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What is Bitcoin and how does it work?

Bitcoin Review

Bitcoin (BTC) is the first decentralized cryptocurrency. The system allows sending or receiving Bitcoins to an individual via peer-to-peer payment system worldwide as long as the Bitcoins user has an internet connection. More and more physical and online stores accept Bitcoins as a payment method, so, it is not only a money transfer method anymore, but also an official payment method. The most important feature of Bitcoin — it is decentralized. It means, it is not controlled by anyone (central bank, government etc.). Shortly, Bitcoin (BTC) is an open-source international currency.

History & Creator

Technical whitepaper to Bitcoin was written by Satoshi Nakamoto in 2008.The first Bitcoin (BTC) was generated the following year. It is still unclear who stands behind “Nakamoto”, is it one person or group of people.

What is Blockchain and how does it work?

Bitcoin (BTC) is generated, or “mined”, by individuals with high level computers, which help to solve encrypted math equations over a distributed internet database named – blockchain. When a BTC transaction takes place, that data is strongly encrypted and sent across the network for these high-end mining computers to confirm. This process is called „cryptography” and keeps the backbone of security for BTC. Bitcoin miner is keeping up-to-date records of the blockchain (at the moment 157GB) and receives reward with small amount of BTC for that.

What is Bitcoin wallet and how does it work?

There are different types of Bitcoin wallets. Possibly, at the moment, there are two main types of them . The first — ‘digital wallets’ that is an online address, which store the keys for Bitcoins / cryptocurrency. And the second — USB based hardware wallet, which allows storing keys offline which automatically guaranties a higher security level.

Statistics

At the moment, there are almost 17 million Bitcoins. Satoshi Nakamoto designed BTC to max out at 21 million in 2140. After 2140, no BTC will be mined or generated. The cap was implemented with the aim to prevent currency inflation.

What is Altcoin and how does it work?

Altcoins are alternative digital currencies to Bitcoins which appeared later. The same, like Bitcoins, most of these currencies are designed around decentralized blockchain technologies. At the moment, there are over 1.800 altcoins, cryptocurrencies by results of https://coinmarketcap.com/Many of them try to offer unique use-cases. For example, Ethereum has its own unique blockchain that allows “smart contracts”.