What is Bitcoin - All about the most important cryptocurrency
Bitcoin is the world’s most famous cryptocurrency. It was featured in a 2008 white paper by an unknown author using the pseudonym Satoshi Nakamoto.
The special thing about Bitcoin is that this currency is controlled and managed in a decentralized manner. This is in contrast to classic fiat currencies such as euros or US dollars, whose currency policy is controlled by a central bank. Bitcoin’s success also lies in its clear aversion to central banks, which were heavily criticized by the financial crisis of 2007-2008. A maximum issue amount of 21 million BTC is set for Bitcoin, which is intended to avoid loss of monetary value (inflation). With Bitcoin, this is decided decentrally across many thousands of nodes in the Bitcoin network.
With Bitcoin it is possible to send money to recipients all over the world within seconds without revealing your own name. In addition, Bitcoin is accepted as a means of payment at some shops and merchants. Most users, however, use it for investment or plant.
How does Bitcoin work?
* Basics & Security
Of course, one can buy and send bitcoin without knowing all the details of the bitcoin blockchain. It is important to know the term bitcoin wallet. Bitcoins are kept in a wallet and can be sent to the wallet addresses of strangers, acquaintances or strangers. Anyone who installs a wallet as an app on their smartphone generates a wallet address. This is similar to an account number; if you want to send money, you need to know the recipient’s wallet address. Each wallet also includes a private key that must be kept secret. Many wallet providers manage this key for a user so that you don’t have to worry about it.
The Bitcoin blockchain is actually a digital and distributed account book in which all transactions with the sender and recipient are noted. The only thing is that the sender and recipient are not known by name, but by their wallet address . The current account balance of each wallet is noted in the account book. Then a user can only transfer or send those BTC that really belong to him. All miners active in the network have the same current version of the account book saved on their computer, there is agreement about the current status of the account book. Through the mining process, all processed transactions are lined up and stored in blocks encrypted by cryptography and added to the blockchain.
* Transactions via wallets
Bitcoins are stored in digital purses, so-called wallets; Transactions take place between two wallets. A wallet always consists of a key pair that belongs together, which includes a public and a private key. The public key is also the address of the Bitcoin wallet, it is required so that friends and acquaintances can send you Bitcoin. The private key is used to sign a transaction, but is never revealed to other parties in the process. Signing proves that you are the owner of the wallet from which Bitcoin is being sent. A signed transaction is confirmed and validated within 10 minutes during the mining process. As the owner of a wallet, you always have to keep your private key secret. If a hacker knows both keys, he could plunder a Bitcoin wallet. It’s important, thatthe associated private key cannot be inferred from a public key.
* Processing (Bitcoin Mining)
In the decentralized Bitcoin network, the participants called nodes must decide in a joint vote whether a transaction is valid or not. The rules by which this is determined are known as the consensus mechanism. This distributed process is referred to as mining, based on gold mining. Transactions are arranged in a chronological order and then summarized and saved in a block. This block fulfills cryptographic rules, the block is encrypted using a mathematical hash function. Each block contains a reference to all previous blocks. This creates a chain of blocks (= blockchain), previous blocks cannot be edited. In mining, every active miner suggests a solution for the mathematical process of encryption, a miner is chosen at random. This process, known as proof-of-work, is energy-intensive, but it stands forIndependence and freedom from censorship or security against manipulation. Selected users are rewarded for their computing power with BTC as a mining reward.