What is bitcoin?
Bitcoin is a digital currency that aims to do away with the need for central authorities such as banks or governments. Bitcoin, on the other hand, employs blockchain technology to enable peer-to-peer transactions between users on a decentralized network.
Bitcoin’s proof-of-work consensus mechanism authenticates transactions by rewarding cryptocurrency miners for validating transactions.
Bitcoin uses peer-to-peer technology to operate without a central authority or banks; the network manages transactions and issues bitcoins collectively. Bitcoin is open-source; its design is open to the public, no one owns or controls Bitcoin, and anyone can participate. Many of Bitcoin’s unique properties enable exciting uses that no previous payment system could cover.
Satoshi Nakamoto, an anonymous developer or group of developers, introduced Bitcoin to the public in 2009.
It has since become the world’s most well-known cryptocurrency. Its popularity has sparked the creation of numerous other cryptocurrencies. These rivals attempt to replace it as a payment system or are used as utility or security tokens in other blockchains and emerging financial technologies.
How do you “MINE” bitcoins
People, or more precisely, extremely powerful, energy-intensive computers, “mine” Bitcoins in order to create more of them. There are currently about 16 million Bitcoins in circulation, with only 5 million more available to mine because Bitcoin developers set a limit of 21 million. Finally, each Bitcoin can be subdivided into smaller fractions, with the smallest fraction being one hundred millionth of a Bitcoin known as a “Satoshi,” after its creator, Satoshi Nakamoto. The mining process involves computers solving an extremely difficult mathematical problem that becomes increasingly difficult over time. When a problem is solved, one Bitcoin block is processed, and the miner receives a new Bitcoin. A user creates a Bitcoin address to receive the Bitcoins they mine, similar to a virtual mailbox.
How it works
Bitcoin is built on blockchain technology, which is a distributed digital ledger. Blockchain is a network of linked data that is made up of units called blocks that contain information about each transaction, such as the buyer and seller, time and date, total value, and a unique identification code for each exchange. Entries are linked in chronological order to form a digital chain of blocks.
When a block is added to the blockchain, it becomes accessible to anyone who wants to look at it, serving as a public record for cryptocurrency transactions. The blockchain is decentralized, which means it is not controlled by a single entity. The digital block chain functions similarly to a Google Doc that anyone can edit. It is not owned by anyone, but anyone with a link to it can access it. Your copy is updated as different people make changes to it.
While the idea of anyone being able to edit the blockchain may appear dangerous, it is precisely this feature that makes Bitcoin trustworthy and secure. A transaction block must be validated by the majority of Bitcoin miners before it can be added to the Bitcoin blockchain.
The unique codes that users use to identify their wallets and transactions must adhere to the correct encryption pattern. Because these unique codes are long random numbers, it is extremely difficult to counterfeit them. The statistical randomness of the blockchain verification codes required for each transaction significantly reduces the likelihood of anyone connected to the network making a fraudulent Bitcoin transaction.
What Bitcoin is Used for ?
Bitcoin is used for a variety of purposes. Bitcoin is regarded by some as a digital gold store of value due to its limited supply. Due to its digital nature and frequently low transaction fees, Bitcoin is an easy and inexpensive way for others to transfer value. Some people continue to use Bitcoin because they are intrigued by its potential and enjoy experimenting with new technologies. Learning about and investing in Bitcoin is a great way to get started in the exciting world of cryptocurrency, blockchain, decentralized technology, and Web3.
Should you buy Bitcoin?
Many financial advisors support their clients’ desire to purchase cryptocurrency, but they do not recommend it unless the client expresses an interest. “Our biggest concern is if someone wants to invest in cryptocurrency and the investment they choose doesn’t perform well, and then they can’t send their kids to college,” says Ian Harvey, a certified financial planner (CFP) in New York City. “Then the risk wasn’t worth it.”
Due to the speculative nature of cryptocurrency, some planners recommend it for “side” investments for clients.Bitcoin is similar to a single stock, and advisors would not advise putting a large portion of your portfolio into any one company. If you’re passionate about Bitcoin, planners recommend putting no more than 1% to 10% of your money into it.
References;
CoinTelegraph. “Who Is the Mysterious Bitcoin Creator Satoshi Nakamoto?
Bernard Marr & co ” Complete Beginners guide to bitcoin”
Coin telegraph “What is bitcoin and how does it work”
Forbes Advisor “ What is bitcoin? How does it work?
