Bitcoin is a decentralized digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: transaction management and money issuance are carried out collectively by the network.
The original Bitcoin software by Satoshi Nakamoto was released under the MIT license. Most client software, derived or “from scratch”, also use open source licensing.
Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto.
The currency began use in 2009 when its implementation was released as open-source software.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services, but the real-world value of the coins is extremely volatile.
Bitcoin is the first successful implementation of a distributed crypto-currency, described in part in 1998 by Wei Dai on the cypherpunks mailing list. Building upon the notion that money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context, Bitcoin is designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities.
Bitcoins have all the desirable properties of a money-like good. They are portable, durable, divisible, recognizable, fungible, scarce and difficult to counterfeit.
Bitcoin has been criticized for its use in illegal transactions, the large amount of electricity (and thus carbon footprint) used by mining,
price volatility, and thefts from exchanges.
Some economists and commentators have characterized it as a speculative bubble at various times.
Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.
Bitcoin is P2P electronic cash that is valuable over legacy systems because of the monetary autonomy it brings to its users.
Bitcoin seeks to address the root problem with conventional currency: all the trust that’s required to make it work — Not that justified trust is a bad thing, but trust makes systems brittle, opaque, and costly to operate.
Trust failures result in systemic collapses, trust curation creates inequality and monopoly lock-in, and naturally arising trust choke-points can be abused to deny access to due process.
Through the use of cryptographic proof, decentralized networks and open source software Bitcoin minimizes and replaces these trust costs.
Bitcoin Transactions are:
- Permissionless and borderless. The software can be installed by anybody worldwide.
- Anonymous. Bitcoin does not require any ID to use making it suitable for the unbanked, the privacy-conscious, computers or people in areas with underdeveloped financial infrastructure.
- Private. When used with care bitcoin can support strong financial privacy.
- Censorship-resistant. Nobody is able to block or freeze a transaction of any amount.
- Fast. Transactions can be made almost as fast as data can travel over the Internet.
- Cheap. Fees can be very very low.Irreversible once settled, like cash. (but consumer protection is still possible.)
- Online and available 24 hours a day, 365 days per year.
Bitcoin can also be a store of value, some have said it is a “swiss bank account in your pocket”.
- Cannot be printed or debased. Only 21 million bitcoins will ever exist.
- Have no storage costs. They take up no physical space regardless of amount.
- Are easy to protect and hide. Can be stored on a phone, computer, encrypted on a paper backup or memorized in your head.
- No counterparty risk. If you keep the private key of a bitcoin secret and the transaction has enough confirmations, then nobody can take them from you no matter for what reason, no matter how good the excuse, no matter what.
- Can be under divided possession with Multisignature. For example with a 2-of-3 multisig scheme there would be three private keys, of which any two is enough to spend the money. Those three keys can be spread anywhere, perhaps in multiple locations or known by multiple people. No other asset does this, for example you cannot hold gold coins under multisig.
What is Bitcoin?
A. Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network.
How does Bitcoin work?
A. Bitcoin uses public-key cryptography, peer-to-peer networking, and proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain. Using these techniques, Bitcoin provides a fast and extremely reliable payment network that anyone can use.
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