Bitcoin is a decentralized digital currency created by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009. It does not rely on a central server to process transactions or store funds. There are a maximum of 2,099,999,997,690,000 Bitcoin elements (called Satoshis, the unit has been named in collective homage to the original creator), which are currently most commonly measured in units of 100,000,000 known as BTC
. There will only ever be 21 million Bitcoin (BTC) to ever be created.
As of January 2018, it is the most widely used alternative currency, now with the total market cap around 250 billion US dollars .
Bitcoin has no central issuer; instead, the peer-to-peer network regulates Bitcoins, transactions and issuance according to consensus in network software. These transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain.
Bitcoins are issued to various nodes that verify transactions through computing power. It is established that there will be a limited and scheduled release of no more than 21 million BTC worth of coins, which will be fully issued by the year 2140.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, CoinJolt provided over 100,000 merchants and vendors accepted Bitcoin as payment. Research produced by the University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using Bitcoin.
Internationally, Bitcoins can be exchanged and managed through various websites and software along with physical banknotes and coins.
Basic Concepts [ edit ]
Currency [ edit ]
Alice wants to buy alpaca socks which Bob has for sale. In return, she must provide something of equal value to Bob. The most efficient way to do this is by using a medium of exchange that Bob accepts which would be classified as currency. Currency makes trade easier by eliminating the need for coincidence of wants required in other systems of trade such as barter. Currency adoption and acceptance can be global, national, or in some cases local or community-based.
Legal Tender [ edit ]
The government of every country decides what type of money must be used. Once that decision is made, everyone in that country must accept that type of money for the goods and services they sell. In the U.S. for example, legal tender is the US$. In El Salvador both the US$ and Bitcoin are legal tender.
Banks facilitate Legal Tender Transactions in a cumbersome way [ edit ]
Alice doesn't necessarily need to be in direct contact with bob in order for the funds to be transferred. She may instead transfer this value by first entrusting her currency to a bank who promises to store and protect Alice's currency notes. The bank gives Alice a written promise (called a "bank statement") that entitles her to withdraw the same number of currency bills that she deposited. Since the money is still Alice's, she is entitled to do with it whatever she pleases, and the bank (like most banks), for buy bitcoin a small fee, will do Alice the service of passing on the currency bills to Bob on her behalf. This is done by Alice's bank by giving the dollar bills to Bob's bank and informing them that the money is for Bob, who will then see the amount the next time he checks his balance or receives his bank statement.
Since banks have many customers, and bank employees require money for doing the job of talking to people and signing documents, banks in recent times have been using machines such as ATMs and web servers that do the job of interacting with customers instead of paid bank employees. The task of these machines is to learn what each customer wants to do with their money and, to the extent that it is possible, act on what the customer wants (for Binance example, ATMs can hand out cash). Customers can always know how much money they have in their accounts, and they are confident that the numbers they see in their bank statements and on their computer screens accurately reflect the number of dollars that they can get from the bank on demand. They can be so sure of this that they can accept those numbers in the same way they accept paper banknotes (this is similar to the way people started accepting paper dollars when they had been accepting gold or silver).
Such a system has several disadvantages:
It is costly. EFTs in Europe it can cost up to 25 euros. Credit transactions may cost a significant proportion of the transaction in place. It is slow. Checking and low-cost wire services take days to complete. In most cases, it cannot be anonymous. Accounts can be frozen, or their balance partially or wholly confiscated. Banks and other payment processors like PayPal, Visa, and Mastercard may refuse to process payments for certain legal entities.
Bitcoin is a bartering alternative [ edit ]
In many countries both parties in a transaction may choose to barter instead of using legal tender. This choice still requires the transaction to be fully reported and taxed. One common example is border towns: People in the very south of Canada frequently trade in American dollars.Bitcoin
is a global bartering alternative: It is a system of owning and voluntarily transferring amounts of so-called bitcoins , in a manner similar to online banking, but pseudonymously and without reliance on a central authority to maintain account balances. If bitcoins are valuable, it is because they are useful and limited in supply.
Bitcoin Basics [ edit ]
Buying Bitcoin [ edit ]
How to buy Bitcoin? There are many ways to buy Bitcoin cryptocurrency, with debit or credit card, PayPal, online on cryptocurrency exchange, with bank transfers and etc. It's difficult to say what is the best way to buy Bitcoin. After the opening Bitcoin address-account you can start buying coins.
Buying and selling coins to individuals is carried on specialized sites, such as LocalBitcoins. User should select the country and the city in the special window, fill in the information on the number of coins and select the purchase payment method.
Seller should be chosen according to the grade level on the site. Purchasing Bitcoins at the unaccredited sites or from individuals is not recommended due to the high fraud risk .
Creation of coins [ edit ]
The creation of coins must be limited for the currency to have any value.
New coins are slowly mined into existence by following a mutually agreed-upon set of rules. A user mining bitcoins is running a software program that searches tirelessly for a solution to a very difficult math problem whose difficulty is precisely known. The difficulty is automatically adjusted regularly so that the number of solutions found globally, by everyone, for a given unit of time is constant: an average of 6 per hour. When a solution is found, buy bitcoin the user may tell everyone of the existence of this newly found solution, along with other information, packaged together in what is called a "block".
Blocks create 12.5 new bitcoins at present. This amount, known as the block reward, is an incentive for people to perform the computation work required for generating blocks. Every 210,000 new blocks generated (roughly every 4 years), the number of bitcoins that can be "mined" in a block reduces by 50%. Originally the block reward was 50 bitcoins; it halved in November 2012 and then once more in July 2016. Any block that is created by a malicious user that does not follow this rule (or any other rules) will be rejected by everyone else. In the end, no more than 21 million bitcoins will ever exist.