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To cut through some of the 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 type of like a digital IOU. On the other hand, you have bitcoin-the-protocol, a distributed network that maintains a ledger of balances of bitcoin-the-token.

The system enables payments to be sent between users without passing via a central authority, such as a bank or payment gateway. It's created and kept electronically. Bitcoins arent printed, for example dollars or euros theyre made by computers all around the world, using free software.

It was the first example of what we today call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography.

A pseudonymous software programmer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, within an electronic payment system based on mathematical evidence. The idea was to generate a means of exchange, independent of any central authority, that may be transferred electronically in a secure, verifiable and immutable manner.

Bitcoin can be utilized to cover things electronically, if both parties are willing. In that sense, its like conventional dollars, euros, or yen, that can also be traded digitally.

Bitcoins most important feature is that 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 committed computers spread around the globe. This attracts individuals and groups who are uncomfortable with all the control that banks or government institutions have over their money. .

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Bitcoin simplifies the double spending issue of electronic currencies (in which digital assets can readily 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 attempt to manipulate a currencys worth relative to others. Holders of the currency (and especially citizens with little alternative) bear the cost.

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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 reached. This makes bitcoin more attractive as an advantage in theory, if demand grows and the distribution remains the same, the value will increase. .

Even though senders of traditional electronic payments are usually identified (for verification purposes, and to abide by anti-money laundering and other legislation), users of bitcoin in concept operate in semi-anonymity. Since there is no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is submitted, the protocol assesses all previous transactions to confirm that the sender has the necessary bitcoin as well as the ability to send them.

In practice, each user is identified with the address of his or her wallet. Transactions can, with some effort, be tracked this way. Additionally, law enforcement has developed approaches to identify consumers if necessary.

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

This is because there is no central adjudicator that can say ok, return the money. If a transaction is listed on the network, and if greater than an hour has passed, then it's impossible to modify.

Even though this might disquiet some, it does mean that any Bonuses 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, about 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 the way bitcoins are mined, what it can be utilized for, as well as how you can purchase, sell and save your bitcoin. We also explain a few alternatives to bitcoin, in addition to the way its underlying technology the blockchain works. .

Bitcoin is a digital currency, also known as a cryptocurrency. It had been invented in 2008 by an anonymous person or group named Satoshi Nakamoto.