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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 have bitcoin-the-token, a snippet of code that represents ownership of an electronic concept sort of like a digital IOU. On the other hand, you've got bitcoin-the-protocol, a dispersed network which maintains a ledger of balances of bitcoin-the-token.

The system enables payments to be sent between users without passing via a central authority, like a bank or payment gateway. It's created and kept electronically. Bitcoins arent printed, like dollars or euros theyre made by computers all around the world, using free software.

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

A pseudonymous software developer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, as an electronic payment method based on mathematical proof. 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 way.

Bitcoin can be used to cover things electronically, if both parties are willing. In that sense, its similar to conventional dollars, euros, or yen, which 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 brings individuals and groups that are uncomfortable with all 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 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. 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 other people. Holders of the currency (and especially citizens with little alternative) bear the cost.

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

Even though senders of traditional electronic payments are usually identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in concept operate 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 assesses all prior transactions to confirm that the sender gets the necessary bitcoin as well as the ability to send them.

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

Additionally, most exchanges are required by legislation to perform identity checks on their customers before they're permitted to buy or sell bitcoin, facilitating another way that bitcoin usage can be monitored. Since the network is transparent, try these out the progress of a particular 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 when more than an hour has passed, then it is not possible to modify.

While this may disquiet a few, 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 may conceivably enable microtransactions that traditional electronic money cannot.

Read more to find out how bitcoin transactions are processed and the way bitcoins are mined, read what he said what it can be used for, in addition to how you can buy, 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 an electronic currency, also known as a cryptocurrency. It had been invented in 2008 by an anonymous person or group named Satoshi Nakamoto.