What is Bitcoin?
Bitcoin is an open source software that provides a decentralized, digital and global currency. At the same time, bitcoin is a monetary network through which people can send money directly to each other without having to trust and know each other personally.
The technical basis of bitcoin is the blockchain. This technology uses cryptographically linked blocks to store and process transactions.
Unlike traditional payment systems where a central institution such as a government, central bank or company is in control, the bitcoin blockchain is a decentralized database that is not subject to central control. This means that there is no need to trust a third party to process payments.
Thanks to this decentralized structure, bitcoin works completely without trust in a central authority.
The idea of bitcoin was published as a whitepaper on the Internet by a person or group under the pseudonym Satoshi Nakamoto in October 2008, and the open source software for it was released in January 2009.
Bitcoin transactions can be made without the supervision of any government, company, or bank. Thus, in the bitcoin payment network, there are no parties to mediate or higher authorities to control it. Transactions are cryptographically signed and settled over an equal peer-to-peer network resistant to censorship.
Any person with Internet access on an electronic device can be part of the network. The bitcoin network therefore excludes no one.
Bitcoin software is open source. This means that the source code is fully published and freely available. Every person participating in the network thus has the option to check and verify the algorithm themselves.
Every person has the opportunity to participate in the development of bitcoin and submit suggestions for improvements. However, changes to the system cannot be made and published alone. It needs a common consensus of the network, i.e. an agreement of the network participants.
Network participants can send money to each other in the form of the currency unit bitcoin. This is done completely digitally. Unlike fiat money, such as the US dollar, the euro or the Swiss franc, there are no physical notes or coins of the Bitcoin currency unit.
Like the cent to the euro or the centime to the franc, bitcoin has a small unit of currency called a satoshi. Each bitcoin is made up of 100 million satoshi.
One of bitcoin's biggest differences from traditional government currencies is that the number of bitcoin available on the network is capped at 21 million units based on a cryptographic formula.
Because Bitcoin operates without banks, fintechs, or other financial institutions, each person who owns Bitcoin is their own bank.
When you manage your bitcoin on your own wallet, you own sole access to your bitcoin funds. Thus, you are completely independent from any third parties. You only have to trust yourself and the cryptography behind bitcoin.
Bitcoin's database, also known as the blockchain, containing all transactions and holdings is not located on a central server at a financial institution, but is distributed across thousands of computers worldwide. This distribution gives all network participants the security that no bitcoin can be created out of thin air, wrong transactions can be executed or issued twice.
Bitcoin creates an environment that is ripe for innovation because it is not just a currency; it is a technology, a network and a currency.
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