Bitcoin is a peer-to-peer currency system based on the internet.
Bitcoin is a cryptocurrency. It is a type of digital currency that is based on a peer-to-peer payment system. It uses cryptography for security, which is a practice for secure communication; hence, the name, cryptocurrency. The digital currency was introduced as open source software in 2009 by Satoshi Nakamoto. Satoshi Nakamoto is a pseudonym, which means that it is not a real person. While it is unclear who Satoshi Nakamoto is, he is believed to represent the actual creator or a group of creators that developed the Bitcoin protocol and reference software, Bitcoin-Qt.
The Bitcoin is a decentralized currency, which means that no one single company or country owns it. It essentially belongs to the people of the internet. The people of the internet, also known as a peer-to-peer network maintain the transactions on a block chain. The block chain is a shared public transaction history database which verifies, timestamps, and records Bitcoin transactions through specialized computers. This process is known as “mining”
In addition to maintaining transactions, the process of mining also creates new Bitcoins. Users allow their computers to solve difficult mathematical algorithms in order to help verify the creation of new Bitcoins and the transfer of Bitcoins between users. A log keeps track of all the transactions. Every 10 minutes, a user whose log updates gets pain 25 bit coins. However in order to limit the creation of Bitcoin, the total number of Bitcoins that can ever be mined is 21 million.
The main concern of using Bitcoin is that it is not backed by any regulatory authority, which means that the entire concept can fail. However, Bitcoins appear to be going strong, and are backed by only the fact that people are using it. Still, the lack of regulatory authority has also allowed Bitcoins to become the currency to use in countries with a volatile currency or for use in illicit activities, such as drugs and guns smuggling. The fact that Bitcoins are completely anonymous to use has also helped their popularity in some instances.