What is bitcoin? (B T C)
Beginner's Guide to Bitcoin
Bitcoin is an invention that, for the first time in history, enabled a group of software users to create and manage a digital currency supply outside the control of any government or bank.
A revolutionary idea when introduced in 2009, the implications of bitcoin continue to be understood and explored by technologists and economists today.
This means that, depending on who you ask, you may have to ask "What is bitcoin?" There can be different answers to such questions. and "Why Does Bitcoin Have Value?"
To start, it helps to think of bitcoin as a software protocol like the ones you interact with everyday – SMTP (which helps route your email) and HTTP (which helps you route your email) to your browser. The web content requested is delivered by a server).
The bitcoin protocol enables computers running its software to manage a data set (the blockchain) and enforce a set of rules that make this data (bitcoin) scarce and valuable.
Bitcoin is a decentralized digital currency that you can buy, sell and exchange directly without an intermediary like a bank. Bitcoin's creator, Satoshi Nakamoto, originally described the need for "an electronic payment system based on cryptographic evidence rather than trust".
Every bitcoin transaction that has ever been made exists on a public ledger that is accessible to all, making the transaction difficult to reverse and counterfeit. This is by design: native to their decentralized nature, bitcoins are not backed by the government or any issuing institution, and there is nothing to guarantee their value other than proof baked into the heart of the system.
Since its public launch in 2009, the value of bitcoin has increased dramatically. Although it once sold for under $150 per coin, as of October 26, 2021, one bitcoin now sells for over $62,000. Because its supply is limited to 21 million coins, many expect its price to continue to rise as time passes, especially as more large, institutional investors consider it a type of digital gold to hedge against market volatility and inflation. Begin to believe as
Public-key cryptography – Wallet software allows bitcoin owners to have a public key (which is used by the protocol to prove themselves bitcoin to you) and a private key (a type of password that, when well-secured, guarantees that Your bitcoins can only be accessed by whom). You).
Peer-to-peer networking - nodes (computers running the software) review transactions to ensure the software's rules are followed. Miners (nodes using specialized computer chips) then compete for the right to batch these transactions into blocks added periodically to the blockchain.
A Limited Supply – According to software rules, only 21 million bitcoins can be produced, a limit that gives bitcoin value.
The bitcoin blockchain is a complete record of the network's history that is validated by the individuals running the bitcoin software (nodes). This ensures that unlike most digital data, which can be freely copied and modified, bitcoins cannot.
Because bitcoins are scarce, divisible and transferable, bitcoins are used as money.
Who created bitcoin?
While bitcoin can safely lay claim to creating the world's first successful cryptocurrency, its technology is built on decades of ideas about how cryptography can help create digital money.
This includes such creative projects as:
B-Money – A proposed anonymous, distributed digital cash system
Bit Gold - an attempt to create a rare online commodity
eCash - the first major effort to create anonymous online payments
Hashcash - a proof-of-work system designed to prevent email spam
In 2006, "Satoshi Nakamoto," still a pseudonymous individual or group, began writing code for a new digital cash system called "Bitcoin."
This was followed by the publication of a white paper in 2008 explaining this proposed system, and on January 9, 2009, the first version of the software, Bitcoin 0.1, was released.
Nakamoto wrote a trove of emails and forum posts offering his thoughts about the future of bitcoin before leaving the project in 2011. Today, hundreds of developers contribute to Bitcoin's code, where they do everything from regular bug fixes to efficiency improvements.
What makes bitcoin decentralized?
It is the belief of many technologists that the fundamental asset of bitcoin – that is, what sets it apart from other digital money systems – is that its network is decentralized.
To fully understand the idea behind decentralization and why it is so important, it is helpful to consider how banking works today.
You can deposit your salary regularly in the bank account. In this case, the bank provides you with the means to access your money (via your ATM, payment cards and checks) while keeping it safe from theft (with security guards, vaults and alarms).
In our example, banks act as the central authority. They are third parties that facilitate transactions between individuals and businesses. Essentially, banks act as middlemen in your transactions. They then provide the same service for all customers, which gives them control over other people's vast supplies of money.
With this power they can easily change the rules. Your bank may lend you money without your permission, decide not to process any transactions for you, or even deny you access to your money. Governments and criminals can also confiscate your data and money from banks.
The idea behind bitcoin is to have a system where there is no middleman or central authority. Only you have control of your money and your transactions cannot be denied.
Bitcoin is "decentralized" because its software allows anyone to reliably verify the authenticity and scarcity of the bitcoins they receive.
Tocoin's decentralization solves the issue of trust inherent in centralized money managers. If one computer stops working, another can take its place.
Bitcoin developers consider the network to be more or less decentralized, depending on how much it costs on average.
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How does bitcoin work?
Bitcoin is built on a distributed digital record called a blockchain. As the name implies, a blockchain is a linked body of data, made up of units called blocks, that contain information about each transaction, including the date and time, the total value, buyers and sellers, and the number of times each exchange takes place. A unique identification code is included. Entries are linked together in chronological order, forming a digital chain of blocks.
“Once a block is added to the blockchain, it becomes accessible to anyone who wishes to view it, acting as the public ledger of cryptocurrency transactions,” advises Pelicoin, a network of cryptocurrency ATMs. Stacey Harris says
Blockchain is decentralized, which means that it is not controlled by any one organization. “It’s like a Google Doc that anyone can work on,” says Buchi Okoro, CEO and co-founder of African cryptocurrency exchange Quidax. "No one owns it, but anyone who has the link can contribute. And as different people update it, your copy is updated as well."
While the idea that anyone can edit the blockchain may sound risky, it is actually what makes bitcoin trustworthy and secure. For a transaction block to be added to the bitcoin blockchain, it must be verified by the majority of all bitcoin holders, and the unique codes used to identify users' wallets and transactions must conform to the correct encryption pattern.
These codes tend to be long, random numbers, making them incredibly difficult to produce fraudulently. In fact, according to Brian Lottie of Crypto Aquarium, a fraudster guessing your bitcoin wallet's key code has about the same odds as winning the Powerball lottery nine times. This level of statistical randomness blockchain verification code, which is required for each transaction, greatly reduces the risk of anyone making fraudulent bitcoin transactions.
How does bitcoin mining work?
Bitcoin mining is the process of adding new transactions to the bitcoin blockchain. It's a tough job. Those who choose to mine bitcoin use a process called proof of work, which deploys computers in a race to solve mathematical puzzles that verify transactions.
To entice miners to solve puzzles and support the overall system, Bitcoin Code rewards miners with new bitcoins. "This is how new coins are created" and new transactions are added to the blockchain, Okoro says.
In the early days, it was possible for the average person to mine bitcoins, but this is no longer the case. Bitcoin code is written to make its puzzles more challenging over time, requiring more and more computing resources. Today, bitcoin mining requires powerful computers and massive amounts of cheap electricity to be successful.
Bitcoin mining also pays less than before, making it even more difficult to compensate for the rising computational and electrical costs. “In 2009, when this technology first came out, every time you got a stamp, you got a lot more bitcoin than you are today,” says Flory Marquez, co-founder of crypto wealth management company BlockFi.
“There are more and more transactions [now, so] the amount you pay for each ticket is less and less.” By 2140, it is estimated that all bitcoins will be in circulation, meaning that mining will not issue any new coins.
