What is Bitcoin?
Bitcoin (BTC and XBT) is a digital or virtual currency, often referred to as a cryptocurrency, which operates on a decentralized network called blockchain. It was introduced in a 2008 whitepaper by an individual or group using the pseudonym Satoshi Nakamoto, and the network went live in January 2009. Bitcoin is not governed by a central authority, like a bank or government, making it a unique financial instrument.
Blockchain technology is the backbone of Bitcoin, providing a secure, transparent, and tamper-proof way to record transactions. In the blockchain, transactions are grouped into blocks and connected in a chronological order. Each block contains a unique code called a cryptographic hash, which is generated using the information from the previous block. This chain of blocks forms an immutable ledger of all transactions that have taken place in the network.
Bitcoin operates on a peer-to-peer (P2P) network, meaning transactions occur directly between users without the need for intermediaries like banks. Every transaction is digitally signed using a private cryptographic key, ensuring the authenticity and security of the transaction. Once a transaction is broadcasted to the network, it is verified by the participants (miners) who maintain the blockchain.
Mining is the process of adding new transactions to the blockchain, ensuring the integrity and security of the network. Miners compete to solve complex mathematical problems using their computational power. The first miner to solve the problem gets to add the new block of transactions to the blockchain and is rewarded with newly created Bitcoins and transaction fees. This process is known as Proof-of-Work (PoW) and acts as an incentive for miners to maintain the network.
One of Bitcoin's key features is its finite supply of 21 million coins. This limited supply creates a deflationary effect, making the cryptocurrency a potential hedge against inflation. Bitcoins can be divided into smaller units called satoshis (named after its creator, Satoshi Nakamoto), with the smallest unit being 0.00000001 BTC. Bitcoin has gained popularity over the years for various reasons, including its potential for investment, ease of use in online transactions, and as a way to avoid censorship or restrictions by governments. It has also inspired the creation of numerous other cryptocurrencies, often referred to as altcoins, which have sought to improve upon or provide alternatives to Bitcoin's features and technology.
20 Facts about Bitcoin: