What is Bitcoin and how does it work?

Bitcoin is a cryptocurrency that was invented in 2008 by an unknown person or group of people known as Satoshi Nakamoto. The currency began to be used in 2009 when its application was released as open-source software.

What is bitcoin and how does it work?

Bitcoin is a digital currency that operates without any central control or supervision by banks or governments. Instead, it relies on software and encryption.

All bitcoin transactions are recorded through the registry every year, and data is stored on servers around the world. Anyone with a computer can set up one of these servers, known as Node.

Consensus is reached on who owns crypto coins through these nodes, rather than relying on a central source of trust such as a bank.

Network transactions and their transfer from node to node. Every ten minutes or so, these transactions are collected by miners in a block and are constantly added to the blockchain. This is the absolute ledger of bitcoin.

With the same idea that traditional coins are stored in a physical wallet, virtual coins are stored in digital wallets and can be accessed using client software or a combination of hardware and online devices.

At the moment, bitcoins can be divided into seven decimal places: the thousandth part of bitcoin is known as Milli, and the hundredth part of bitcoin is known as Satoshi.

In fact, there is no such thing as a bitcoin or a wallet, just an agreement between the network on the ownership of the currency. The private key is used to confirm the ownership of funds in the network when entering into a transaction.

Anyone can use their private key and does not need anything else to receive or spend their virtual money, a concept known as a "brain wallet".

Can bitcoin be converted to cash?

Bitcoin can be converted into cash. There are many cryptocurrency exchanges online, but transactions can also be made in person or through any trading platform, allowing even small businesses to accept bitcoins. Bitcoin does not have a built-in conversion procedure into another currency.

Nothing inherently valuable underlies the Bitcoin network. But this has been found in many of the world's most stable national currencies since the gold standard was abandoned, such as the US dollar and the British pound.

What is the purpose of bitcoin?

Bitcoin was established to allow people to send money over the internet. The purpose of the digital currency offer was to give the greatest alternative payment system that operates without centralized control and can be used in the same way as traditional currencies.

Are bitcoins safe?

Bitcoin's core encryption is based on the SHA-256 algorithm developed by the US National Security Agency. In fact, it is impossible to break this, because there are more possible private keys that need to be checked (2256).

When exchanging bitcoin is being hacked and stolen money, but this digital process stores we received on behalf of customers. But in this case, Yum hacked the site, not the Bitcoin network.

If an attacker manages to control more than half of all existing bitcoins, this shows that he owns all of bitcoin's blockchain. But as the number of coins increases, this becomes less practical.

A real problem is that bitcoin operates without any central authority. Because of this, anyone who makes a mistake in a transaction on their wallet has no right to get their money back. If you accidentally send bitcoins to the wrong person or lose your password, you have no one to turn to.

Of course, the possible emergence of practical quantum computing could destroy all this. Much of cryptography is based on mathematical calculations, which is very difficult for modern computers, but quantum computers work quite differently and can perform it in a split second.

What is Bitcoin mining?

Bitcoin mining is the process of producing new bitcoins and putting them into circulation, because it is a virtual currency that is done through a decentralized network or what is known as the blockchain, and the transactions are verified through complex mathematical operations via the computers of the miners or their.

All transactions are continuously placed on the network, where miners collect large clusters of transactions in blocks and perform cryptographic calculations that are extremely difficult to decipher, but very easy to verify. 

The first miner who solved the next block puts it to the network and, if it proves correct, it is added to the blockchain. This miner receives a reward in the form of a newly created amount of bitcoin.

There are only 21 million bitcoins in circulation. There will be none left after that. By 2140, the total number of coins in circulation will be reached. Every four years, bitcoin mining becomes more difficult by lowering the payout.

Miners also choose which transactions to include in a block, so the sender can add a variety of fees as an incentive. These fees will continue to be charged once all of the coins have been mined as an incentive to keep mining. This is vital since it provides the Bitcoin network's infrastructure.

Who invented Bitcoin?

Bitcoin is the first cryptocurrency, created by an anonymous person/team under the name “Satoshi Nakamoto” in 2009 who started writing his code in 2007, created a website called bitcoin org, and continued to collaborate with developers by programming Bitcoin, experts in Cryptography before it disappeared in 2010.

Before Nakamoto's disappearance in mid-2010, he handed over control of the source code and the network alert switch to another developer named Gavin Andersen, a developer, and designer of 3D graphics and virtual reality software, based in Amritsar, Hampshire, Massachusetts, USA.

Gavin Andersen then sought to decentralize control of the digital currency. This was the first step on the path of future development of Bitcoin as we know it today, which contrasts somewhat with the system of control and power initially envisioned by Nakamoto.

2017 was a watershed year in the history of Bitcoin. The number of companies accepting bitcoin has continued to increase, and it has gained a great deal of popularity and legitimacy.

In 2020, the Frankfurt Stock Exchange admitted quoting the first paper to be traded on the Bitcoin exchange (ETN), and PayPal also announced that it would allow its users to buy and sell bitcoin on its platform.

Advantages and disadvantages of Bitcoin

Bitcoin features:

1. Security: Private and secure transactions at any time with lower fees, with smooth execution, once you own bitcoin, you can transfer it anytime and anywhere, reducing the time and potential cost of any transaction.
2. Privacy: Transactions do not contain personal information such as a name or credit card number, eliminating the risk of consumer information theft due to fraudulent purchases or identity theft.
3. Significant growth potential: Some investors who buy and hold the currency are betting that over time and the increase in its popularity and popularity as a currency will follow with greater confidence and wider use, and consequently increased demand. Its value will increase.
4. Decentralization: It is the primary and first purpose of its creation, and it is an alternative virtual currency to traditional cash that has the ability to avoid traditional banks or government supervision and authority, meaning that all transactions from initiation to confirmation and approval replace them within the decentralized network without the need for third parties.

Disadvantages of Bitcoin

• Price volatility: The previous bitcoin price rally in 2017 was driven by demand from speculators who rushed into the cryptocurrency market, especially bitcoin, and then dropped to more than 80% of its value by the end of 2018.
• Hacking Concerns: Although advocates of blockchain technology generally claim that Bitcoin is more secure than traditional electronic money transfers, Bitcoin wallets have been an attractive target for hackers. And there have been many hacks, such as what happened in May 2019 when more than $40 million in bitcoins were stolen from several accounts on Binance.
• Limited Buying as Payments: Until now we can't tell the house to create universal access in a way that would make it a 100% efficient alternative to traditional cash, but over time Bitcoin has been able to gain popularity and acceptance, by both financial institutions, businesses, and individuals as individual users.