Learn the Basics of Bitcoin and Blockchain Technology
+ What is Bitcoin?
Bitcoin is a peer-to-peer digital currency system that is decentralized, meaning that it isn't controlled by any single individual, group, or institution.
+ How does Bitcoin work?
The Bitcoin network consists of thousands of nodes, each of which store a full copy of Bitcoin's transaction history since the very first transaction in 2009. This transaction ledger is called the blockchain, because new transactions are batched together (into blocks) and added to the end of the chain. Once a transaction has been added to the blockchain, it cannot be altered.
+ What determine's Bitcoin's price?
Bitcoin's price is governed by the law of supply and demand. When the amount of Bitcoin that people want to buy is higher than the amount people are willing to sell, price goes up. The opposite occurs when the amount that people want to sell is higher than the amount people are willing to buy.
+ What makes Bitcoin valuable?
Bitcoin has several characteristics in common with other currencies as well as a few unique properties that differentiate it.
Like many other currencies, Bitcoin is:
- Transferable - can be sent from one person to another
- Durable - can remain intact over time
- Fungible - one Bitcoin is treated the same way as any other Bitcoin in the network
- Divisible - you can divide one Bitcoin into 100 000 000 million parts, called satoshis. (1 satoshi = 0.00000001 ₿)
Unlike fiat currencies (e.g. USD, GBP, BRL, EUR, YEN, etc.), Bitcoin is also:
- Scarce - Bitcoin's total supply is capped at 21 million coins
- Immutable - Once transactions have been validated and confirmed by the network, they are permenant
- Permissionless - Anybody with internet access can participate in the Bitcoin network by running a node (i.e. maintaining a full transaction history) and mining (i.e. maintaining a full transaction history and validating new transactions).
- Censorship-resistant - No individual or group has the power to censor somebody else from using Bitcoin or to take somebody's Bitcoin (unless they manage to steal their private key)
+ How can I buy Bitcoin?
There are many cryptocurrency exchanges which allow you to buy Bitcoin and other cryptocurrencies with your local fiat currency. The exchanges available to you will depend on your location.
+ How can I mine Bitcoin?
To mine Bitcoin, all you need is to purchase mining hardware or download software for the hardware you already have. However, Bitcoin mining is a very competitive industry. To be profitable, miners currently use specialized hardware, called ASIC machines, which have made mining with CPUs and GPUs unviable. Unless you live in a region with extremely cheap electricity, mining likely isn't a good idea.
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Expand your knowledge of cryptocurrencies further with these articles from Daniel:
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