How Does the Bitcoin System Work?

How Does the Bitcoin System Work?

To cut through the confusion surrounding the bitcoin, we have to separate this in two components. On one hand, you’ve got bitcoin-the-token, snippet of code, which represents the ownership of the digital concept – and sort of like virtual IOU. Alternatively, you have got bitcoin-the-protocol, distributed network, which maintains the ledger of balances on bitcoin-the-token. And both can be referred as the “bitcoin.”

System allows the payments to send between the users without even passing through the central authority, like the bank and payment gateway. This is made and held electronically. The Bitcoins are not printed, such as dollars and Euros –they are produced by the computers all over the world, by using the free software. This was first example on what we call cryptocurrencies, the growing asset class, which shares a few characteristics of the traditional currencies, with the verification based on the cryptography and learn how to get a bitcoin wallet.

Who made it?

The pseudonymous software developer with the name of Nakamoto proposed bitcoin in the year 2008, as the electronic payment method based on the mathematical proof. An idea was producing means of exchange and independent of central authority, which can get transferred electronically in the verifiable, secure, as well as immutable way.

Even today, nobody knows who really Satoshi Nakamoto is and in what ways this is different from the traditional currencies?

Bitcoin will be used for pay for the things electronically, in case both the parties are keen on doing that. In this sense, it is like the conventional dollars, yen or Euros that are traded digitally. However, it actually differs from the fiat digital currencies at many important ways:

Decentralization

Bitcoin’s important characteristic is it’s decentralized. There is no single institution that controls bitcoin network. This is well maintained by the group of the volunteer coders, or run by the open network of the dedicated computers spread over the world.

About John Sparrow

John Sparrow