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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 have bitcoin-the-token, a snippet of code which represents ownership of a digital concept sort of like a virtual IOU. On the other hand, you've got bitcoin-the-protocol, a distributed network which maintains a ledger of balances of bitcoin-the-token.

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

It was the first instance of what we today call cryptocurrencies, a growing asset class which shares some characteristics of traditional currencies, with verification based on cryptography.

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

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

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

Bitcoin simplifies the double spending problem of electronic currencies (in which digital assets can easily be replicated 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. 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 attempt to manipulate a currencys value relative to other people. Holders of the currency (and notably citizens with little alternative) bear the price.

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Together with bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. Even a small number of new bitcoins trickle out every hour, and 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 asset in concept, if demand grows and the distribution remains the same, the value will increase. .

Even though senders of traditional electronic payments are often identified (for verification purposes, and to abide by anti-money laundering and other legislation), users of bitcoin in concept operate 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 submitted, the protocol checks all prior transactions to confirm that the sender gets the necessary bitcoin in addition to the authority to send them.

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In practice, every user is identified by the address of their wallet. Transactions can, with some effort, be monitored 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 clients before they are permitted to buy or sell bitcoin, facilitating this contact form another manner that bitcoin usage can be monitored. Since the network is transparent, the progress of a specific transaction is visible to all.

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This is because there is no central adjudicator that can say okay, return the money. If a transaction is recorded on the network, and when greater than an hour has passed, then it is not possible to change.

Even though this might disquiet some, it does mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is referred to as a satoshi. It is one hundred millionth of a bitcoin (0.00000001) at todays prices, about one hundredth of a cent. This could 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 how its underlying technology the blockchain works. .

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

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