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To cut through some of the 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 which represents ownership of a digital concept type of like a virtual 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 machine enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is created and kept electronically. Bitcoins arent printed, like dollars or euros theyre produced by computers all around the world, using free software.

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

A pseudonymous software programmer going by the name of Satoshi Nakamoto suggested 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, that could be transferred electronically in a secure, verifiable and immutable manner.

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

Bitcoins most important feature is it is decentralized. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders, and run through an open network of committed computers spread around the world. This attracts 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 problem of electronic currencies (in which digital assets can easily 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 attempt to manipulate a currencys worth relative to other people. Holders of the currency (and especially citizens with little alternative) bear the cost.

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With bitcoin, on the other hand, the distribution is tightly controlled by the underlying algorithm. Even a small number of new bitcoins trickle every hour, and will continue to do so at a diminishing rate until a max of 21 million has been attained. This creates bitcoin more attractive as an advantage in theory, if demand grows and the distribution remains the same, the value will increase. .

While 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 theory 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 submitted, the protocol checks all prior transactions to confirm that the sender has the necessary bitcoin in addition to the authority to send them.

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

Additionally, most exchanges are required by law to perform identity checks on their clients before they're permitted to buy or sell bitcoin, facilitating another manner that bitcoin usage can be tracked. Since the network is transparent, the advancement of a particular transaction Home Page is visible to all.

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

While this may disquiet some, it will special info mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is called a satoshi. It's 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 utilized for, as well as how you can purchase, sell and save your bitcoin. We also explain a few alternatives to bitcoin, in addition to how its underlying technology the blockchain works. .

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