In the past few years, many people all over the world have begun to discuss and learn about the concept of Bitcoin.
The concept, like most cryptocurrencies, involves digital currencies that can be used to buy and sell goods online.
The only difference is that unlike traditional currencies, Bitcoin has no physical form. All the transactions are recorded on a blockchain that is distributed across all the nodes in the network.
History
The concept of Bitcoin is actually thousands of years old. First identified as 'The First Internet Currency' in 2008, Bitcoin is a new kind of cryptocurrency that is digital and digital in nature. Its birth is due to Satoshi Nakamoto, who developed the system in the late 1990s.
The first Bitcoin transaction, conducted by Nakamoto on the 8th of January, was for 10,000 Satoshis to the address 1A2zPXZFkm7MS2CuXq6sWxwEJWh5AhyLXv7.
With Bitcoin, Nakamoto set up a set of rules for the system and developed a cryptocurrency that relied solely on the principles of cryptography, without any sort of centralised control. In other words, each user has the ability to set up their own account and perform transactions via cryptographic means.
Since it was launched in 2009, Bitcoin has undergone a few major upgrades. At its core, the system was created to prevent a single person, or entity from controlling and manipulating the value of the currency. This means that it has no central authority to change the rules or take control of the transactions, with the exception of the network administrator that manages the network.
Because it was introduced in 2009, Bitcoin is a relatively young currency. Other cryptocurrencies, such as Litecoin, have been launched in recent years. However, unlike the other cryptocurrencies, Bitcoin is unique in that it is already widely accepted in multiple industries. For instance, a number of Bitcoin wallets have been created for iOS devices and Android devices.
How Does Bitcoin Work?
Blockchain and Transactions
The first important concept to understand with Bitcoin is that it doesn't need any central authority. This means that it's entirely possible for all users to create accounts, perform transactions, and access all the transactions for themselves.
The way this system works is by creating a number of blockchains on the network. Blockchains are essentially a shared system that any users can add blocks and transactions to. Anyone on the network can access the entire set of transactions for themselves.
To create a blockchain, users or groups of users are required to create a block. This block then adds a new block to the blockchain. As a result, each blockchain has a distinct identity. This allows anyone to keep a record of all the transactions that have been performed on the network.
This is just one of the features that make Bitcoin unique, as well as secure. The concept behind Bitcoin is that it doesn't need a centralised authority to validate transactions. Instead, transactions are validated by other users who add their own information into the block. As a result, there is no centralised control over the transactions.
For instance, let's assume that Alice wants to send 2 bitcoins to Bob. Alice will first select the 'Send' button in her wallet and then begin typing the recipient's name. Alice will then click on the address box and paste in Bob's email address. A new address will then be displayed.
Alice can then enter the amount she wants to send. Clicking 'Send' will then show a confirmation that the transaction is being sent. Bob will be given the notification, and will immediately receive the currency in his wallet.
As part of the process, Alice will create a new blockchain that has her own set of information. For instance, she will create a new unique address to receive the funds from Bob.