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To cut through some of the confusion surrounding bitcoin, we need to divide 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 distributed network that maintains a ledger of balances of bitcoin-the-token.

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

It was the very first example of what we today call cryptocurrencies, a growing strength class that shares several 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 proof. The idea was to generate a means of exchange, independent of any central authority, that may be transferred electronically in a secure, verifiable and immutable way.

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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 can also be traded digitally.

Bitcoins most important feature is that it is decentralized. No single institution controls the bitcoin network. It's maintained by a group of volunteer coders, and run by an open network of dedicated servers 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. .

Bitcoin solves the double spending issue of electronic currencies (in which digital assets can readily be copied 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. Together 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 other people. Holders of the currency (and notably citizens with very little alternative) keep the cost.

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Together with bitcoin, on the other hand, the supply is closely controlled by the underlying algorithm. A small number of new bitcoins trickle every hourand will continue to do so at a diminishing rate until a maximum of 21 million has been attained. This makes bitcoin more appealing as an asset in theory, if demand grows and the supply remains the same, the value will increase. .

Even though senders of traditional electronic payments are usually identified (for verification purposes, and to abide by anti-money laundering and other legislation), users of bitcoin in theory function in semi-anonymity. Since there is no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is submitted, the protocol assesses all previous transactions to confirm that the sender gets the necessary bitcoin as well as the ability to send them.

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In practice, every user is identified with the address of his or her wallet. Transactions can, with a little effort, be tracked this way. Also, law enforcement has developed approaches to identify users if necessary.

Additionally, most exchanges are required by legislation to perform identity checks on their customers before they're permitted to purchase or sell bitcoin, facilitating another manner that bitcoin utilization can be monitored. Since the network is transparent, the progress of a specific transaction is observable to all.

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This is because there is no central adjudicator that can say ok, return the money. If a transaction is listed on the network, and when more than an hour has passed, it's not possible to modify.

While this may disquiet some, it will 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 find 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 to find out how bitcoin transactions are processed and how bitcoins are mined, what it can be utilized for, in addition to how you can buy, sell and save your bitcoin. In addition, we explain a few alternatives to bitcoin, as well as the way its underlying technology the blockchain functions. .

If you want to know what is Bitcoin, how you can get it and how it can assist you, without floundering into technical details, this guide is for you. It will explain how the system operates, how you can use it for your gain, which scams to avoid. It will also guide you to sources that will enable you to store and use your very first pieces of digital currency.

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