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What is Bitcoin?
Bitcoin is digital money that isn’t controlled by any bank or company or person. Bitcoin was invented in 2008 by a pseudonymous programmer called Satoshi Nakamoto. The volunteer network went live in 2009, and people around the world have been contributing to this open-source project ever since.
Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock and buy Xbox games. But much of the hype is about getting rich by trading it. The price of bitcoin skyrocketed into the thousands in 2017.
Bitcoins can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value.
BASIC BITCOIN TERMINOLOGY
- Hot Wallet
Downloading a bitcoin wallet, to your device is the most convenient way to send and receive small amounts of bitcoin. However, there are important trade-offs to carrying your funds on a device, like a mobile phone, that is connected to the internet.
- Open Source
The Bitcoin network is made up of individual participants,choosing to run particular software that is publicly accessible and collaborative in its maintenance. No single person or company owns, hosts or runs the network, making it highly resilient to threats.
Bitcoin users, miners and full nodes are scattered all over the world. It is these groups in aggregate that make up the network. With no headquarters, CEO or employees, there is no central point of failure.
- Peer To Peer (P2P)
When two people exchange money and goods in person, they are doing so in a decentralized way. But online transactions have continued to rely on trusted third parties because we’ve lacked a way to enforce honesty. Bitcoin incentivizes honesty through its transparent and auditable design.
- Full Node
Full nodes are hardware that maintain a full copy of the Bitcoin blockchain, while enforcing the network’s predefined rules. They can independently validate, broadcast and relay transactions, without the need to trust any third party. This arrangement results in decentralization.
- Block Explorers
One of the features of bitcoin’s open and public blockchain is the ability to view all historical transactions as well as transactions taking place in real time that settle on Bitcoin’s main layer.
Bitcoin's pseudonymous creator, Satoshi Nakamoto, referred to their creation as a “timechain,” as each block includes an approximate timestamp. This makes it possible to determine the sequence of all transactions and ensure no bitcoin can be double-spent. When combined with digital signatures, the Bitcoin blockchain acts as a de facto global public store of record.
Securing your sats is not a passive exercise. As the value of your bitcoin holdings grows, so should the strength and resilience of your security measures and backup procedures. The reality of being a bitcoiner means continually updating your knowledge regarding best practices and regularly testing your set up.
- Private Key
A private key in the context of Bitcoin is a key connected to an address (technically, the address is the hash of the public key corresponding to the private key) that is stored behind the scenes and allows you to send bitcoin that have been previously sent to that address. Note that because of the way the encryption algorithm that Bitcoin uses (ECDSA) works, it is possible to generate the public key and the address from just the private key.
Bitcoin’s future in question
No one knows what will become of bitcoin. It is mostly unregulated, but some countries like Japan, China and Australia have begun weighing regulations. Governments are concerned about taxation and their lack of control over the currency.