What is Bitcoin?
Bitcoin (BTC) is the world's first and most well-known cryptocurrency. Created in 2009 by an anonymous entity known as Satoshi Nakamoto, Bitcoin introduced the concept of a decentralized digital currency that operates without a central authority, like a bank or government. It is often referred to as "digital gold" due to its scarcity and role as a store of value.
The Genesis of Digital Money
Before Bitcoin, attempts at digital currency struggled with the "double-spending problem," where a digital asset could be spent more than once. Bitcoin solved this by using a revolutionary technology: the blockchain. Every Bitcoin transaction is recorded on this public, distributed ledger, ensuring transparency and preventing fraud.
- **Decentralized:** No single entity controls Bitcoin. Its network is maintained by thousands of computers (nodes) around the world, making it resistant to censorship and manipulation.
- **Limited Supply:** There will only ever be 21 million Bitcoins created, making it a deflationary asset, unlike traditional fiat currencies which can be printed indefinitely.
- **Peer-to-Peer:** Bitcoin transactions happen directly between users, without the need for intermediaries, reducing fees and increasing transaction speed compared to traditional banking.
How Bitcoin Transactions Work
1. Transaction Initiation
When you send Bitcoin, you initiate a transaction using your cryptocurrency wallet. This transaction is signed with your private key and broadcast to the Bitcoin network.
2. Verification by Miners
"Miners" (powerful computers on the network) compete to verify and add new blocks of transactions to the blockchain through a process called "Proof of Work." They solve complex computational puzzles, and the first one to find the solution gets to add the new block and is rewarded with newly minted Bitcoins and transaction fees.
3. Block Addition to Blockchain
Once a miner successfully adds a block, it becomes a permanent part of the immutable blockchain ledger. This process ensures that all transactions are verified, secure, and irreversible.
Bitcoin's innovation laid the groundwork for the entire cryptocurrency industry, proving that a secure, transparent, and decentralized digital currency was possible.