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To cut through some of the confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you've got bitcoin-the-token, a snippet of code which represents ownership of an electronic concept sort of like a digital IOU. On the other hand, you've got bitcoin-the-protocol, a distributed 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, such as 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 example of what we today call cryptocurrencies, a growing asset category that shares some characteristics of traditional currencies, with verification based on cryptography.

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

Bitcoin can be used to cover things electronically, if the two parties are willing. In that sense, its similar to conventional dollars, euros, or yen, which are also traded digitally.

Bitcoins most important feature is it is decentralized. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders, and run by an open network of dedicated computers spread around the globe. 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 digital assets can easily be replicated 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 attempt to manipulate a currencys value relative to other people. Holders of this currency (and especially citizens with little alternative) keep the price.

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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 hourand will continue to do so at a diminishing rate until a maximum of 21 million has been attained. This creates bitcoin more appealing 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 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 filed, the protocol assesses all previous transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them.

In click for info practice, every user is identified by the address of his or her pocket. Transactions can, with a little effort, be monitored this way. Also, law enforcement has developed approaches to identify consumers if necessary.

Additionally, most exchanges are required by law to perform identity checks on their clients before they are allowed to buy or sell bitcoin, facilitating another way that bitcoin utilization can be tracked. Since the network is transparent, the progress of a particular transaction is observable to all.

This is because there's absolutely no central adjudicator that can go to my blog say okay, return the money. If a transaction is listed on the network, and when more than an hour has passed, then it's impossible to change.

Even though this might disquiet a few, it will mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) at todays prices, about one hundredth of a cent. This could 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, as well as how you can purchase, sell and save your bitcoin. In addition, we explain a few alternatives to bitcoin, as well as how its underlying technology the blockchain functions. .

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