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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've got bitcoin-the-token, a snippet of code that represents ownership of an electronic concept sort of like a digital IOU. On the other hand, you've got bitcoin-the-protocol, a dispersed network that maintains a ledger of balances of bitcoin-the-token.

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

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

A pseudonymous software developer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, as an electronic payment method based on mathematical evidence. The idea was to produce a means of exchange, independent of any central power, that could be transferred electronically in a secure, verifiable and immutable manner.

Bitcoin can be utilized to pay for things electronically, if both parties are willing. In that sense, its similar to conventional dollars, euros, or yen, which are also traded digitally.

Bitcoins most important feature is it is decentralized. No single institution controls the bitcoin network. It's maintained by a group of volunteer coders, and run through an open network of committed computers spread around the world. This attracts individuals and groups that are uncomfortable with all the control that banks or government institutions have over their money. .

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Bitcoin simplifies the dual spending problem of electronic currencies (in which electronic assets can easily be replicated and re-used) via 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 try to manipulate a currencys value relative to others. Holders of this currency (and notably citizens with very little alternative) keep the cost.

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

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

In practice, each user is identified by the address of his or her pocket. Transactions can, with some effort, be monitored this way. Also, law enforcement has developed methods to identify consumers if necessary.

Additionally, most exchanges are required by legislation to perform identity checks on their clients before they are allowed to purchase or sell bitcoin, facilitating another manner that bitcoin usage can be tracked. Since the network is transparent, the advancement of a specific 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 if greater than an hour has passed, then it's impossible to modify.

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

The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) in todays prices, roughly one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.

Read more to find out how bitcoin transactions are processed and the way bitcoins are mined, what it can be utilized for, as well as how you can purchase, sell and store your bitcoin. In addition, we explain a few alternatives to bitcoin, as well as the way its underlying technology the blockchain works. .

Bitcoin is an electronic currency, also known as a cryptocurrency. It was invented in 2008 by an anonymous person or group named Satoshi Nakamoto.