What is bitcoin ?

What is Bitcoin ?

In 2008 we where seeing a financial crisis. The housing market bubble had burst and a lot of people where losing money. Inflation was increasing and people started to doubt the economy in those period.

One year later the was a group or a person under the pseudonym “Satoshi Nakamoto” who published a white paper about a new digital decentralized currency called “Bitcoin”.

The goal of Bitcoin was to be used as a store of value and function as a digital currency.

A decentralized digital currency using a technology invented in 1991 called the “blockchain”.

Bitcoin is functioning as a global ledger. For every transaction made there is a block added to the blockchain.  The blocks are getting verified by miners. Miners are computers who solve mathematical problems. With every transaction there needs to be a “puzzle” solved. The puzzle is a mathematical problem and computing power is solving the puzzle. Therefor the miner receives a miners fee. The sender of the Bitcoin is paying a transaction fee. The transaction fee will be rewarded to the miners.

Every block in the blockchain contains of 3 things : Data, a hash code, the hash code of previous block. The hash code is a digital fingerprint and is always unique. Because every block is using the hash link of the previous block it’s creating the chain. It also creates validation as if anyone tries to temper with the information the hash code will be changed and therefor the block will be invalid and not verified. It’s almost a digital notary.

Next to that Bitcoin is working with a proof of work model which means that the majority of the miners need to agree on the information being verified. This makes it really difficult for hackers to hack Bitcoin because they would need more then 50% of the computing power which is almost an impossible option.

Bitcoin has a limited supply. There are only 21.000.0000 (21 million) bitcoins in circulation. There is no possibility of creating more bitcoins. It works the same as gold, there is only one certain amount. That’s also why people refer Bitcoin as “Digital gold”.

Bitcoins you store in digital wallets or hardware wallets. Digital wallets are online wallets with an interface. They save your private keys mostly on only your device and not on their servers, but to be really safe a hardware wallet is a offline wallet.

Bitcoin is already evolving since 2009 and there is no reason it won’t grow more to the mainstream. It is a interesting technology and already a lot of companies and governments are implementing blockchain technology into their systems.

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