How does Bitcoin work
This guide will help you understand what is Bitcoin and how the Blockchain technology works.
Bitcoin is a decentralized digital currency. Bitcoin is a cryptocurrency not controlled by a central bank, government or any other authority.
How are Bitcoins created?
Central banks or governments decide how much â€śfiatâ€ť money to print, which often leads to inflation.
Central governments do not control cryptocurrencies. Most cryptocurrencies and Bitcoin are created through â€śminingâ€ť, maintaining the blockchain, the public ledger that confirms all transactions. Miners are using powerful computer hardware to solve complex mathematical problems to confirm transactions. These are created by a cryptographic hash function assigning an arbitrary size data to a fixed-size bit string. It is designed to be irreversible, so every transaction is permanent.
There is a built-in rewards system paying incentives to Bitcoin miners. When a Bitcoin miner finds a solution to one of these math problems and adds a new block to the blockchain, that miner is rewarded.
The majority of cryptocurrencies have a maximum number of coins to be created. The maximum number of Bitcoins that will ever be created is 21,000,000.
The miners are ensuring the security of the network by resolving and approving transactions.
Who invented Bitcoin?
An individual or group using the pseudonym of Satoshi Nakamoto published a paper In October 2008 called: â€śBitcoin: a peer-to-peer electronic cash systemâ€ť.
Satoshi Nakamoto launched the first Bitcoin client software in January 2009. Satoshi Nakamoto left the project in 2010 without revealing his identity.
The Bitcoin community has grown rapidly. An entity canâ€™t have total control over Bitcoin. All the changes made to Bitcoin are public. All the users are equally informed and have the same power.
Bitcoin is the digital version of cash.
How does Bitcoin work?
All transactions taking place in the Bitcoin network are registered in the blockchain. It is a public ledger maintained by the miners, and that thousands of people worldwide have a â€ścopyâ€ť of this public ledger.
In cryptocurrency transactions, payments are made from address to address.
Public ledger? What about my privacy?
Like most questions regarding privacy concerns, things may seem a little complicated with Bitcoin. Bitcoin provides privacy, not anonymity. Everyone may see transactions to and from your public address, but nobody will know your name.
How to buy Bitcoin?
Get familiarized with cryptocurrency exchanges and learn about cryptocurrency trading and what to expect. Are you looking at a long-term investment, or do you expect a huge profit overnight? How much are we prepared to invest?
Always remember the golden rule: never to invest more than you afford to lose.
You donâ€™t need to buy a whole Bitcoin. It is possible to buy just a fraction of a Bitcoin. Aâ€ť satoshiâ€ť is the one hundred millionth part of a Bitcoin (0.00000001 BTC).
Why is Bitcoin so popular?
There are many reasons for its huge popularity, and some are political. Some people are unhappy with their governments, and Bitcoin is a way for them to keep their money safe. The so-called crypto-anarchists may have ideological or philosophical reasons, wishing to liberate themselves and create their new world, but many people ar are in to get rich.
Bitcoin acts as a gold standard. The value of other cryptocurrencies is usually measured compared to Bitcoin, so bitcoin has a big impact on the entire market.
Bitcoinâ€™s main advantages are decentralization, anonymity, and transparency are making it more and more popular.