Bitcoin is a cryptocurrency, but there's so more to it as well.
Bitcoin is a challenge. Bitcoin has been a movement. Bitcoin is a fight against conventional finance, which is restrictive.
The birth of Bitcoin stemmed from a desire to be able to send value without having to involve financial institutions or third parties in a digital format.
Bitcoin is a cryptocurrency that handles and stores transactions processed by network contributors, known as miners, using a blockchain network.
Bitcoin matters
Using conventional methods, there are a range of perceived disadvantages to sending money. It can be slow, high fees can occur (particularly when sending money abroad) and you have limited access. Sometimes, money is available only during working hours.
These disadvantages don't happen with Bitcoin, at least not in the same way. With low fees, you can send your money anywhere, anywhere, swiftly.
Demand has been clear for something like Bitcoin. Finance changed when the Bitcoin whitepaper was released on January 3, 2009. Bitcoin revealed how efficient a cryptocurrency might be. The technology of the blockchain was truly introduced to the world.
The implementation of Bitcoin is like a snowball. It was starting late. Bitcoin was used as an online digital currency within the first few years, but only within niche communities.
The scope of Bitcoin has expanded as time has advanced. Satoshi Nakamoto, the founder of Bitcoin, invented the Bitcoin network with one purpose: to create electronic cash from peer to peer. Bitcoin today remains a way of digitally exchanging money.
The Bitcoin whitepaper should be read by newcomers to space. It's a perfect way to understand the complexities behind Bitcoin and to understand its creation's true intent.
How it works
Bitcoin has become decentralized. To manage the network, computers all over the world work together. This means that it is not possible to tamper with the Bitcoin network, since both of these machines agree on an absolute reality, which is the whole network's transaction history.
Bitcoin uses what's known as a tool for consensus. In order to monitor the network, process transactions and ensure that funds are truly spent, this is important. A malicious user will be able to exploit the network and carry out duplicate spending without an appropriate consensus mechanism.
Reaching consensus means that a general agreement within a community has been reached. A consensus mechanism helps networks such as blockchains to find consensus on a distributed network's proposed changes.
Bitcoin utilizes the consensus system for Proof-of-Work (PoW), which allows "work" to be completed in order to process transactions. Nodes, also referred to as miners, perform this function by using computing power.
Bitcoin explained
Miners are competing to solve the "nonce," a mathematical puzzle. This nonce blends into the upcoming block and requires a certain requirement to be met. Whoever solves the puzzle will first validate the next block that is added to the blockchain of the Bitcoin network.
Mining takes place using machines designed for this purpose. In order to maintain the network speed and block formation rate constant, the complexity of the process is scaled to account for more or less mining rivalry.