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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 type of like a virtual IOU. On the other hand, you have bitcoin-the-protocol, a dispersed network which 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 world, using free software.

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

A pseudonymous software developer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, within an electronic payment method based on mathematical evidence. The idea was to generate a means of exchange, independent of any central power, that could 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, that are also traded digitally.

Bitcoins most important characteristic 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 dedicated computers spread around the globe. This attracts individuals and groups who are uncomfortable with all 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 electronic assets can readily 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 anchor 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 value relative to other people. Holders of the currency (and especially citizens with very little alternative) keep the cost.

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With bitcoin, on the other hand, the distribution is closely controlled by the underlying algorithm. Even 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 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 comply with 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 checks all prior transactions to confirm that the sender gets the necessary bitcoin in addition to the ability to send them.

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

Additionally, most exchanges are required by law to perform identity checks on their customers before they are permitted to purchase or sell bitcoin, facilitating another way that bitcoin utilization can be monitored. Since the network is transparent, the advancement 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 recorded on the network, and when more than an hour has passed, it's not possible to modify.

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 called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) at todays prices, roughly one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.

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

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.

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