About Bitcoin - What is Bitcoin and how does it work?
What is Bitcoin and how does it work?
is a digital currency that is not supported by a country`s central bank or government. Bitcoins can be traded as payment for goods or services. Bitcoin is also called crypto-currency or digital currency an is basically a way o pay without the involvement of a third-party broker like banks or governments.
Bitcoin was created in 2009 by Satoshi Nakamoto and it was released as an open-source software. The identity of Satoshi Nakamoto is not yet clear but is creation might change economy as we know it. Considering existing payment methods were not designed for the fast and dynamic internet era, Bitcoin is a up to date alternative which has the makings of a verry succesfull payment method.
When using Bitcoin the transaction take place directly between users, so it is a peer to peer system. Afterwards the transactions are being verified by network nodes and recorded in a public distributed ledger called the blockchain.
If we talk about what differentiating characteristics Bitcoin has, compared to other approahes we notice bitcoin is jus an electronic payment system. By that i mean it`s jus a vehicle, a conduit by which two parties can transact over the internet. If for example we have two people,and first person needs to pay the second person a certain sum, lets call them person A and person B. Consider the person B is a merchant or a non-profit or any other reason why this person has to recive money from peron A. The payment can be done over the internet. Now, if person B is wiling to receive Bitcoin as payment then person A can go ahead and send some value in bitcoins. Basially a Bitcoin transaction between person A and person B amounts to a specially constructed sequence of numbers that person A will send over to person B. This will be done entirely over the internet, thease numbers will have certain mathematical properties the make it very difficult for someoe to defraud te system or to conduct any type of nefarious action an the system . The way this transaction can be done is either by installing a special piece of software, which we call a bitcoin client, or by working with a third party that can handle these machanics. Ider way bitcoin client or the third party creates the sequence of numbers for person A and helps person B to ider use the sequence of numbers to buy different items or to transform it in real money.
A fair questions is, why whould person B accept Bitcoin as payment?
Considering bitcoin is just a sequence of numbers you might wonder why should one trust in their value.
Well, it turns out that bitcoins actually havea real-word value, and more and more merchands accept bitcoins as payment. A big difference in how people see bitcoins is that in nowadays there are bitcoins exchanges, places where you can go and exchange bitcoins for mainstream currencies like euros and dollars and others. The value of a bitcoin fluctuates just like the value of tel say a euro for example.