How does Bitcoin work and what is it?

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Bitcoin was the first cryptocurrency, established in 2009, although there were previous attempts at creating an online currency, like Bit Gold and B-Money, which were never fully developed. Bitcoin is a cryptocurrency or often referred to as a digital asset that is like an online version of cash. It is becoming an increasingly popular way to pay for online goods and services and as a trading alternative to traditional currencies, click here for an online platform where users can trade Bitcoins. Bitcoin was invented by Satoshi Nakamoto, this is thought to be a synonym and the real identity remains unknown, although there has been much speculation as to the identity.

New users to Bitcoin can easily get started without understanding the technical side, you install a Bitcoin wallet on your computer or smartphone, it will then generate your Bitcoin address, you can create more whenever you need. The address can be shared with your friends so they can pay you or they can share theirs and you pay them. It is very similar to how emails work, however you only use a Bitcoin address once.

A Bitcoin is a digital file that is stored in a digital wallet on an app on a smartphone or computer, you can send Bitcoins to other people or part of one and each transaction is recorded in a public list called a blockchain, this is a shared public ledger on which the entire Bitcoin network relies. This makes it possible to trace their history and stops people from spending Bitcoins they do not own or making illegal copies of false transactions.

A Bitcoin transaction is a transfer of value between Bitcoin wallets included in the blockchain. The wallets keep a piece of data called a private key or seed, this is used to digitally sign transactions to provide mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered once it has been issued. The transactions are sent to the network and usually start to be confirmed in 10-20 minutes, through a process called mining.

Mining is a distributed consensus system that is used to confirm pending transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be in a block that fits strict cryptographic rules, verified by the network. These rules prevent previous blocks from being modified. Mining also prevents any individual from easily adding new blocks to the block chain. In this way, no group or individuals can replace parts of the block chain to roll back their own or other transactions.

You get Bitcoins by either buying them with real money, sell things for them or you can create them using a computer, this is called mining. The process where computers are used to work out incredibly difficult sums and you are rewarded with Bitcoins, it can take years of processing before you get a single Bitcoin and the cost of electricity used could cost more than the value of the Bitcoin you have just earned.

Bitcoins are pretty safe, however, it is possible to lose or delete your Bitcoins and they are then lost forever, some have been stolen from websites that let you store your Bitcoins so be careful and do your research.