Bitcoin is a cast of digital currency, created in addition to held electronically. No 1 controls it. Bitcoins aren’t printed, similar dollars or euros – they’re produced past times people, in addition to increasingly businesses, running computers all around the world, using software that solves mathematical problems.
What makes it dissimilar from normal currencies?
Bitcoin tin survive used to purchase things electronically. In that sense, it’s similar conventional dollars, euros, or yen, which are too traded digitally.
However, bitcoin’s around of import characteristic, in addition to the matter that makes it dissimilar to conventional money, is that it is decentralized. No unmarried establishment controls the bitcoin network. This puts about people at ease, because it agency that a large banking concern can’t command their money.
Who created it?
A software developer called Satoshi Nakamoto proposed bitcoin, which was an electronic payment organization based on mathematical proof. The persuasion was to orbit a currency independent of whatsoever fundamental authority, transferable electronically, to a greater extent than or less instantly, amongst really depression transaction fees.
Who prints it?
No one. This currency isn’t physically printed inwards the shadows past times a fundamental bank, unaccountable to the population, in addition to making its ain rules. Those banks tin only orbit to a greater extent than money to encompass the national debt, hence devaluing their currency.
Instead, bitcoin is created digitally, past times a community of people that anyone tin join. Bitcoins are ‘mined’, using computing ability inwards a distributed network.
This network also processes transactions made amongst the virtual currency, effectively making bitcoin its ain payment network.
So y'all can’t churn out unlimited bitcoins?
That’s right. The bitcoin protocol – the rules that brand bitcoin run – state that solely 21 meg bitcoins tin e'er survive created past times miners. However, these coins tin survive divided into smaller parts (the smallest divisible amount is 1 hundred millionth of a bitcoin in addition to is called a ‘Satoshi’, after the founder of bitcoin).
What is bitcoin based on?
Conventional currency has been based on aureate or silver. Theoretically, y'all knew that if y'all handed over a dollar at the bank, y'all could instruct about aureate dorsum (although this didn’t truly run inwards practice). But bitcoin isn’t based on gold; it’s based onmathematics.
Around the world, people are using software programs that follow a mathematical formula to orbit bitcoins. The mathematical formula is freely available, in addition to then that anyone tin banking concern jibe it.
The software is too opened upwards source, important that anyone tin await at it to brand certain that it does what it is supposed to.
What are its characteristics?
Bitcoin has several of import features that laid it apart from government-backed currencies.
1. It's decentralized
The bitcoin network isn’t controlled past times 1 fundamental authority. Every automobile that mines bitcoin in addition to processes transactions makes upwards a business office of the network, in addition to the machines run together. That agency that, inwards theory, 1 fundamental potency can’t tinker amongst monetary policy in addition to motility a meltdown – or only create upwards one's heed to accept people’s bitcoins away from them, every bit the Central European Bank decided to do in Republic of Cyprus inwards early on 2013. And if about business office of the network goes offline for about reason, the money keeps on flowing.
2. It's tardily to laid up
Conventional banks brand y'all jump through hoops only to opened upwards a banking concern account. Setting upwards merchant accounts for payment is about other Kafkaesque task, beset past times bureaucracy. However, y'all tin prepare a bitcoin address inwards seconds, no questions asked, in addition to amongst no fees payable.
3. It's anonymous
Well, sort of. Users tin agree multiple bitcoin addresses, in addition to they aren’t linked to names, addresses, or other personally identifying information. However…
4. It's completely transparent
…bitcoin stores details of every unmarried transaction that e'er happened inwards the network inwards a huge version of a full general ledger, called the blockchain. The blockchain tells all.
If y'all receive got a publicly used bitcoin address, anyone tin tell how many bitcoins are stored at that address. They exactly don’t know that it’s yours.
There are measures that people tin accept to brand their activities to a greater extent than opaque on the bitcoin network, though, such every bit non using the same bitcoin addresses consistently, in addition to non transferring lots of bitcoin to a unmarried address.
5. Transaction fees are miniscule
Your banking concern may accuse y'all a £10 fee for international transfers. Bitcoin doesn’t.
6. It’s fast
You tin post money anywhere in addition to it volition brand it minutes later, every bit before long every bit the bitcoin network processes the payment.
7. It’s non-repudiable
When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.
So, bitcoin has a lot going for it, inwards theory. But how does it work, inwards practice? Read to a greater extent than to detect out how bitcoins are mined, what happens when a bitcoin transaction occurs, in addition to how the network keeps runway of everything.
