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Bitcoin Explained

Updated: Apr 17, 2023

A cryptocurrency, such as Bitcoin (BTC), eliminates the need for third parties to be involved in financial transactions by acting as money and a means of payment independent of any one person, group, or entity. It is available for purchase on numerous platforms and is given to blockchain miners as compensation for their efforts in verifying transactions. By utilizing the alias Satoshi Nakamoto, an unidentified developer or group of developers presented Bitcoin to the general public in 2009.


Since then, it has grown to be the most well-known cryptocurrency worldwide. Numerous additional cryptocurrencies have been developed as a result of Bitcoin's popularity. These rivals either want to displace it as a means of payment or are employed in other blockchains and cutting-edge financial technology as utility or security tokens.


KEY TAKEAWAYS

  • According to market capitalization, Bitcoin, which debuted in 2009, is the biggest cryptocurrency in the world.

  • Bitcoin, unlike traditional money, is produced, circulated, traded, and stored using a blockchain, a decentralized ledger system.

  • Proof-of-work (PoW) consensus, which is also the "mining" procedure that adds new bitcoins to the system, protects Bitcoin and its ledger.

  • Several cryptocurrency exchanges allow for the purchase of Bitcoin.

  • The history of Bitcoin as a store of value has been tumultuous; during the course of its relatively brief existence, it has experienced numerous boom and bust cycles.

  • In its aftermath, a plethora of new cryptocurrencies have been inspired by Bitcoin, the first decentralized virtual money to experience widespread acceptance and success.

Understanding Bitcoin

The domain name Bitcoin.org was registered in August 2008. This domain is WhoisGuard Protected today at least, which means the person who registered its identity is private.


On the Cryptography Mailing List at metzdowd.com in October 2008, someone or some organization going by the fictitious name Satoshi Nakamoto posted: "I've been working on a new electronic payment system that's totally peer-to-peer, with no trusted third party." "Bitcoin: A Peer-to-Peer Electronic Cash System," a now-famous white paper that was posted on Bitcoin.org, would go on to become the Magna Carta for how Bitcoin functions today.


Block 0—the very first Bitcoin block—was mined on January 3, 2009. This is also referred to as the "genesis block" and contains the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks," which may serve as both relevant political commentary and as evidence that the block was mined on or after that date.


Every 210,000 blocks, bitcoin payouts are half. For instance, in 2009, the block reward was 50 brand-new bitcoins. The third halving took place on May 11, 2020, reducing the reward for finding a block to 6.25 bitcoins.

The smallest unit of a bitcoin, which is divisible to eight decimal places (100 millionths of a bitcoin), is known as a satoshi. Bitcoin could someday be divided to even more decimal places if necessary and if the active miners agree to the change.


Understanding Bitcoin as a type of digital currency isn't that difficult. For instance, if you have a bitcoin, you can send smaller amounts of that bitcoin to pay for goods or services using your cryptocurrency wallet. However, when you attempt to grasp how it operates, it gets really difficult.



Would you be interested in using Bitcoin for your online transactions?

  • Yes.

  • No.



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