How Bitcoin works, part 1

Bitcoin and Blockchain are taking the world by storm. It’s been over 10 years since its inception and the price of Bitcoin even hit 20 000 USD once. It is already sitting again at 10 000 USD and it’s preparing for the next run. If you are new to that, you might want to educate yourself on what really that Bitcoin is.

Before we start discussing Bitcoin, a few points to start with:

  • Bitcoin is a digital currency (It does not have a physical form), a sort of a decentralized system that stores transactions in a distributed ledger also called a blockchain. Once something is written into the blockchain, it cannot be altered or reverted or deleted.
  • Bitcoin miners (individuals responsible for creation and maintenance of it) run complex computer rigs to solve complicated mathematical equations in an effort to confirm groups of transactions called blocks. Once they succeed, these blocks are added to the blockchain record and the miners are rewarded with a small number of bitcoins.
  • Other users market can purchase or sell Bitcoins through many cryptocurrency exchanges or even face to face (Over The Counter)
  • The Bitcoin ledger is protected against fraud via a trustless system; Bitcoin exchanges also defend themselves against potential hacks, but high-profile attacks have occurred and sometimes succeeded.

How to define Bitcoin? Is it a currency, a payment network, a fad, an asset class or a store of value? Or all the above?

It also is the most successful of hundreds of attempts to create virtual money through the use of cryptography, the science of making and breaking codes. Bitcoin has inspired hundreds of imitators, but it remains the largest cryptocurrency by market capitalization, a distinction it has held throughout its decade-plus history.

Bitcoin is a digital currency made in January 2009. It follows the thoughts set out in a whitepaper by the strange and anonymous designer Satoshi Nakamoto, whose genuine personality still can’t seem to be confirmed. Bitcoin offers the guarantee of lower exchange expenses than conventional online installment instruments and is worked by a decentralized position, not at all like official monetary forms. 

There are no physical bitcoins, just balances kept on an open record in the cloud, that – alongside all Bitcoin transactions – is checked by a monstrous measure of CPU power. Bitcoins are not given or sponsored by any banks or governments. In spite of it not being legitimate delicate, Bitcoin outlines high on prominence and has set off the dispatch of many other virtual cryptos altogether alluded to as Altcoins. 

Each and every transaction is recorded in an open rundown called the blockchain. Individuals can send Bitcoins (or part of one as Bitcoin is separated into “Satoshis”) to your computerized wallet, and you can send Bitcoins to others. 

Along these lines, it resembles an online variant of money. You can utilize it to purchase items and services, you can exchange it on trades, you can hold it to trust it will grow in value. 

It additionally is the best of many endeavors to make virtual cash using cryptography, the study of making and breaking codes. Bitcoin has propelled several imitators, yet it remains the biggest digital currency by market capitalization, a differentiation it has held during its time to history.

We will stop here for now. We will discuss blockchain, mining, hashes and keys/wallets in the second part coming soon.

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