So what exactly is bitcoin?
Bitcoin is an online payment system invented by anonymous user ‘Satoshi Nakamoto’, who published his invention in 2008, and released as open-source software in 2009.
The bitcoin system is peer-to-peer, and users can transact directly with each other all over the world almost instantly, without needing an intermediary such as a bank, Western Union, Moneygram, Paypal or any other company.
The bitcoin system works without a central repository or single administrator, so is the worlds first decentralized digital currency, and it is the largest of its kind in terms of total market value. There is no company or entity controlling bitcoin.
Bitcoin as a form of payment for products and services has grown, and merchants have an incentive to accept it because fees are lower than those typically imposed by credit card processors. Unlike credit cards, any fees are paid by the purchaser,
The simplest explanation of bitcoin is that it is electronic money.
Bitcoin is a form of digital currency, it is decentralised, and created and held electronically.
No one controls it. Bitcoins aren’t printed, like Rand, dollars or euros – they’re produced by lots of people running computers all around the world, using software that solves mathematical problems. These people and their computers are called ‘bitcoin miners’. It’s the first example of a growing category of money known as cryptocurrency.
What makes it different from regular currencies?
Bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money.
Who created bitcoin?
Bitcoin was invented by anonymous user ‘Satoshi Nakamoto’, who published his invention in 2008, and released as open-source software in 2009.
Satoshi Nakamoto proposed bitcoin as an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
Who prints or creates bitcoin?
No one. This currency isn’t physically printed in the shadows by a central bank, unaccountable to the population, and making its own rules. Those banks can simply produce more money to cover the national debt, thus devaluing their currency.
Instead, bitcoin is created digitally, by a community of people that anyone can join. Bitcoins are ‘mined’, using computing power in a distributed network.
This network also processes transactions made with the virtual currency, effectively making bitcoin its own payment network.
The Bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the founder of bitcoin).
What is bitcoin based on?
Conventional currency has been based on gold or silver. Theoretically, you knew that if you handed over a dollar at the bank, you could get some gold back (although this didn’t actually work in practice). But bitcoin isn’t based on gold; it’s based on mathematics.
Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available, so that anyone can check it.
The software is also open source, meaning that anyone can look at it to make sure that it does what it is supposed to.
What are the features of bitcoin?
Bitcoin has several important features that set it apart from normal fiat currencies.
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