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To cut through some of this 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 a digital concept type 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 via 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 made by computers all around the world, using free software.

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

A pseudonymous software programmer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, within an electronic payment system based on mathematical evidence. The idea was to generate a means of exchange, independent of any central power, which may be transferred electronically in a secure, verifiable and immutable manner.

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

Bitcoins most important characteristic 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 computers spread around the globe. This brings individuals and groups who are uncomfortable with the control that banks or government institutions have over their money. .

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Bitcoin solves the double spending issue of electronic currencies (in which digital assets can easily be copied and re-used) through 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 these 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 price.

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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 max of 21 million has been reached. This creates bitcoin more attractive as an advantage in concept, 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 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 filed, the protocol assesses all previous transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them.

In practice, every user is identified by the address of their pocket. Transactions can, with a little effort, be tracked this way. Also, law enforcement has developed methods to identify users if necessary.

Furthermore, most exchanges read here are required by legislation to perform identity checks on their clients 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 visible to all.

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

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 hundred millionth of a bitcoin (0.00000001) in todays prices, roughly one hundredth of a cent. This may conceivably enable microtransactions that traditional electronic money cannot.

Read more to find out how bitcoin transactions are processed and how bitcoins are mined, what it can be used for, as well as how you can buy, sell and save your bitcoin. We also explain a few alternatives to bitcoin, in addition to the way its underlying technology the blockchain functions. .

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