Simply put, Bitcoin is a distributed linear currency. The transfer of that currency can be sent instantly and securely between any two people in the world who accept Bitcoin transactions. It’s like digital cash in the sense you can send Bitcoins to any other Bitcoin user in the world. Unlike your traditional currencies, however, this currency only exists on the blockchain in digital form!
The world’s first decentralized currency was introduced in 2009 via an open-source software platform. Unlike regular fiat currencies, Bitcoin is not controlled by any government or central authority. This is because the Bitcoin network is run by thousands of independent nodes and miners across the globe. You’ve probably heard a lot about decentralization as well, so we will explain to you that essentially no banks are controlling how many coins you get out when you mine for Bitcoins as long as you have the computational power to do so. You can also use this software along with a smartphone app or computer program to be able to send or receive Bitcoins from anyone on the Bitcoin network (if they'll accept your payment).
How Does Bitcoin Work?
If you ever wondered how Bitcoin works and is sustained, then let us answer your questions on the matter. Bitcoin uses public-key cryptography and proof-of-work to process payments electronically. Bitcoins are digitally signed over from one digital wallet to another, with each user having potentially hundreds of different storage methods that they use to sign online transactions and engage in online marketplaces or community forums.
Each payment transaction is broadcast to the network and included in the Bitcoin blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time (i.e. in a block that is mined roughly every 10 minutes) by the massive amount of processing power that continues to extend the blockchain.
Many argue that Bitcoin's maximum supply is too low as it cannot grow with the use of bitcoins. Moreover, a major selling point of Bitcoin as an international currency is that there would trivially only ever be 21 million coins or about 4% of global GDP. Yet this does not take into account its divisibility: you can transfer millions if not billions without breaking a single coin. Trading and gambling sites such as can help the economy to bloom, not affect Bitcoins value due to demand and supply patterns that do not relate directly to market capitalization and which should be discussed in further detail.
What Is Blockchain?
One of the most revolutionary aspects of Bitcoin is its decentralized transaction ledger system known as the blockchain. At its core, the blockchain is a distributed ledger in which every Bitcoin transaction ever made is recorded and immutably stored on thousands of computers across the world. This ledger provides transparency between buyers and sellers, thus preventing future conflicts.
The Bitcoin network is incredibly complex and is made up of many moving parts. The basic idea is that information about the transactions taking place on its network is sent to all users at all times for verification. This ledger by default is shared and continually updated by everyone using the system. Therefore, it can be said that every transaction ever made in bitcoin's history is both stored on a public accounting book and also corroborated by multiple sources throughout the blockchain, creating what's referred to as a "shared record".
When a transaction occurs, it is recorded on a public ledger. Once a transaction has been completed, it will be included in the block known as the blockchain. Bitcoin miners then confirm transactions and add them to the blocks above by including them in blocks. Nodes sometimes commonly referred to as Bitcoin user accounts, which run Bitcoins software clients containing an entire copy of the blockchain and validate transactions are running bitcoin client software containing a full copy of the blockchain and can perform any number operations themselves without connecting to the external network.
How Does Bitcoin Solve The Double-Spending Problem?
Bitcoin users can protect themselves from double-spending fraud by waiting for confirmations before accepting a payment. As the number of confirmations rises, a receiving bitcoin address becomes more irreversible when receiving payments on the blockchain, thus making it harder to perform double-spending scams.
How Is Bitcoin Decentralized?
As discussed earlier, Bitcoin uses a decentralized system in which no centralized authority is required to perform operations and verify transactions. This means that Bitcoin has special properties not shared by centralized systems. For example, if you keep your private key a Bitcoin secret, you can ensure that nobody can ever take the Bitcoin from you! Possession of a Bitcoin isn't enforced by policy or regulations--only cryptography and game theory are used to ensure that nobody spends your Bitcoin except for yourself.
One of the key qualities of bitcoin is its anonymity. There are no restrictions as to who can obtain a coin and there’s no need for bank cards or even identification such as a national ID. This often comes with controversy - proponents argue that it provides more freedom from being spied upon by government and corporate agencies, but against this people point out that it makes bitcoin a haven for criminal groups such as drug dealers and black-market arms dealers because even with the best cybersecurity in place, every single transaction can be traced back to its source so if you have criminal intentions, bitcoin – with or without its permission – could well make you untraceable.
Similar to Bitcoin, the US dollar bill is anonymous. Furthermore, money laundering has not been an issue at all with Bitcoin because all transactions on the blockchain are public and it’s possible to trace people back through their Bitcoin address.