What is Bitcoin?

What is Bitcoin?

Bitcoin is a digital currency that was first introduced in January of 2009. It is based on ideas presented in a whitepaper by Satoshi Nakamoto, a mysterious and pseudonymous figure. 1 The identity of the individual or people behind the technology is still unknown. Bitcoin promises reduced transaction fees than existing online payment methods, and it is controlled by a decentralized authority, unlike government-issued currencies.

Cryptocurrencies, such as Bitcoin, are a sort of digital currency. There are no real bitcoins; instead, balances are stored on a public ledger that everyone can see. A significant amount of computational power is used to verify every bitcoin transactions. Bitcoin is not issued or backed by any banks or governments, and a single bitcoin has no monetary value. Despite the fact that it is not legal tender in most countries, bitcoin is extremely popular, and it has sparked the creation of hundreds of alternative cryptocurrencies known as altcoins. "BTC" is a frequent abbreviation for Bitcoin.

Understanding Bitcoin

The bitcoin system consists on a network of computers (also known as "nodes" or "miners") that execute bitcoin's code and store its blockchain. A blockchain can be viewed of as a collection of blocks metaphorically. Each block contains a set of transactions. No one can trick the system because all computers running the blockchain have the same list of blocks and transactions and can watch these fresh blocks being filled with new bitcoin transactions transparently.

These transactions may be seen in real-time by anyone, whether or not they run a bitcoin "node." To carry out a criminal deed, a bad actor would need to control 51 percent of bitcoin's computational power. As of June 2021, Bitcoin has over 10,000 nodes, and this number is growing, making such an attack highly implausible.

However, if an attack were to occur, bitcoin miners—those who participate in the bitcoin network via their computers—would most likely split to a new blockchain, rendering the bad actor's attempt futile.

Public and private "keys," which are long sequences of numbers and letters connected by the mathematical encryption technique used to construct them, are used to keep track of bitcoin token balances. The public key (which is similar to a bank account number) is the address that is made public and to which others can send bitcoin.

The private key (which functions similarly to an ATM PIN) is designed to be kept private and is only used to authorize bitcoin transactions. A bitcoin wallet, which is a physical or digital device that supports bitcoin trade and allows users to monitor ownership of coins, should not be confused with bitcoin keys. The name "wallet" is a little deceptive, because bitcoin is never held "in" a wallet, but rather decentralized on a blockchain.

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