What is Bitcoin? - Beginners Must Know
Bitcoin is the world’s first widely adopted cryptocurrency that is based on decentralization and backed by peer-to-peer and blockchain technology. Announced in 2008 (and launched in 2009), it offers users the ability to send and receive digital money.
But unlike the fiat currencies that we are familiar with, there is no central bank controlling it. Instead, thousands of computers distributed around the world are in charge of running the Bitcoin financial system. By downloading open-source software, anyone can participate in the ecosystem. People may send digital money to each other over the internet safely and immediately with Bitcoin.
It is noteworthy that, to maintain a level of scarcity, there will only ever be 21 million bitcoins. Since the creation of Bitcoin, thousands of more cryptocurrencies have been launched, yet it remains the world’s No.1 cryptocurrency by market cap and trading volume.
Who Created Bitcoin?
Bitcoin was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology in a 2008 whitepaper. It’s an appealingly simple concept: Bitcoin is a digital currency that allows for secure peer-to-peer transactions on the internet.
How Bitcoin Works?
Unlike credit card networks like Visa and payment processors like Paypal, Bitcoin is not owned by an organization or individual. Bitcoin is the world’s first fully open payment network that does not rely on banks or private companies to process transactions. The Bitcoin network is a blockchain-based system collectively maintained by computers distributed around the world. Anyone can contribute to the building of this ecosystem by providing his/her hashing power.
To ensure its normal operation, the network requires the deployment of specialized computers to function as nodes. More specifically, they generate new blocks by validating transactions in the Bitcoin network while keeping records on the blockchain. This can be seen as a bookkeeping process, where the blockchain serves as the ledger and participants function as bookkeepers. To draw more participants, the Bitcoin network rewards bookkeepers (participants who earn the right to update blocks) with the bitcoins generated in the new block. This process is called “Bitcoin mining”. Mining is one of the primary means to acquire Bitcoin. Due to its limited supply, Bitcoin is also known as “digital” gold.
Though the concept of everyone being able to update the blockchain may appear hazardous, it is exactly what makes Bitcoin trustworthy and secure. All transactions are recorded in a public list called a blockchain, which makes it easier to track Bitcoin. This prevents people from spending coins they don’t own and avoids the copy or revocation of transactions.
How to Get Bitcoin?
The easiest way to buy Bitcoin is through an online exchange. With crypto exchanges, users can buy, sell, send, receive, and store bitcoins with great ease, without the need to use public and private keys.
However, if you don't buy bitcoins from or store bitcoins on online exchanges, then you will need to make use of the public key, which is a long string of letters and numbers issued to each person who joins the Bitcoin network, and the private key, which is equivalent to the password of your bank account.
When you buy, send, or receive bitcoins, you will get a public key, which can be regarded as a key that unlocks a virtual vault that gives you access to your money. You can send bitcoins to someone through his/her public key, but only the holder of the private key can access the bitcoins in the “virtual vault” once they are sent.
How can we transfer the funds to a bank account once our bitcoins are sold? The answer is to withdraw your crypto assets using an exchange. Similar to traditional bank transfers or ATM withdrawals, most crypto exchanges set a daily cap on withdrawals, and your request may take days or a week to complete.
