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To cut through some of this confusion surrounding bitcoin, we need to divide it into two components. On the one hand, you have bitcoin-the-token, a snippet of code that represents ownership of a digital concept sort of like a digital IOU. On the other hand, you have 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, such as a bank or payment gateway. It is created and kept electronically. Bitcoins arent printed, like dollars or euros theyre made by computers all around the world, using free software.

It was the very first example of what we today call cryptocurrencies, a growing strength class which shares some characteristics 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 method based on mathematical proof. The idea was to generate a means of exchange, independent of any central power, which could be transferred electronically in a secure, verifiable and immutable manner.

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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's maintained by a group of volunteer coders, and run through an open network of dedicated servers spread around the globe. This attracts individuals and groups that are uncomfortable with the control that banks or government institutions have over their money. .

Bitcoin solves the double spending problem of electronic currencies (in which digital assets can readily be replicated and re-used) via 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 bitcoin, the integrity of the 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 worth 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 tightly 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 max of 21 million has been reached. This creates bitcoin more appealing as an asset in theory, if demand grows and the supply remains the same, the value will increase. .

While senders of traditional electronic payments are usually identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in concept function in semi-anonymity. Since there's absolutely no central validator, users do not need to identify themselves when sending bitcoin More about the author to another user. When a transaction request is submitted, the protocol assesses all prior transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them.

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In practice, every user is identified by the address of his or her wallet. 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 legislation to perform identity checks on their customers before they're permitted to purchase or sell bitcoin, facilitating another way that bitcoin utilization can be monitored. Since the network is transparent, the progress of a particular transaction is visible to all.

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This is because there is no central adjudicator that can say ok, return the money. When a transaction is recorded on the network, and if more than an hour has passed, it is impossible to modify.

While this may 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.

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 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. .

If you want to know what is Bitcoin, the way you can get it and how it can assist you, without floundering into technical details, this manual is for you. It will explain how the system works, how you can use it for your profit, which scams to avoid. It will also guide you to sources that will enable you to store and use your very first pieces of digital currency.

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