Bitcoin was developed by Satoshi Nakamoto, a person or group operating under a pseudonym who first described the concept in a white paper in 2008. The idea behind bitcoin, which enables safe peer-to-peer transactions online, is deceptively straightforward.
Bitcoin Basics
Bitcoin is decentralized: any two people, anywhere in the world, can send bitcoin to each other without the involvement of a bank, government, or other institution. In contrast to services like Venmo and PayPal, which depend on the traditional financial system for permission to transfer money and on existing debit/credit accounts.
The blockchain, which is comparable to a bank’s ledger, or record of customer funds coming in and leaving out of the bank, tracks every Bitcoin transaction. It is a list of each bitcoin transaction that has ever been made, to put it simply.
The Bitcoin blockchain is dispersed across the whole network, unlike a bank’s ledger. It is not governed by any corporation, nation, or other entity, and anybody can join the network.
Only 21 million bitcoins will ever exist. It is impossible to inflate or manipulate this digital currency in any way.
You don’t have to purchase a full bitcoin; if a portion is all you need or want, you can do so.
Although dozens of other cryptocurrencies have been introduced since the introduction of Bitcoin (abbreviated as BTC), it continues to be the most valuable in terms of market capitalization and trading volume.
Who Created Bitcoin?
Starting at the beginning aids in better understanding how bitcoin functions. The originator of bitcoin is still a mystery ten years after the invention of the technology, despite extensive research by journalists and members of the cryptocurrency community.
The fundamental ideas behind Bitcoin first surfaced in a white paper that was posted online in late 2008 by the unknown author(s) or group known only by the pseudonym Satoshi Nakamoto.
This paper wasn’t the first to propose a cryptographic and computer science-based form of digital currency; in fact, it made reference to earlier ideas. However, it offered a particularly elegant solution to the issue of establishing trust between various online entities where individuals may be concealed (like bitcoin’s creator) by pseudonyms or geographically dispersed.
The blockchain ledger and the bitcoin private key are two related ideas that Nakamoto created. A private key, which is a string of randomly generated numbers and letters that unlocks a virtual vault containing your purchase, is how you manage bitcoin when you possess it. On the blockchain, a type of electronic ledger, each private key is recorded.
Working Of Bitcoin
In contrast to payment networks like Paypal and credit card networks like Visa, bitcoin is not owned by either a person or a business. Anyone with an internet connection can use Bitcoin, the first fully open payment network in the world. Bitcoin was created specifically for use online and doesn’t rely on banks or other private entities to handle transactions.
The blockchain, one of the most crucial components of Bitcoin, keeps track of who owns what, just like a bank does with its assets. The Bitcoin blockchain is decentralized, meaning that anybody can examine it and no single institution controls it, which distinguishes it from a bank’s ledger.
Here are some specifics on how everything operates:
The mathematics necessary to validate and record a new transaction is carried out by specialized computers called “mining rigs.” Early on, virtually anyone who was inquisitive could try their hand at mining because a regular desktop PC was powerful enough to participate. These days, the necessary computers are enormous, highly specialized, and frequently owned by businesses or huge numbers of people who pool their resources. (To mine one bitcoin in October 2019, 12 trillion times more computer power was needed than when Nakamoto mined the initial blocks in January 2009.)
The correctness of the ever-expanding ledger is guaranteed by the combined computing power of the miners. The blockchain and bitcoin are closely linked; subsequent transactions involving all current coins as well as each new bitcoin are both recorded on the blockchain.
How does the network encourage miners to take part in the ongoing, crucial task of confirming transactions, which is required to keep the blockchain operational? The Bitcoin network runs a constant lottery in which all of the global mining equipment competes to be the first to complete a mathematical puzzle. A winner is selected roughly every 10 minutes, and the winner adds fresh, legitimate transactions to the Bitcoin ledger. The price varies with time, but as of the beginning of 2020, each raffle winner received 12.5 bitcoin.
A bitcoin was first theoretically worthless. It was trading at about $7,500 as of the end of 2019. As bitcoin’s value increased, its simplicity (the ability to purchase a small portion of one bitcoin) emerged as a crucial feature. The smallest unit of a bitcoin, known as a “Satoshi,” is now divisible to eight decimal places (100 millionths of a bitcoin.
Nakamoto designed the network so that there will only ever be 21 million bitcoin, maintaining scarcity. There are currently about 3 million bitcoins left to be mined, albeit this process will proceed more slowly. The last blocks should be mined in the year 2140.
