mathematical proof. The idea was to generate a means of exchange, independent of any central authority, that may be transferred electronically in a secure, verifiable and immutable manner.
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Bitcoin can be utilized to cover things electronically, if the two parties are willing. In that sense, its like conventional dollars, euros, or yen, that are also traded digitally.
Bitcoins most important feature is that it is decentralized. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders, and run by an open network of dedicated computers spread around the globe. This attracts individuals and groups who are uncomfortable with the control that banks or government institutions have over their money. .
Bitcoin simplifies the dual spending problem of electronic currencies (in which digital assets can readily be copied and re-used) via an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. With bitcoin, the integrity of these transactions is maintained by a distributed and open network, owned by no-one. .
Fiat currencies (dollars, euros, yen, etc.) have an unlimited supply central banks can issue as many as they want, and can attempt to manipulate a currencys value relative to others. Holders of the currency (and notably citizens with little alternative) keep the price.
While senders of traditional electronic payments are usually identified (for verification purposes, index and to comply with anti-money laundering and other legislation), users of bitcoin in concept function in semi-anonymity. Since there is no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is submitted, the protocol checks all previous transactions to confirm that the sender gets the necessary bitcoin as well as the authority to send them.
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In practice, every user is identified by the address of his or her wallet. Transactions can, with a little effort, be tracked this way. Also, law enforcement has developed methods to identify consumers if necessary.
Furthermore, most exchanges are required by law to perform identity checks on their customers before they are allowed to buy or sell bitcoin, facilitating another way that bitcoin usage can be monitored. Since the network is transparent, the advancement of a specific transaction is visible to all.
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This is because there is no central adjudicator that can say ok, return the money. When a transaction is listed on the network, and when more than an hour has passed, it's not possible to modify.
Even though this might disquiet a few, it will mean that any transaction on the bitcoin network cannot be tampered with.
The smallest unit of a bitcoin is called a satoshi. It's one hundred millionth of a bitcoin (0.00000001) at todays prices, about one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.
Read more to find out how bitcoin transactions are processed and how bitcoins are mined, what it can be utilized for, as well as how you can buy, sell and store your bitcoin. We also explain a few alternatives to bitcoin, in addition to how its underlying technology the blockchain functions. .
If you want to know what blog here is Bitcoin, the way you can get it and how it can help you, without floundering into technical details, this guide is for you. It will explain how the system operates, how you can use it to your gain, which scams to avoid. It will also guide you to resources that will enable you to shop and use your very first pieces of digital currency.