What Is The Price Of Bitcoin - Questions
To cut through some of the confusion surrounding bitcoin, we need to divide it into two components. On the one hand, you've got bitcoin-the-token, a snippet of code which represents ownership of a digital concept type of like a digital IOU. On the other hand, you've got bitcoin-the-protocol, a distributed network that maintains a ledger of balances of bitcoin-the-token.
The system enables payments to be sent between users without passing through a central authority, like a bank or payment gateway. It is made and kept electronically. Bitcoins arent printed, like dollars or euros theyre made by computers all around the planet, using free software.
It was the first example of what we today call cryptocurrencies, a growing strength category that shares some features of traditional currencies, with verification based on cryptography.
A pseudonymous software developer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, within an electronic payment system based on mathematical proof. The idea was to generate a means of exchange, independent of any central authority, which may be transferred electronically in a secure, verifiable and immutable manner.
Bitcoins most important characteristic is that it is decentralized. No single institution controls the bitcoin network. It's maintained by a group of volunteer coders, and run by an open network of committed servers spread around the globe. This brings individuals and groups that are uncomfortable with the control that banks or government institutions have over their money. .
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Bitcoin solves the dual spending issue of electronic currencies (in which electronic assets can readily be replicated and re-used) via an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. Together with bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. .
Fiat currencies (dollars, euros, yen, etc.) have an unlimited supply central banks can issue as many as they want, and can attempt to manipulate a currencys worth relative to others. Holders of this currency (and especially citizens with very little alternative) keep the price.
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Together with bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. A small number of new bitcoins trickle every hourand will continue to do so at a diminishing rate until a max of 21 million has been reached. This makes bitcoin more appealing as an asset in theory, if demand grows and the supply remains the same, the value will increase. .
Even though senders of traditional electronic payments are usually identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in concept operate in semi-anonymity. Since there is no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is filed, the protocol checks all prior transactions to confirm that the sender gets the necessary bitcoin as well as the authority to send them.
In practice, each user is identified with the address of his or her wallet. Transactions can, with a little effort, be tracked this way. Additionally, law enforcement has developed methods to identify users if necessary.
Furthermore, most exchanges are required by law to perform identity checks on address their clients before they are allowed to buy or sell bitcoin, facilitating another way that bitcoin utilization can be tracked. Since the network is transparent, the progress of a particular transaction is observable to all.
This is because there's absolutely no central adjudicator that can say ok, return the money. If a transaction is listed on the network, and when more than an hour has passed, it is impossible to change.
While this may disquiet a few, it does mean that any transaction on the bitcoin network cannot be tampered with.
The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) in todays prices, about one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.
Bitcoin is an electronic currency, also known as a cryptocurrency. It had been invented in 2008 with an anonymous person or group named Satoshi Nakamoto.