Learn the Basics of Bitcoin

Posted By Lobitech IT Solutions West End, London WC2H Lobitech on 28-12-2020 22:21:18

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The Basics of Bitcoin:

Bitcoin was first created in August 2008 when Satoshi Nakamoto registered the domain, Bitcoin.org. In October 2008 a document called the white paper was released “Bitcoin: A Peer-to-Peer Electronic Cash system”. This paper described the principles of Bitcoin, an electronic payment system that would eliminate the need for any central authority while ensuring secure, verified transactions. Basically, it allowed for trustless payments between parties who did not need to disclose their identities. Pseudonymity is one of the main features of Bitcoin.

To this day no one knows who Satoshi Nakamoto is. However due to bitcoins decentralised system this information is not considered important.

How does Bitcoin work?

Bitcoin is the first example of what we call a cryptocurrency, money that is completely virtual. BTC is its ticker symbol. It isn’t printed like fiat currency (dollars, euros etc). Instead it is produced by computers all around the world and held electronically in programs called wallets.

There are two interpretations of bitcoin:

• Bitcoin the token: the keys to a unit of the digital currency that users own and trade. A bitcoin token is held in a bitcoin wallet that is identified by a series of letters and numbers.
• Bitcoin the protocol: a distributed ledger that maintains the balances of all token trading. These are large files stored on computers all around the world. All transactions are recorded onto these ledgers in the network.

Bitcoin does not depend on a centralised system of banking. Each node of the network is owned privately so the whole network is responsible for maintaining the accuracy of the ledger. When you send a value of bitcoin the entire network takes part. This is called decentralisation and is one of bitcoins most important features. No single institution controls the bitcoin network. It is run by an open network of computers all around the world.

Bitcoin does not depend on a centralised system of banking. Each node of the network is owned privately so the whole network is responsible for maintaining the accuracy of the ledger. When you send a value of bitcoin the entire network takes part. This is called decentralisation and is one of bitcoins most important features. No single institution controls the bitcoin network. It is run by an open network of computers all around the world.

Bitcoin Decentralisation process

Decentralisation means that users do not need to identify themselves when buying or selling bitcoins. Instead the protocol checks all previous transactions to confirm the sender has the necessary funds for the transaction as well as the authority to send them. Bitcoin users operate in semi-anonymity and the network self-polices. Each user is identified by the address in their wallet, which is used to track transactions. Hence each user is pseudo-anonymous. Tracing a bitcoin transaction to a specific person is difficult but not impossible to do, which is why bitcoin is not completely anonymous.

Every transaction on the network is fully transparent; the progress of transactions is visible to all. Once the transaction is confirmed it cannot be reversed. This makes all transactions on the bitcoin network immune to hackers. Most bitcoin hacks happen in wallets; hackers steal the keys to bitcoins in wallets rather than hacking the bitcoin protocol itself.

Another attractive feature of bitcoin is that it takes away the need of centralised banks which has a supply that is controlled by underlying algorithms. Central banks can issue as many currency units as they want to manipulate their currencies value relative to others. Holders of the currency bear the cost of this. With bitcoin a small amount of new coins are introduced to the network each hour and will continue to do so until a maximum amount has been reached. This finite amount makes bitcoin attractive as an asset. If demand grows, the supply stays the same so value increases. continue reading >> History of Bitcoin

Article Author Ellen Glover

Tags: the basics of bitcoin, bitcoin, history of bitcoin, the future of bitcoin, ellen glover, bitcon token

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