What is Bitcoin?

There is no company or individual that owns bitcoin, unlike credit card networks and payment processors such as Paypal. With Bitcoin, anyone with an internet connection can participate in the first completely open payment network in the world. The underlying technology of Bitcoin enables it to be used on the internet without the need for banks or private companies to facilitate transactions.

The blockchain, a similar feature to a bank’s asset management system, is one of Bitcoin’s defining characteristics. Decentralized, meaning anyone can view the Bitcoin blockchain, and no single entity controls it, makes it different from a bank’s ledger.

Detailed information about how it all works can be found here:

• The equations necessary for verifying and recording new transactions are performed by specialized computers called mining rigs. Back then, almost anyone interested in mining was able to participate with a desktop PC that was powerful enough. The computers used today are massive, specialized, and are usually owned by businesses or large groups of people pooling their resources. (Mining a bitcoin in October 2019 requires 12 trillion times as much computing power as mining the first block did in January 2009.)

• The ever-growing ledger is kept accurate by the miners’ collective computing power. Whenever a new bitcoin is created or a transaction is made with any of the existing coins, it is recorded on the blockchain.
• What motivates miners to maintain the blockchain by verifying transactions constantly? Each mining rig in the Bitcoin network competes to be the first to solve a math problem. The Bitcoin ledger is updated every few minutes when a new winner is found. In early 2020, each winner of this raffle received 12.5 bitcoins.
• The value of a bitcoin was theoretically zero at the beginning. A price of around $7,500 was recorded at the end of 2019. As bitcoin’s value has increased, its easy divisibility (the ability to purchase fractions of one bitcoin) has become increasingly important. The bitcoin community refers to the smallest unit of bitcoin as a ‘Satoshi’. Bitcoin has an eight-decimal decimal place divisibility.
• Nakamoto designed the network in such a way that there would never be more than 21 million bitcoins, ensuring scarcity. The number of bitcoins available to be mined is currently around 3 million, which will decrease over time. Approximately 2140 will be the year that the last blocks are mined.

Blockchain is a virtual ledger that records all bitcoin transactions and public keys. Transactions are recorded chronologically in the ledger. Using enormous computing power across the globe, each bitcoin ledger is constantly checked and secured across all computers connected to the bitcoin network. In addition to cryptocurrencies, blockchains are now being used for things like supply-chain management, which has proven to be powerful and adaptable. Cryptocurrency blockchains store bitcoin transactions and private keys, and are referred to as ‘Bitcoin Blockchains’.

There is no border to Bitcoin. Cash can be sent around the world as easily as cash can be sent in the real world. Weekends aren’t closed, you won’t be charged a fee to access your money, and there aren’t any arbitrary fees.

A bitcoin transaction cannot be reversed. The sender of Bitcoin cannot reverse transactions, like cash. Because of centralized intermediaries that complete transactions, credit cards, conventional online payment systems, and banking transactions can sometimes be reverted months after the payment has been made. Using credit cards is therefore more expensive for merchants because of the higher fraud risk.

Private transactions are possible with Bitcoin. The merchant does not need to receive bank statements or any unnecessary personal information when you pay with bitcoin. The bitcoin addresses and amounts involved in transactions are the only identifying information.

Bitcoin allows for secure transactions. Payments using Bitcoin are fundamentally more secure than those involving debit/credit cards because of the cryptographic nature of the network. Making bitcoin payments does not require sending sensitive information over the internet. Financial information or your identity is very unlikely to be compromised.

Bitcoin is an open currency. There is no exception to the public publication of every transaction on the Bitcoin network. Hence, transactions cannot be manipulated (except in a highly unlikely scenario of a 51% attack) and bitcoin’s supply can’t be changed. Software composing Bitcoin’s core is available to anyone as a free and open-source project.

It is safe to use Bitcoin. It has never been possible to successfully hack into the Bitcoin network in its ten years of existence. In addition, the system’s permissionless nature and open-source nature have allowed cryptographers and computer scientists to examine the security and efficiency of the system from every angle.

It is virtually ‘mined’ by an enormous network of decentralized computers known as peer-to-peer (also known as peer-to-peer networks) that constantly verify and secure the blockchain’s accuracy. The ledger reflects each and every bitcoin transaction, and new information is periodically added to previous blocks to form a new block.