what is bitcoin

Everything You Need to Know About Bitcoin

By thecharliebrown | CryptoBite.io | 6 Jun 2022

What is Bitcoin?

Bitcoin is the first cryptocurrency ever invented. It pioneered the decentralization of money by providing a digital currency that users can exchange and trade across a P2P medium without any central distributing authority, like a bank or the Fed. Its innovation, therefore, is in providing an alternative to a fiat currency, giving users full autonomy over their own money. Bitcoin is based on cryptography or the secure transmission of computerized data.

Who Created Bitcoin?

An unknown individual or group with the nom de plume Satoshi Nakamoto created Bitcoin. This individual or group has not revealed its true identity to this day, but there is speculation as to who it might be.

When was Bitcoin Launched?

Nakamoto first published Bitcoin's principles at the end of 2008. Bitcoin officially launched in January of 2009, with the first genesis block mined on Jan. 9, 2009.

How does Bitcoin Work?

First, users buy Bitcoin via a debit card, bank transfer, or wire transfer. Once they have Bitcoin in their account, they can exchange money to purchase and sell goods. Bitcoin's valuation is predicated on functional social agreements on what good is worth, just like with fiat currency. As with regular money, Bitcoin is multifunctional, serving investment, savings, and distribution-of-value purposes.

Users store their Bitcoin in digital wallets which they can access through a private key. These private keys are comprised of randomized letters and numbers, like a password. Private keys are analogous to random password generators on the web which suggests highly secure passwords that websites automatically fill in so users don't have to remember them. Bitcoin users also use a public key, which is like an e-mail address.

Bitcoin uses a public ledger that keeps a record of all Bitcoin transactions. The blockchain stores this data on servers around the world. Any given user can set up one of these servers with a computer; this computer then becomes a node in the network. Nodes, however, are more complex than simply a computer that communicates with other computers across the network. Nodes are also programs that mine data and they are the users of these computers and programs who mine the data themselves.

Miners serve an essential function in Bitcoin's seamless operation. In essence, they are the overseers or verifiers of transactions on the blockchain. Mining takes place on specialized computers or mining rigs. Miners across the entire Bitcoin network compete in a race to solve a math problem, and the system chooses a winner at ten-minute intervals. This is called a proof-of-work system, underscoring the contributional aspect of Bitcoin's value. The winners update the Bitcoin blockchain with new transactions and receive a fixed sum of money. This incentivization process is also strikingly similar to gamification. Users can also invest in Bitcoin just like with fiat currencies.

Nakamoto capped the number of available, mineable Bitcoin to 21 million. Taking into account the rates of change of such variables as the number of users, number of miners, and number of nodes on the blockchain, this number always ensures that it is a constant resource with precise, fixed limits. Taking into account basic economic laws such as supply and demand while also precluding inflation further increases its constancy.

How to Keep Your Bitcoin Safe

Bitcoin is an inherently safe monetary system. It has experienced no hacks whatsoever since its inception. Computer scientists, cryptographers, researchers, and research centers (such as MIT) socially contribute to Bitcoin's successful security through constant examination of the system.

To ensure that safety, Bitcoin users should store their data in a digital wallet. This wallet contains their private key and their access to their account/vault.

Is Bitcoin a Good Investment?

We are not here to provide investment advice for Bitcoin, only to illustrate its functionality, advantages, and potential disadvantages. From an objective point of view, there are no downsides to investing in Bitcoin. It is a uniquely strong cryptocurrency, robust in roles, regulations, and operation. From the bottom up–the fundamental blockchain all the way to investment–Bitcoin is a secure system. The way it democratizes and decentralizes money is one of the foremost innovations of the 21st century. Socially contributing to the system to gain, spend, oversee money, and ensure its security is a truly unique process that is certainly worthwhile to investigate.

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