Bitcoin Definition

What is Bitcoin?

Bitcoin is a digital currency that was created in January 2009 after the housing market crash. Follow the ideas set out in a white paper by the mysterious pseudonym Satoshi Nakamoto.

The identity of the person or persons who created the technology remains a mystery. Bitcoin promises lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government issued currencies.

There are no physical Bitcoins, just ledger balances that everyone can access transparently, which, along with all Bitcoin transactions, are verified with an enormous amount of computing power. Bitcoins are not issued or endorsed by any bank or government, and individual bitcoins have no value as a commodity. Although not a legal tender, Bitcoin is very popular and has launched hundreds of other virtual currencies collectively referred to as Altcoins.

Understanding Bitcoin

Bitcoin is a collection of computers, or nodes, that run Bitcoin code and store their own blockchain. You can think of a blockchain as a collection of blocks. In each block there is a set of transactions. Since all blockchain computers have the same list of blocks and transactions and can transparently see these new blocks filled with new Bitcoin transactions, no one can fool the system. Anyone, whether they are managing the Bitcoin "node" or not, can see that these transactions occur directly. To perform an act of infamy, a bad actor would need to run 51% of the computing power that makes up Bitcoin. Bitcoin contained around 47,000 nodes in May 2020 and that number is increasing, making such an attack unlikely.

In the event of an attack, it is possible for the Bitcoin nodes, or the people participating in the Bitcoin network with their computers, to fork into a new blockchain, making the effort of a bad actor to achieve the attack a waste of time. waste.

Bitcoin is a type of cryptocurrency. Bitcoin balances are held using public and private "keys," which are long strings of numbers and letters linked through the mathematical cryptography algorithm used to create them. The public key (which can be compared to a bank account number) acts as a posting address in the world to which others can send bitcoins. The private key (which can be compared to an ATM PIN code) is intended to be a guarded secret and is only used to authorize Bitcoin transfers. Bitcoin keys should not be confused with a Bitcoin wallet, which is a physical or digital device that facilitates Bitcoin trading and allows users to track ownership of the currency. The term "wallet" is a bit misleading, because the decentralized nature of Bitcoin means that it is never stored "in" the wallet, but rather decentralized on the blockchain.

Pattern Notes: According to the official Bitcoin Foundation, the word "Bitcoin" is capitalized in the context of referring to an entity or concept, while "bitcoin" is written in lowercase when referring to an amount of the currency. (eg "I" change 20 Bitcoin ") Or the units themselves. The plural can be" bitcoin "or" bitcoins. "Bitcoin is also commonly abbreviated as" BTC ".

How does Bitcoin work?

Bitcoin was one of the first digital currencies to use peer-to-peer technology to facilitate instant payments. The autonomous individuals and companies that own the ruling computing power and participate in the Bitcoin network consist of miners or miners. The "miners", or people who process transactions on the blockchain, are incentivized by bonuses (the launch of the new bitcoin) and transaction fees paid in bitcoin. These miners can be seen as a decentralized authority enforcing the reliability of the Bitcoin network. New bitcoins are being issued to miners at a steady rate, but they are periodically decreasing, with the total supply of bitcoins approaching 21 million. As of July 2020, there are approximately 3 million Bitcoins yet to be mined. In this way, Bitcoin (and any cryptocurrency created through a similar process) works differently than fiat currency; In central banking systems, the currency is liberalized at a rate that matches the growth of commodities in an effort to maintain price stability, while a decentralized system like Bitcoin determines the rate of issue in advance and accordingly. with an algorithm.

Bitcoin mining is the process by which Bitcoins are put into circulation. In general, mining requires solving computationally difficult puzzles to discover a new block that has been added to the blockchain. By contributing to the blockchain, it adds mining and verification of transaction logs on the network. For adding blocks to the blockchain, miners receive a reward in the form of a few bitcoins; The bonus is halved every 210,000 blocks. The block reward was 50 new Bitcoins in 2009 and is currently 12.5. On May 11, 2020, the third halving occurred, reducing the reward for each block discovery to 6.25 Bitcoins. A variety of devices can be used to mine Bitcoin, but some provide higher rewards than others. Certain computer chips called application-specific integrated circuits (ASICs) and more advanced processing units, such as graphics processing units (GPUs), can bring more rewards. These elaborate mining magicians are known as "mining rigs."

A single Bitcoin can be divided into eight decimal places (100 parts of a million of a Bitcoin), and this smaller unit is known as Satoshi. If necessary, and if the participating miners accept the change, Bitcoin can eventually be made divisible to more decimal places. .

Who Invented Bitcoin?

No one knows who invented Bitcoin, or at least not conclusively. Satoshi Nakamoto is the name associated with the person or group of people who published the original Bitcoin whitepaper in 2008 and worked on the original Bitcoin software released in 2009. In the years since then, many people have claimed or suggested that they are the real people. Behind the nickname, but as of May 2020, the true identity (or identities) behind Satoshi remained a mystery.

Why is Satoshi anonymous?

There are some reasons that push the inventor of Bitcoin to keep his identity a secret. The first is privacy. With Bitcoin gaining fame, becoming a global phenomenon, Satoshi Nakamoto is likely to attract a lot of media and government attention.

Receive Bitcoins As Payment

Bitcoins can be accepted as a payment method for products sold or services provided. If you have a physical store, simply display a sign that says "Bitcoin accepted here" and many of your customers can enjoy it; Transactions can be handled using the required hardware terminal or the wallet address via QR codes and touch screen applications. Online businesses can easily accept bitcoins by adding this payment option to others that offer credit cards, PayPal, etc.