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

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

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

A pseudonymous software programmer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, within an electronic payment method based on mathematical proof. The idea was to generate a means of exchange, independent of any central authority, that 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 similar to conventional dollars, euros, or yen, that are also traded digitally.

Bitcoins most important characteristic is that it is decentralized. No single institution controls the bitcoin network. It's 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 solves the double spending problem of electronic currencies (in which digital assets can easily 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. 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.) have an unlimited supply central banks can issue as many as they want, and can attempt to manipulate a currencys basics value relative to other people. Holders of the currency (and especially citizens with little alternative) bear the price.

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With bitcoin, on the other hand, the supply is closely controlled by the underlying algorithm. A small number of new bitcoins trickle out every hourand will continue to do so at a diminishing rate until a max of 21 million has been reached. This creates bitcoin more attractive as an asset in theory, if demand grows and the distribution remains the same, the value will increase. .

While senders of traditional electronic payments are often identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in theory 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 filed, the protocol checks all previous transactions to confirm that the sender gets the necessary bitcoin as well as the authority to send them.

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

Furthermore, most exchanges are required by legislation to perform identity checks on their customers before they are allowed to purchase or sell bitcoin, facilitating another manner 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 say okay, return the money. If a transaction is recorded on the network, and when greater than an hour has passed, then it's impossible to modify.

While this may disquiet some, it will mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is referred to as a satoshi. It is one hundred millionth of a bitcoin (0.00000001) at todays visit site prices, about 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 how bitcoins are mined, what it can be used for, as well as how you can buy, sell and store your bitcoin. We also explain look here a few alternatives to bitcoin, in addition to the way its underlying technology the blockchain functions. .

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.