In the topic, Basics of Bitcoin, we take a look into what exactly a Bitcoin actually is along with the features that are very much unique to Bitcoin. Hence the todays session has been divided into 2 parts covering the different aspects of Bitcoins.
Topics to be covered
Basics of Bitcoin: What are bitcoins?
In Basics of Bitcoin t e word currency often side-tracks people when they are trying to understand Bitcoin. They get caught up trying to understand aspects of conventional currencies which do not apply to Bitcoin, for example, what backs it (nothing) and who sets the interest rate (there is none). Bitcoin is also sometimes described as a digital token, and in some respects that is accurate; but, alas, the term token is now also used to mean something more specific, which we will cover later, so the ambiguity of this term too is best avoided.
Basics of Bitcoin: Features of Bitcoin
In Basics of Bitcoin, bitcoins are digital assets (‘coins’) whose ownership is recorded on an electronic ledger that is updated (almost) simultaneously on about 10,000 independently operated computers around the world that connect and gossip with each other. This ledger is called Bitcoin’s blockchain. Transactions that record transfer of ownership of those coins are created and validated according to a protocol—a list of rules that define how things work and which therefore govern updates to the ledger.
The protocol is implemented by software—an app—that participants run on their computers. The machines running the apps are called ‘nodes’ of the network. Each node independently validates all pending transactions wherever they arise, and updates its own record of the ledger with validated blocks of confirmed transactions. Specialist nodes, called miners, bundle together valid transactions into blocks and distribute those blocks to nodes across the network. Anyone can buy bitcoins, own them, and send them to other people.
Every Bitcoin transaction is recorded and shared publicly in plain text on Bitcoin’s blockchain. Contrary to many media articles, Bitcoin’s blockchain is not encrypted. By design, everyone sees all details of all transactions. Anyone can, in theory, create bitcoins for themselves too. This is part of the block creation process, called mining, and is described later.
In Basics of Bitcoin, the next session we take a look at the other cryptocurrencies and its own distinctive features which makes it different from other cryptocurrencies.
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