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To cut through some of this confusion surrounding bitcoin, we need to divide it into two components. On the one hand, you've got bitcoin-the-token, a snippet of code which represents ownership of a digital concept sort of like a virtual IOU. On the other hand, you've got bitcoin-the-protocol, a dispersed network which maintains a ledger of balances of bitcoin-the-token.

The system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is created and kept electronically. Bitcoins arent printed, for example dollars or euros theyre produced by computers all around the world, using free software.

It was the first instance of what we today call cryptocurrencies, a growing asset class that shares some features of traditional currencies, together with verification based on cryptography.

A pseudonymous software developer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, as an electronic payment system based on mathematical proof. The idea was to produce a means of exchange, independent of any central power, that may be transferred electronically in a secure, verifiable and immutable manner.

Bitcoin can be utilized to cover things electronically, if both parties are willing. In that sense, its like conventional dollars, euros, or yen, which can also be traded digitally.

Bitcoins most important feature is it is decentralized. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders, and run by an open network of committed servers spread around the globe. This brings individuals and groups that are uncomfortable with all the control that banks or government institutions have over their money. .

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Bitcoin simplifies the dual spending problem of electronic currencies (in which digital assets can easily be copied and re-used) through an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. Together with bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. .

Fiat currencies (dollars, euros, yen, etc.) have an unlimited supply central banks can issue as many as they want, and can attempt to manipulate a currencys value relative to other people. Holders of the currency (and especially citizens with very little alternative) keep the price.

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With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. Even a small number of new bitcoins trickle out every hourand will continue to do so at a diminishing rate until a maximum of 21 million has been attained. This creates bitcoin more attractive as an asset in concept, if demand grows and the supply remains the same, the value will increase. .

While senders of traditional electronic payments are often identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in theory operate in semi-anonymity. Since there's absolutely no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is filed, the protocol assesses all previous transactions to confirm that the sender gets the necessary bitcoin in addition to the ability to send them.

In practice, every user is identified by the address of their wallet. Transactions can, with a little effort, be tracked this way. Additionally, law enforcement has developed approaches to identify consumers if necessary.

Furthermore, most exchanges are required by legislation to perform identity checks on their clients before they're allowed to purchase or sell bitcoin, facilitating another manner that bitcoin utilization can be tracked. Since the network is transparent, the advancement of a specific transaction is visible to all.

This is because there is no central adjudicator that can say okay, return the money. If a transaction is recorded on the network, and when more than an hour has passed, it is not possible to modify.

While this may disquiet a few, it does mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is referred to as a satoshi. It's one hundred millionth of a bitcoin (0.00000001) at todays prices, about one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.

Read more to find out how bitcoin transactions are processed and how websites bitcoins are mined, what it can be used for, in addition to how you can buy, sell and save your bitcoin. We also explain a few alternatives to bitcoin, in addition to how its underlying technology the blockchain works. .

Bitcoin is an electronic currency, also known as a cryptocurrency. It had been invented in 2008 with an anonymous person or group named Satoshi Nakamoto.