You may just heard about Bitcoin or are struggling to understand how it works? In this article, we explain a little bit more and ask the question What Is Bitcoin?
Easy and Quick Explanation
Historically with digital payments, when moving money from one person to another over the internet it has been difficult to ensure that no-one is able to spend the same money more than once. Traditionally, this has been done by relying on trusted 3rd parties like Paypal and banks to verify that transactions are valid. With Bitcoins (Or BTC for short), one is able to transfer value from one person to another, digitally, without involving ANY 3rd party, bank or payment processor.
Bitcoin is a peer-to-peer internet payments system. All transactions from the very first Bitcoin transaction are recorded on a public ledger (called the blockchain) through a process called mining. (What is mining?) This process is performed by computers on the network which using computing power tosecure transactions ensuring that no transaction can ever be counterfeited or double spent.
Miners are rewarded in Bitcoin for the computing power they provide, this is how they come into circulation. They are programmed have a set rate of inflation and only 21,000,000 will ever come into circulation. This makes them scarce and ensures that they cannot be printed or over-inflated.
Bitcoin can be sent from one person to another by using what’s known a wallet. A wallet typically consists of a public Bitcoin address and a private key which controls it, the private key is kept a secret to ensure that no-one else is able to spend it. The best way to learn about it is to experiment, buy some and try it out for yourself.
What is Bitcoin? In-depth Explanation
Bitcoin is a type of electronic digital currency in which P2P (Peer to peer) it uses cryptographic encryption methods to regulate the creation of units of currency and which uses Blockchain technology to publicly verify a transfer between two public addresses.
It operates independently of any central authority or bank. It is Open source and was invented by an anonymous person or group of people known as “Satoshi Nakamoto”.
Bitcoins aren’t printed like traditional Fiat currencies, they come into circulation digitally using a process called “mining”.
Essentially, miners put in work in the form of processing power verifying transactions on the network.
Miners who successfully confirm a block of transactions, receive a reward. This reward is the way new Bitcoin come into circulation.
It’s core technology -The Blockchain
Every transaction from the very first is publically available and recorded on a distributed ledger known as the blockchain. Transactions are confirmed using computers which solve complex mathematical problems to discover transactions which have taken place.
Miners are rewarded when they are the first to solve and confirm a 10-minute period of transactions, called a block. These blocks make-up the entire history of all transactions which is called the Blockchain.
Who controls the supply of Bitcoin?
Unlike traditional currencies Bitcoins cannot be printed in unlimited amounts. They were designed so that only 21,000,000 (21 Million) units will ever be mined.
This process is governed by trustless cryptographic protocols which make it secure.
Even though there will only ever be 21 million Bitcoins in existence, each bitcoin is divisible in to 100,000,000 (100mil) segments known affectionately as “Satoshi’s” after the creator. 1 Satoshi = 0.00000001 BTC.
Is it secure?
Bitcoins are sent between people on the network using Bitcoin Addresses and can be sent between parties only if the sender has the private key to match the public address.
The addresses are encrypted using SHA256 encryption methods which are virtually un-hackable meaning that it is almost impossible to steal coins from a known Bitcoin address.
The only way to move the Bitcoins between addresses on a network is if you hold the private key. This key enables you to move the Bitcoin between public wallet addresses.