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To cut through some of this confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code which represents ownership of a digital concept kind of like a virtual IOU. On the other hand, you've got bitcoin-the-protocol, a dispersed network which maintains a ledger of balances of bitcoin-the-token.

The system enables payments to be sent between users without passing via a central authority, such as a bank or payment gateway. It's made and kept electronically. Bitcoins arent printed, like dollars or euros theyre made by computers all around the planet, using free software.

It was the first instance of what we call cryptocurrencies, a growing strength class that shares some features of traditional currencies, with verification based on cryptography.

A pseudonymous software programmer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, within an electronic payment system based on mathematical evidence. The idea was to generate a means of exchange, independent of any central authority, which may be transferred electronically in a secure, verifiable and immutable manner.

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Bitcoin can be utilized to cover things electronically, if both parties are willing. In that sense, its like conventional dollars, euros, or yen, that are also traded digitally.

Bitcoins most important feature is that it is decentralized. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders, and run by an open network of dedicated servers spread around the globe. This attracts individuals and groups who are uncomfortable with all the control that banks or government institutions have over their money. .

Bitcoin simplifies the double spending issue of electronic currencies (in which digital assets can readily be replicated and re-used) via an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. Together with bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. .

Fiat currencies (dollars, euros, yen, etc.) have an unlimited supply central banks can issue as many as they want, and can attempt to manipulate a currencys worth relative to other people. Holders of this currency (and notably citizens with little alternative) keep the cost.

With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. A small number of new bitcoins trickle every hour, and will continue to do so at a diminishing rate until a maximum of 21 million has been reached. This makes bitcoin more attractive as an asset in concept, if demand grows and the supply remains the same, the value will increase. .

While senders of traditional electronic payments are often identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in concept function in semi-anonymity. Since there is no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is submitted, the protocol checks all previous transactions to confirm that the sender has the necessary bitcoin in addition to the ability to send them.

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In practice, every user is identified by the address of their pocket. Transactions can, with a little effort, be monitored this way. Additionally, law enforcement has developed methods to identify consumers if necessary.

Furthermore, most exchanges are required by legislation to perform identity checks on their customers before they are permitted to purchase or sell bitcoin, facilitating another way that bitcoin utilization can be monitored. Since the network is transparent, the progress of a specific transaction is visible to all.

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This is because there is no central adjudicator that can say okay, return the money. When a transaction is listed on the network, and if more than an hour has passed, then it is impossible to modify.

While this may disquiet some, it will mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of web a bitcoin is referred to as a satoshi. It's one hundred millionth of a bitcoin (0.00000001) in todays prices, about one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.

Read more to find out how bitcoin transactions are processed and the way bitcoins are mined, what it can be used for, as well as how you can buy, sell and save your bitcoin. We also explain a few alternatives to bitcoin, in addition to the way its underlying technology the blockchain works. .

If you want to know what is Bitcoin, the way you can get it and how it can assist you, without floundering into technical details, this guide is for you. It will explain how the system operates, how you can use it to your profit, which scams to avoid. It will also guide you to resources that will enable you to shop and use your first parts of digital currency.