What Is Bitcoin & How Does It Work?
What Is Bitcoin?
Bitcoin is the first decentralized, peer-to-peer cryptocurrency. It is a digital coin that you can send to anyone via the internet. The smallest unit of Bitcoin is called a satoshi, or 0.00000001 Bitcoin. This enables very small micropayments, less than one-thousandth of a penny.
The first Bitcoin white paper was published in 2009 by an unknown individual under the pseudonym Satoshi Nakamoto. Still, to this day nobody knows who originally proposed the idea of Bitcoin.
One of the main benefits for Bitcoin and other cryptocurrencies is to remove the need for a central authority. This means that no single institution controls the Bitcoin network. Instead, it is maintained by a group of volunteer coders. Governments, banks, and other financial intermediaries have no way to interrupt user transactions or place freezes on Bitcoin accounts.
Bitcoin has a limited supply of 21 million coins. Compared to traditional ‘fiat’ currencies which have an unlimited supply. New Bitcoins are slowly released to miners, who help support the network by verifying transactions. This will continue until all 21 million are released. This makes Bitcoin an attractive asset, as the value increases and the supply remains the same.
Why Should I Use Bitcoin?
Bitcoin has many advantages over traditional currency. Bitcoin is transferred directly from person to person, removing the need for a middleman which lowers fees. You can use Bitcoin in any country, all you need is an electronic device and an internet connection. Your Bitcoin account cannot be frozen by a higher power and there are no arbitrary limits to owning or using Bitcoin. Another benefit is the speed of transferring money, which is much quicker than traditional methods.
How Does Bitcoin Work?
There are many exchanges that allow you to buy and sell Bitcoin with dollars, euros, and other fiat currencies. Your Bitcoins are kept on your computer, mobile device, or hardware wallet. Using your Bitcoin to purchase things is as easy as sending a text message.
The Bitcoin network, or Blockchain, is secured by individuals called miners. These miners are rewarded for verifying transactions on the Blockchain. Once the transaction is verified, it is recorded in a public ledger.
Bitcoin transactions are immutable. This means transactions can’t be revered, unlike electronic fiat currencies.