What is Bitcoin?

Bitcoin is a digital currency that originated in January 2009. It is a decentralized internet protocol that enables a peer-to-peer monetary network with its own assets. The Bitcoin Protocol follows the rules set out in a white paper of the mysterious and pseudonymous Satoshi Nakamoto (Oct, 2008). The identity of the person or group of people who have created the technology is a mystery. The technology behind Bitcoin offers the promise to enable lower transaction costs than traditional online payment mechanisms. In contrast to the government issued by the government, it is not managed by a central authority.

Bitcoin is known as cryptocurrency because it uses cryptography. There are no physical bitcoins, only virtually where the balances are kept in a public ledger that everyone has transparent access. All Bitcoin transactions are verified by a huge amount of computer power through a process called "mining". Bitcoin is not issued by banks or governments. Although Bitcoin is not a legal means of payment in most parts of the world, it is very popular and has given the start of the rise of thousands of other cryptocurrencies and digital assets, jointly referred to as altcoins.

Understand Bitcoin

The Bitcoin system is a collection of computers (also known as "nodes" and/or "miners") that all run the Bitcoin code and therefore store the Bitcoin Blockchain locally. Figuratively speaking, a blockchain can be seen as a collection of blocks. Each block contains a collection of transactions. Because all computers that run the blockchain have the same list of blocks and transactions and these new blocks can see transparently when they are filled with new Bitcoin transactions, no one can manipulate the system.

Anyone, whether a Bitcoin node is turned or not, can see these transactions in real time. To do something malicious about Bitcoin, a participant should use 51% of Bitcoin's computing power. If an attack were to take place, miners-the people who participate in the Bitcoin network with their computers-could jointly choose to split for a new blockchain, which makes the effort that the bad actor has made to carry out the attack has been for nothing.

The Bitcoin balances are kept with public and private "keys", these are long series of numbers and letters connected by the mathematical encryption algorithm that is generated. The public key (similar to a bank account number) serves as the address that is announced to the world and where others can send Bitcoin. The private key (similar to a pin code at an ATM) is intended as a well-kept secret and is only used to authorize Bitcoin transfers. Bitcoin keys should not be confused with a Bitcoin wallet, which is a physical or digital device that facilitates Bitcoin trade and enables users to follow the possession of bitcoins. The term "wallet" is misleading because Bitcoin is so decentralized that it is never stored "in" a wallet but is distributed on a blockchain.

Peer-to-peer technology

Bitcoin is the first digital asset that peer-to-peer (P2P) technology uses to make direct payments possible. The independent individuals and companies that have computer capacity and participate in the Bitcoin network-as miners-are responsible for processing the transactions on the blockchain. In this way Bitcoin and other digital assets work differently than Fiatuututa; In centralized banking systems, the currency is created at a pace that corresponds to the growth of the economy; This system is intended to maintain price stability. A decentralized system, such as Bitcoin, determines the issue rate in advance according to an algorithm.

Bitcoin Mining

Bitcoin Mining is the process with which new Bitcoins are put into circulation. In this process, complex mathematical puzzles are solved to discover a new block of the Bitcoin blockchain, which is then added to the blockchain. Bitcoin Mining adds transaction data to the network and verifies it. On average, a Bitcoin block is used every 10 minutes. Miners can be seen as the decentralized authority that enforces the credibility of the Bitcoin network. New bitcoins are released to miners at a fixed but periodically decreasing rate. In total, only 21 million bitcoins can be mined. One Bitcoin is divisible to eight decimal places (100 millionth of one bitcoin), and this smallest unit is called a Satoshi. Miners are rewarded with bitcoins; The reward is halved every 210,000 blocks. The halving ensures that fewer new bitcoins are generated per block. This means that the range of new bitcoins is lower. In normal markets, a lower supply and constant demand usually leads to higher prices.