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To cut through some of this confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code which represents ownership of a digital concept sort of like a digital IOU. On the other hand, you have 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 made and kept electronically. Bitcoins arent printed, for example dollars or euros theyre made by computers all around the planet, using free software.

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

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

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, which can also be traded digitally.

Bitcoins most important characteristic is it is decentralized. No single institution controls the bitcoin network. It's maintained by a group of volunteer coders, and run by an open network of committed computers spread around the world. This brings individuals and groups that are uncomfortable with the control that banks or government institutions have over their money. .

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Bitcoin solves the double spending issue of electronic currencies (in which electronic assets can readily 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. 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 other people. Holders of this currency (and notably citizens with little alternative) keep the price.

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

While senders of traditional electronic payments are often identified (for verification purposes, and to abide by anti-money laundering and other legislation), users of bitcoin in concept function in semi-anonymity. Since there's absolutely 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 in addition to the ability 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. Additionally, law enforcement has developed approaches to identify consumers if necessary.

Furthermore, try this out most exchanges are required by law to perform identity checks on their customers before they're allowed to purchase or sell bitcoin, facilitating another manner that bitcoin usage can be tracked. Since the network is transparent, the advancement of a particular transaction is observable to all.

This is because there is no central adjudicator that can say okay, return the money. If a transaction is recorded on the network, and when more than an hour has passed, then it is not possible to change.

Even though this might disquiet some, it does 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, roughly one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.

Read more to find my explanation out how bitcoin transactions are processed and how bitcoins are mined, what it can be used for, as well as how you can buy, sell and save your bitcoin. We also explain a few alternatives to bitcoin, as well as how its underlying technology the blockchain works. .

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