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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 an electronic concept sort of like a digital 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 machine enables payments to be sent between users without passing through a central authority, like a bank or payment gateway. It is made 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 first instance 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, as an electronic payment system based on mathematical evidence. The idea was to produce a means of exchange, independent of any central power, which could be transferred electronically in a secure, verifiable and immutable manner.

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

Bitcoins most important feature 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 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 dual spending issue of electronic currencies (in which electronic assets can readily be replicated 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. Together 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 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. A small number of new bitcoins trickle every hour, and will continue to do so at a diminishing rate until a maximum of 21 million has been reached. This creates bitcoin more attractive as an asset in theory, if demand grows and the distribution remains the same, the value will increase. .

While 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 operate 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 filed, the protocol assesses all prior transactions to confirm that the sender has the necessary bitcoin in addition to the authority to send them.

In practice, each user is identified by the address of his or her wallet. Transactions can, with a he said little effort, be monitored this way. Also, law enforcement has developed methods to identify users if necessary.

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

This is because there's absolutely no central adjudicator that can say okay, return the money. When a transaction is listed on the network, and when greater than an hour has passed, it is impossible to modify.

While this may disquiet a few, it does 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 to find out how bitcoin transactions are processed and the way bitcoins are mined, what it can be utilized for, as well as how you can purchase, sell and store your bitcoin. We also explain a few alternatives to bitcoin, as well as how its underlying technology the blockchain works. .

Bitcoin is an electronic currency, also known as a cryptocurrency. It had been invented in 2008 with an anonymous person or group named Satoshi Nakamoto.