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To cut through some of this confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code that represents ownership of an electronic concept kind of like a virtual IOU. On the other hand, you've got 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, like a bank or payment gateway. It's 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 very first instance of what we call cryptocurrencies, a growing asset class which 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 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 way.

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Bitcoin can be utilized to pay for things electronically, if both parties are willing. In that sense, its like conventional dollars, euros, or yen, which are also 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 by an open network of dedicated servers spread around the world. This brings individuals and groups that are uncomfortable with all the control that banks or government institutions have over their money. .

Bitcoin solves the dual spending issue 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. 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 try to manipulate a currencys worth relative like this to other people. Holders of this currency (and especially citizens with little alternative) keep the price.

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Together with bitcoin, on the other hand, the distribution is closely 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 maximum of 21 million has been attained. This makes bitcoin more appealing as an asset in concept, if demand grows and the supply 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 operate 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 gets the necessary bitcoin in addition to the ability to send them.

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In practice, each user is identified with the address of their wallet. Transactions can, with a little effort, be tracked this way. Also, law enforcement has developed methods to identify consumers if necessary.

Furthermore, most exchanges are required by law to perform identity checks on their clients before they're allowed to buy or sell bitcoin, facilitating another way that bitcoin utilization can be monitored. Since the network is transparent, the progress of a particular transaction is observable to all.

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This is because there's no central adjudicator that can say ok, return the money. When a transaction is recorded on the network, and when more than an hour has passed, then it is not possible to change.

Even though this might disquiet some, it will 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 click this millionth of a bitcoin (0.00000001) in todays prices, about one hundredth of a cent. This may conceivably enable microtransactions that traditional electronic money cannot.

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

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

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