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To cut through some of this confusion surrounding bitcoin, we need to divide 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 sort of like a digital IOU. On the other hand, you've got bitcoin-the-protocol, a distributed network that maintains a ledger of balances of bitcoin-the-token.

The system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is made and kept electronically. Bitcoins arent printed, like dollars or euros theyre produced by computers all around the planet, using free software.

It was the first instance of what we call cryptocurrencies, a growing strength category that shares some characteristics of traditional currencies, together with verification based on cryptography.

A pseudonymous software programmer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, within an electronic payment system based on mathematical evidence. The idea was to produce a means of exchange, independent of any central power, which could be transferred electronically in a secure, verifiable and immutable manner.

Bitcoin can be utilized to pay for things electronically, if both parties are willing. In that sense, its similar to 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's maintained by a group of volunteer coders, and run through an open network of committed servers spread around the world. This attracts individuals and groups that are uncomfortable with the control that banks or government institutions have over their money. .

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Bitcoin simplifies the double spending problem of electronic currencies (in which digital assets can easily be copied and re-used) through 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. Together 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 try to manipulate a currencys worth relative to others. Holders of the currency (and especially citizens with little alternative) bear the cost.

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With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. Even a small number of new bitcoins trickle every hour, and will continue to Bonuses do so at a diminishing rate until a maximum of 21 million has been attained. This makes bitcoin more attractive as an advantage in concept, if demand grows and the supply remains the same, the value will increase. .

Even though senders of traditional electronic payments are usually identified (for verification purposes, and to abide by anti-money laundering and other legislation), users of bitcoin in concept operate 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 filed, the protocol checks all previous transactions to confirm that the sender has the necessary bitcoin in addition to the authority to send them.

In practice, every user is identified with the address of his or her wallet. Transactions can, with some effort, be monitored this way. Also, law enforcement has developed approaches to identify users if necessary.

Furthermore, most exchanges are required by law to perform identity checks on their customers before they're permitted to purchase or sell bitcoin, facilitating another way that bitcoin utilization can be tracked. Since the network is transparent, the advancement of a specific transaction is observable to all.

This is because there is no central adjudicator that can say okay, return the money. When a transaction is recorded on the network, and if more than an hour has passed, it is impossible to change.

While this may disquiet some, it does mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is referred to as a satoshi. It is one hundred millionth of a bitcoin (0.00000001) at todays prices, roughly one hundredth of a cent. This may conceivably enable microtransactions that traditional electronic money cannot.

Read to find out how bitcoin transactions are processed and how bitcoins are mined, what it can be used for, in addition to how you can purchase, sell and store your bitcoin. We also explain a few alternatives to bitcoin, in addition to how its underlying technology the blockchain works. .

Bitcoin is a digital currency, also known as a cryptocurrency. It had been invented in 2008 by an anonymous person or group named Satoshi Nakamoto.