Bitcoin Guide

About Bitcoin

What is Bitcoin

BTC, short for Bitcoin, is a decentralized virtual currency that was invented by Satoshi Nakamoto. The anonymous inventor or group published a white paper in 2008 as a proof of concept, then released it as open-source prototype software in 2009. Bitcoin uses peer-to-peer technology to operate without a central authority or banking institution; managing transactions and issuing new BTC, also known as mining, is carried out collectively by the network. Bitcoin has many unique characteristics compared to traditional credit cards such as international payments, low transaction fees, irreversible transactions for merchants, and security through encryption.

How is new Bitcoin created?

Bitcoins are only created as a reward for proof of work involving cryptographic hashes called mining. Users offer their computing power to verify and record payments in to a public ledger, known as the blockchain. Bitcoin that is already mined is in circulation and can be exchanged for goods and services. There will only ever be 21 million bitcoins in existence, with the final fractions of bitcoin being redeemed by miners in the year 2140. If this great bitcoin experiment succeeds and people still use it after that point, BTC miners will be supported exclusively by numerous small transaction fees – which are required to let your transactions be included swiftly into the blockchain. However, these coins can be divisible into smaller units, unlike regular currencies bitcoins are divisible by up to 10^8, which means that over time people will have the ability to use tiny little fractions of bitcoin to buy things. The smallest divisible unit of a bitcoin is aptly named a ‘Satoshi’.

What are the Characteristics that make bitcoin different to conventional money?

Bitcoin has several features that it different than government backed currencies:

Why do people trust Bitcoin?

Unlike centralized fiat payment systems, Bitcoin is fully open-source and decentralized. Transactions can be verified independently at any time. Bitcoin payments can be made instantly and directly without an intermediary. The whole system is protected by a combination of elliptic curve cryptography and hashing on the sha256 curve. Together these mechanisms sufficiently provide large enough random key-space that cannot be attacked by hackers or gamed through mathematics.

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