We will try to explain in the simplest and clearest way what is Bitcoin, how it works and other interesting data. We know that for many people it is difficult to understand this technology and what it means. Let’s start by dividing it into two elements. On the one hand, we have bitcoin currency, a fragment of code that represents the ownership of a digital concept, something like virtual money. On the other hand, we have the bitcoin protocol, a distributed network that maintains a general ledger of bitcoin currency balances.
To simplify it: The Bitcoin network as a whole to refer to the project itself is written with “B”. Example: Bitcoin has changed the money as we know it today.
If we refer to the coin unit it is written with “b”. Example: I have 2 bitcoins (BTC).
The Bitcoin and blockchain network together allow payments to be sent between users without going through a central authority, such as a bank or payment gateway. They are created and carried out electronically. Bitcoins are not printed, like euros or dollars, they are produced by computers around the world, using free mining software.
Bitcoin is the first example of what we today call digital currency, digital currency, cryptomoney (among other names), a growing asset class that shares some of the characteristics of traditional currencies, with verification based on cryptography.
Who created the Bitcoin network and bitcoins?
A pseudonym software developer named Satoshi Nakamoto proposed bitcoin in 2008 (in 2009 it was launched), as an electronic payment system based on mathematical evidence. The idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable manner.
Today there is confusion about who Satoshi Nakamoto is. Some recent studies claim to have found the real creator of Bitcoin, but there is no total consensus on this.
How does it differ from traditional currencies?
How does it differ from traditional currencies?
Bitcoin can be used to pay electronically, if both parties are willing. This can also be done with conventional fiat coins. Bitcoin, however, has many differences with the money we knew until a few years ago.
How does Bitcoin and CryptoCoins differ from conventional money?:
1 – Decentralised
Bitcoin’s most important feature is that it is decentralized. No institution, government or bank controls the bitcoin network. It is maintained by a group of volunteer programmers and miners, and managed by an open network of dedicated computers spread around the world. This attracts individuals and groups who feel uncomfortable with the control that banks or government institutions have over their money.
Bitcoin solves the “double expenditure problem” of electronic currencies (where digital assets can be easily copied and reused) through an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is performed by banks, which gives them control over the traditional system. With bitcoin, transaction integrity is maintained by a distributed and open network, owned by no one and all.
2 – Has a limited and predefined supply
Fiat coins (yen, euros, dollars, etc.) have an unlimited supply. Central banks, backed by governments, can issue as much money as they want, and may attempt to manipulate the value of one currency in comparison with others. Coin holders, especially the lower and middle class, pay the cost.
However, with bitcoin, the supply is strongly controlled by the algorithm. A small number of new coins are issued every hour, and will continue to do so at a decreasing rate until it reaches a maximum of 21 million. This makes Bitcoin more attractive as an asset. In theory, if demand grows and supply remains the same, the value will increase.
3 – Transactions are irreversible
Unlike electronic transactions with conventional money, bitcoin transactions cannot be reversed or reversed.
This is because there is no central referee who can void a transaction. If a transaction is registered in the network and a certain amount of time has elapsed, it is impossible to change it.
Although this may cause some concern, it means that any transaction on the bitcoin network cannot be manipulated. It’s really a good thing in most cases.
4 – “It’s anonymous”
Users of common money are usually identified (for verification purposes and to comply with anti-money laundering legislation and other laws). However, Bitcoin users do not. 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 verifies all previous transactions to confirm that the sender has sufficient bitcoins, as well as the authority to send them. The system does not need to know your identity.
In practice, each user is identified by the address of their wallet. Transactions can be tracked, unless extra security measures are taken, within reach of a few. In addition, law enforcement agencies have developed methods to identify users if necessary.
Increasingly, the law requires most exchanges to perform identity checks on their customers before they are allowed to buy or sell bitcoin, which facilitates another way to track the use of bitcoin. Since the network is transparent, the progress of a particular transaction is visible to all.
In short, although Bitcoin is anonymous if a government or police force wants to know its movements, it will be able to do so the vast majority of times.
5 – Bitcoin Unit (Satoshi)
The smallest unit of a bitcoin is called satoshi. It is the hundredth millionth part of a bitcoin (0.0000000001), at current prices, about one hundredth of a cent. 1 bitcoin is 100 million satohis. This could allow for possible microtransactions that conventional money cannot carry out with such precision.
We hope you will now understand much better what a bitcoin (BTC) is, how Bitcoin works and what Bitcoin Network is.