Introduction to Bitcoin
Understanding Bitcoin is easy once you understand what Bitcoin is and the problems it solves. Most people do not understand what crypto currency is or how it works so they don’t benefit from its advantages. Crypto currency means Bitcoin or other crypto currencies are not regulated by a financial institution, the government or NOG (non-governmental group).
Bitcoin – is an agreement among a community of people to use 21 million secure mathematical tokens known as “bitcoins” as money. This allows for them to not be backed by any authority to succeed or accepted by anyone else ex: a bank. This makes them act like a local currency and much more effective and local to the whole world.
Benefits:
There will never be more Bitcoins, cannot be printed into creation.
They are impossible to counterfeit.
They are owned anonymously.
They are spent anonymously.
They can be divided into smaller pieces as you want.
They can be transferred instantly around the world via the internet.
There is a set limited quantity on a pre-agreed schedule.
How Safe Is Bitcoin?
This is accomplished by the use of powerful cryptography many times stronger than that used by banks. Instead of simply being “sent” coins have to be cryptographically signed over from one entity to another, essentially putting a lock and key on each token so that bitcoins can be securely backed up in multiple places, and so that copying doesn’t increase the amount you own.
Because Bitcoins are given their value by the community, they don’t need to be accepted by anyone else or backed by any authority to succeed. They are like a local currency except much, much more effective and local to the whole world.
What Problem Bitcoin Solves:
Abuse is one major issue Bitcoin solves, for there is no one person who can abuse the system. Not one person can print more Bitcoin, nobody can copy the coins, no one can use anyone else’s coins without having direct access to their encrypted keys. The only way Bitcoin can fail is if everyone stops using it.
Cutting-edge Cryptography:
This ensures that only the owner of the Bitcoins has the authority to spend them. Bitcoin’s cryptography is stronger than all the world’s online banking systems, it is like having a 100-digit combination lock on it that could not be removed without destroying the Bitcoin itself. That is how secure it is.
Blockchain:
This is a single master registry of the already-cryptographically-secured Bitcoin transfers verifying them and locking them down in a highly competitive market called mining. This confirms transactions to the rest of the network as having taken place establishing legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
Mining is also used to introduce new coins into the system, in return for this critical role, the Bitcoin community rewards miners with a set amount of Bitcoins per block, taken from the original limited quantity on a pre-agreed schedule.
Miners are paid any transaction fees as well as a “subsidy” of newly created coins. It is a lot like mining for gold or any other commodity requiring exertion and it a slow process.
Transactions
Bitcoin transactions are intentionally irreversible–unlike credit cards or PayPal where chargebacks can invalidate a payment that has already been made. And there are no middlemen. Transactions are completed directly between the sender and the receiver via the peer to peer network.
Conclusion:
Because of Bitcoin’s intricate design, the network remains secure no matter where or how you process Bitcoin transactions. Which is incredible–no one else has ever tried to create a system that worked this way! All previous monetary systems have relied on trusting somebody, whether it was the king, town hall, the Federal Reserve, or banks. Bitcoin doesn’t. It’s guaranteed instead by the laws of mathematics, and that’s why it has everyone from technologists to economists very excited
