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A Brief Introduction to Bitcoin

Decentralized Currency

Bitcoin is a decentralized, digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. Its use as a currency began in 2009 when its implementation was released as open-source software. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.

Bitcoin is decentralized, thus:

  • Bitcoin is limited to 21 million Bitcoins.
  • Bitcoin does not have a central authority.
  • The Bitcoin network is peer-to-peer; there are no central servers.
  • The network has no central storage; the Bitcoin ledger is distributed.
  • The ledger is public; anybody can store it on a computer.
  • There is no single administrator; the ledger is maintained by a network of equally privileged miners.
  • Anyone can become a miner.
  • The additions to the ledger are maintained through competition. Until a new block is added to the ledger, it is not known which miner will create the block.
  • The issuance of Bitcoin is decentralized. They are issued as a reward for the creation of a new block.
  • Anybody can create a new Bitcoin address (the Bitcoin equivalent of a bank account) without needing approval.
  • Anybody can send a transaction to the network without needing any approval; the network merely confirms that the transaction is legitimate.
  • Bitcoin is pseudonymous, meaning that funds are not tied to real-world entities but to Bitcoin addresses.Owners of Bitcoin addresses are not explicitly identified, but all transactions on the blockchain arepublic.

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