Bitcoin is a virtual or digital currency also known as cryptocurrency created by the mysterious (and unknown) Satoshi Nakamoto. Bitcoin is like other currencies: it can be used to buy items locally and electronically. However, bitcoin differs from conventional money in that it is decentralized and totally independent. No institution controls the Bitcoin network and is not tied to a country like the US dollar. The entire network is maintained by individuals and organizations referred to as Bitcoin Miners. The Bitcoin miners process and verify bitcoin transactions through a mathematical algorithm based on the cryptographic hash algorithm (hence the cryptocurrency name) SHA256.
Bitcoin is decentralized
No central authority controls Bitcoin or its transaction network. A community of Bitcoin miners composes the network and processes the transactions. If a developer or developers who use GitHub make a change in Bitcoin, a majority of 51% of the hashing power of the miners must agree to it. This ensures that, in theory, no individual can steal their bitcoins or print (create) more.
How can the Bitcoin and Bitcoin code be changed?
Everyone can contribute and edit the Bitcoin source code since the Bitcoin protocol is open source. The Bitcoin protocol is visible to all, which makes it easier to detect weaknesses and provide suggestions for improvement. However, if a developer edits the Bitcoin code, that edition must be accepted by more than 51% or more of the Bitcoin miners who run the Bitcoin network. Bitcoin can be seen as a democratic currency where the majority always decides what will happen next with the Bitcoin source code.
Bitcoin Wallet and Transactions
Although every Bitcoin transaction is recorded in a public register called a blockchain, the names of buyers and sellers are never revealed, only their Bitcoin wallet addresses. Each wallet address is unique and can not be linked to anyone unless the creator of that specific bitcoin address discovers itself.
is an example of a unique bitcoin address used to receive and send bitcoins.
To send, receive and create Bitcoin addresses you must have a Bitcoin wallet (learn to choose the correct Bitcoin wallet here). A Bitcoin wallet is software that is essentially your bank account for bitcoins. Your wallet can contain as many bitcoins and Bitcoin addresses as you want, and you can have the number of wallets you want.
While Bitcoin can be anonymous, that does not mean it is. If you buy your bitcoins in a Bitcoin trading platform or an exchange that has your information, the bitcoins you buy can be linked to you.
Bitcoin is transparent
Every bitcoin transaction that has happened is stored in detail in the public ledger known as the blockchain. By using the blockchain, anyone can see how many bitcoins are stored in a particular address and can see the deposits and withdrawals at that address, but they can not know to whom the address belongs.
When you send bitcoins to a Bitcoin address, you can not reverse the transaction. Unlike credit cards where the transaction can be contested or reversed, the bitcoins are not refundable. Bitcoin can not be replaced either. If your wallet is stored on your hard drive and not in a “cloud”, you could lose your bitcoins if they pirate you, have a virus or if your computer dies. These lost bitcoins can never be recovered. That is why it is so important to make regular backups and implement measures for Bitcoin wallet security.
In addition, merchants can not charge you charges as they can with credit cards. Each transaction must be initiated by the holder of the wallet, which further highlights the advantages of the Bitcoin system.
The advocates of Bitcoin promote their formidable security, and with good reasons. In theory, unless 51% of the system is controlled by one party, Bitcoin is virtually impossible to dismantle. For example, in order for someone to change a transaction or double spend a Bitcoin, he or she will have to gain majority control of the system and modify each miner in this majority. When there is a disagreement in the chain of blocks, the system annuls the minority with the data agreed by the majority.
However, there have been concerns that different mining companies and mining groups could achieve 51% of the Bitcoin hash power and carry out a so-called 51% attack on the Bitcoin network.
Bitcoins are created through a process known as mining. Mining is the term used by those who contribute to the processing of transactions. The miners process and secure the network using specialized hardware that “mines” the new bitcoins. As “payment” for their contribution, they are granted new bitcoins. This is how the new bitcoins are generated.
New currencies are created at a fixed and decreasing rate that is predictable. The number of coins created each year is halved over time until 21 million bitcoins are in circulation. At this point, bitcoin miners will be rewarded with transaction fees.
When a miner has successfully created a new hash, the block is sealed and added to the block chain. 25 bitcoins are granted to the miner who discovered the new hash. The number of bitcoins rewarded per block is halved every four years. The blocks are resolved at an approximate speed of 6 per hour.
Why use Bitcoins?
Bitcoins are attractive to a large number of people for an equally large number of reasons. Bitcoins can be anonymous, almost instantaneous and offer a level of control over your money like no other traditional currency. There are no banks that can take your money, and Bitcoin are deflationary in nature, while, for example, the USD is inflationary where your money depreciates over time. Bitcoins are also speculative in nature, attracting the attention of investors.
Traders are attracted to Bitcoin due to low rates. Merchants typically pay 2-3% fees for credit card processors, while many types of transactions are free with Bitcoin. Transactions are free if several conditions are met. All transactions that do not meet the requirements will be charged 0.1mBTC (0.0001 BTC) per 1,000 bytes. Typical transactions are 500 bytes but do not meet the priority requirement and, therefore, a fee of 0.1mBTC is charged regardless of how many coins are transferred. You can see the live price of Bitcoin here.
How to get Bitcoins
Bitcoins can also be obtained by being part of the Bitcoin network and starting to extract bitcoins. Before the days of the ASIC miners, people could set up their computers to extract and earn bitcoins easily. Those days are gone due to the difficulty to extract Bitcoin, the level of difficulty of Bitcoin, has increased enormously making it increasingly difficult to earn bitcoins with the same team. Becoming a miner and seeing a positive return on investment would mean a substantial investment and is now in the hands of large companies and wealthy investors. For most people, buying your Bitcoin through a Bitcoin exchange is the best option. You can also find ways to earn free bitcoins.
The best videos of “What is Bitcoin”
We have chosen the three best videos of “What is Bitcoin” that you should see to get more information about Bitcoin. You can see them below.