Bitcoin is a virtual peer to peer currency that is decentralized and operates on a distributed network called the Blockchain where transaction records and data are stored with cryptographic encryption.
Bitcoin is a digital currency that operates on the Blockchain and is free from centralized management.It works peer to peer across distributed nodes of computers and works algorithmically.
Bitcoin whitepaper was first released in 2008 by an unknown entity called Satoshi Nakamoto describing Bitcoin as a peer to peer electronic currency. During the 2008 global financial crisis or what we call market crush, Satoshi Nakamoto introduced a peer to peer currency on the internet that could be an alternative to the fiat currency that exhibits some amazing features the world have ever wanted. A peer to peer currency that is completely decentralized, free from any sort of government control, free from any centralized financial organization like banks and transactions easily accessibility, taking action on your funds absolutely depends solely on individuals. Bitcoin was introduced as an innovative payment network and a new kind of money on the internet. One can actually use Bitcoin without knowing all its technicalities, once you create or download the Bitcoin wallet you can straight ahead use your wallet address to send and receive Bitcoin straight away without knowing all the cumbersome technicalities. A Bitcoin wallet address is a string of alphanumeric (eg. 17bCbPGQLHVXPhntmneTsCNUkUeMkpcrSh). Today Bitcoin is on a whole different level, the current role Bitcoin is playing in the financial market is a foundation for similar peer to peer currency to emerge and I believe it’s the new financial system everyone in the Bitcoin community is building to change our socio-economic lives and the freedom to our current financial system that is centralized.
How Bitcoin Works
As said earlier, Bitcoin is a peer to peer digital currency, a cryptocurrency that operates on a decentralized network without any central authority or banks. Now breaking it down to how things actually happens on the Blockchain regarding records of transactions and how it recorded, how the sender and the receiver plays their role during the transaction is what I am going to explain now. For one to be able to use Bitcoin to transact business, they need a Bitcoin wallet to generate a Bitcoin wallet address, a string of alphanumeric mixed up and that is what one will use to receive Bitcoin like your bank account. Once a wallet address is generated, the sender will use this address to send the Bitcoin and one will receive the Bitcoin. Let’s say two people involved in a transaction, George and Augustine, for George to be able to receive Bitcoin from Augustine he will have to generate a Bitcoin address and send it to Augustine from his wallet. Let’s say the transaction is then made, within some few seconds George will receive his Bitcoin and both parties account balance will be updated, in case Augustine has $1000 and sent $200 to George, Augustine will be left with $800 and George’s new balance will be $200 now the transaction that happened will then be broadcasted on the Blockchain through the process of hashing. Hashing is used to represent the transaction cryptographically between Augustine and George. A hash looks similar to Bitcoin wallet address but a Bitcoin address consists of 25-35 alphanumeric characters while a hash consists of 64 alphanumeric characters. For anonymity, sake transactions that happens on the Bitcoin network are represented in hash cryptographically and broadcasted on the blockchain, all computers that are connected to this network will see the transaction broadcasted but each transaction will come with a different hash making it impossible for one to identify a particular person who did the transactions except only the people involved in the transaction can identify that particular hash to be theirs. After the transaction is represented in a hash and broadcasted on the Blockchain, miners come in and confirm the transaction’s validity to see if all info broadcasted on the Blockchain is intact. Miners are a group of computer nodes connected to the network that offer record-keeping services. After miners sets in to verify the transaction with a complex mathematical algorithm, the transaction is then confirmed and the transaction info remain on the network forever and it is distributed across the whole Blockchain network. Eg. Of a hash; 65132e39352c4ba7f2bbc471c414041c578e4c45e311ce9840489d4d8c156720
Bitcoin is powered by the people in the community as well as the Blockchain, it is acknowledged as the internet native currency. Bitcoin is limited in supply and about 21,000,000 bitcoins maximum in supply now and about 17,625,875 BTC in circulation. That means about 3,374,125 BTC left to be distributed. Bitcoin is abbreviated as BTC and it is a currency for the people on the internet. Bitcoin is money.
Characteristics of Bitcoin
- Bitcoin is decentralized
- Bitcoin transaction is anonymous (relatively)
- Bitcoin transaction is transparent
- Bitcoin is faster and safer
- Bitcoin is non-repudiable
- Bitcoin can be traded among people
- Bitcoin prices goes up and down base on demand and supply
- Bitcoin is easy to set up and used.
- Bitcoin is automated
- Bitcoin is limited in supply
- Bitcoin gives full accessibility and freedom
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