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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 that represents ownership of a digital concept sort of like a virtual IOU. On the other hand, you have bitcoin-the-protocol, a dispersed network that maintains a ledger of balances of bitcoin-the-token.

The machine enables payments to be sent between users without passing through 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 produced by computers all around the planet, using free software.

It was the very first example of what we 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 proposed bitcoin in 2008, within an electronic payment system based on mathematical evidence. 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 manner.

Bitcoin can be used to cover things electronically, if both parties are willing. In that sense, its like 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 is maintained by a group of volunteer coders, and run by an open network of committed servers spread around the world. This attracts individuals and groups who 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 easily be replicated and re-used) via 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 the transactions is maintained by a distributed and open network, owned by no-one. .

Fiat currencies (dollars, euros, yen, etc.) imp source have an unlimited supply central banks can issue as many as they want, and can attempt to manipulate a currencys value relative to others. Holders of this currency (and notably citizens with very 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 hour, and will continue to do so at a diminishing rate until a max of my sources 21 million has been reached. 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 is no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is filed, the protocol checks all prior transactions to confirm that the sender gets the necessary bitcoin as well as the ability to send them.

In practice, each user is identified by the address of their wallet. Transactions can, with a little effort, be monitored this way. Additionally, law enforcement has developed approaches to identify consumers if necessary.

Furthermore, 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 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 ok, return the money. If go to website a transaction is listed on the network, and if more than an hour has passed, then it is impossible to change.

While this may 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'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 out how bitcoin transactions are processed and how bitcoins are mined, what it can be utilized for, as well as how you can buy, sell and store your bitcoin. In addition, we explain a few alternatives to bitcoin, in addition to how its underlying technology the blockchain functions. .

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