What Is Bitcoin? In Simple Terms

The idea of creating Bitcoin(BTC) cryptocurrency was born from the need to move from centralized systems to decentralized systems. This goal was achieved by blockchain technology, and Bitcoin cryptocurrency was created to implement this technology.

Why was this technology implemented by a cryptocurrency as a form of money?

Because money is the common language of the world and almost everyone deals with money 24 hours a day.

Bitcoin is the most valuable and popular cryptocurrency in the world and is the first cryptocurrency to be introduced to the world. In this article, we will discuss this Bitcoin(BTC) cryptocurrency In Simple Terms and how to work and invest in it.

What is Bitcoin?

Bitcoin(BTC) is the first decentralized and encrypted cryptocurrency, known by the symbol BTC. It is a type of digital currency that has been very successful in payments and has been able to gain the trust and attention of people. Therefore, it can be used for buying, selling, and storing value.

This currency is not controlled or managed by any organization or individual. The official website of Bitcoin is Bitcoin.org, which was purchased by Satoshi Nakamoto in 2008.

Unlike the paper money that we have today, which is created by governments and is monitored by governments, this cryptocurrency is not created by any government and is a decentralized cryptocurrency and encrypted coin.

All of its transactions are controlled by thousands of computers around the world, and anyone can participate in the Bitcoin network on a voluntary basis.

Cryptocurrency is a digital asset that has its transactions secured using encryption and has its own encryption algorithm.

Who is the creator of Bitcoin?

Who is the creator of Bitcoin

The only information available about the inventor of Bitcoin is that Satoshi Nakamoto worked on the codes of the Bitcoin blockchain network from 2007, and on August 18, 2008, he purchased a website at www.Bitcoin.org.

 Finally, on October 31, 2008, he introduced his idea to the public in the form of a whitepaper.

He did not publish any information about himself in any of his activities, and no one knows his real identity.

The BTC network started working in 2010, and he retired from the network a year after the popularity of Bitcoin, and since then, no news of him has been heard.

What is the Bitcoin blockchain?

What is the Bitcoin blockchain

The entire Bitcoin network uses blockchain technology. All transactions that are confirmed in the network are stored in its blockchain.

Blockchain technology is an immutable and secure distributed database or ledger in which data is Timely placed in blocks connected in a chain, referred to as ‘blocks.’

Each block in this chain is responsible for storing a type of information that is transformed using secure and unalterable encryption methods.

 This ledger can be public, allowing equal access to it for all individuals.

The most important and prominent features of the Bitcoin blockchain are:

  • The possibility of hiding and censoring data is not possible.
  • The possibility of double-spending it in any transaction does not exist.
  • Its transactions can be performed at any time and in any place.

How does Bitcoin work?

If someone wants to have a transaction in this network, the information from the previous block is copied to a new block with new data, and then it is encrypted. The transaction request is sent to all members of the network.

Network members, by reviewing the history, realize whether he has enough balance to make this transaction or not, and in the end, they consider his transaction valid or invalid.

 If a transaction is valid and the members of the network approve it, a new block is created, and a certain amount of Bitcoin is given as a reward to the miners who have verified the data within the block.

The data that are in the block of the Bitcoin network include information about each transaction, such as buyer and seller, time and date, total amount, and a unique identification code for each exchange.

What is Bitcoin Backing?

The backing of a currency used by any country is the government and the economic power of that country itself. This backing is determined by the government of each country and can include assets such as gold, oil, gas, or government securities. But Bitcoin was not created by a government and is not controlled by a government.

 So, what is the backing of Bitcoin, and why does it have value?

As we mentioned at the beginning of this article, Bitcoin is a type of digital currency that has no physical existence; its entire nature is made up of computer code.

Therefore, what gives the first cryptocurrency in the world credibility is the acceptance of its technology by people, its recognition, and its use for various purposes.

In the Bitcoin network, due to the transparency of transactions, the high security of the system, low transaction fees, and the lack of need for an intermediary, has created trust between network users.

It can be said that the deployment of complex algorithms for encryption and limited supply has led to the increase in the value and price of Bitcoin over time.

How many total Bitcoins are there?

The total number of Bitcoins that can be mined and added to the network is 21 million. Satoshi Nakamoto, in designing Bitcoin and the paper he published, considered a limited and controlled quantity to maintain its value, which is 21 million.

In the end, there will be 21 million Bitcoins, of which about 19.3 million Bitcoins have been mined so far. It is estimated that in the year 2140 the number of Bitcoins will reach 21 million and after that it will no longer exist.

In economics, the value of anything is based on its scarcity. When there are no more Bitcoins to be created, it is expected that the price of this digital currency will increase.

It’s worth mentioning that for various reasons such as forgotten passwords, more than 4 million Bitcoins have been lost, and over time, this number may increase.

Are Bitcoin Transactions Anonymous?

Although personal information is not required to perform transactions, the blockchain and the Bitcoin network are entirely transparent, and a specific transaction or address can be tracked from the source to the destination.

Therefore, it can be said that Bitcoin transactions are semi-anonymous. This means they are not completely anonymous, and since transaction details are recorded on the blockchain, the possibility of identifying and tracing transactions exists. Information such as the public wallet address is recorded on the blockchain.

Who Controls Bitcoin?

Some computers only hold a copy of the blockchain, while others also participate in Bitcoin mining.All decisions related to the rules, capabilities, and software code of Bitcoin are made by the community of miners.

 Everyone can propose their own changes to Bitcoin in a specified format. If these proposals gather enough support, they are voted on among miners and, if approved, are implemented in Bitcoin.

How is the Price of Bitcoin Determined?

Bitcoin has faced various challenges since its inception in 2009 to the present day. Various events have had positive and negative effects on its price and acceptance, sometimes doubling it and sometimes dragging it to the lowest possible level.

The method of determining the price of Bitcoin is one of the important questions that always linger in the minds of digital currency enthusiasts.

Generally, the most important factor in determining the price of Bitcoin is the supply and demand.

 In addition to these two factors, aspects such as regulation, the cost of Bitcoin mining, halving events, news, social media, large companies buying significant amounts of Bitcoin like PayPal, the behavior of whales who hold a large number of Bitcoins, and similar factors can all impact the price of Bitcoin.

It is important to remember that the digital currency market is still a nascent market, with only a few participants worldwide.

In general, the value of this market is relatively low compared to traditional financial markets. All of these points make the cryptocurrency market volatile and we see a sudden increase and decrease in the price of cryptocurrencies.

How are Bitcoins Sent and Received?

In the Bitcoin network, each user has a public key and a private key. The public key acts as an account number, while the private key is like a password for accessing the account.

The transfer of Bitcoins is done by the sender specifying an amount of Bitcoin, which is not more than their balance, and sending it to the recipient’s address, or their public key, and signing the transaction with their private key.

Once the transaction is signed, it is sent to Bitcoin nodes. Nodes verify the transaction’s validity in terms of the balance and the private key’s authenticity.

If everything is correct, the transaction receives initial confirmation and enters a new block. When a new block is mined, the transaction is added to the Bitcoin blockchain or ledger. Now, this transaction is considered valid.

What is a Bitcoin Wallet and How Does it Work?

What is a Bitcoin Wallet and How Does it Work

Just as you use a physical wallet to hold your banknotes, Bitcoin also has its own special wallet. However, since Bitcoin is a digital currency, the Bitcoin wallet is digital as well. This allows you to send and receive Bitcoins.

A Bitcoin wallet stores only the necessary encryption information needed to access Bitcoin addresses and perform transactions.

Generally, there are two types of wallets for storing Bitcoin: exchange wallets and personal wallets. In exchange wallets, the private key is not in the user’s control, while In personal wallets, the user has full control over their assets. This type has different models such as software, hardware, and paper.

What is Bitcoin Backing?

The backing of any country’s currency is determined by the government and its economic power. This backing is typically represented by assets such as gold, oil, gas, or government financial securities. However, Bitcoin is unique; it was not created or controlled by any government entity. So, what exactly backs Bitcoin, and why does it hold value?

As mentioned earlier, Bitcoin is a form of digital currency, devoid of physical existence, formed entirely by computer code. Its credibility stems from public acceptance, recognition, and its utilization for various purposes. In the world of Bitcoin, transparency in transactions, high system security, minimal transaction fees, and the absence of intermediaries have fostered trust among network users. The implementation of complex algorithms for encryption and limited supply has contributed to the increasing value of Bitcoin over time.

Total Number of Bitcoins: How Many Exist?

The total number of Bitcoins that can be mined and added to the network is 21 million. Satoshi Nakamoto, the creator of Bitcoin, established this limited and controlled number to preserve its value, with 21 million being the maximum limit. Currently, around 19.3 million Bitcoins have been mined. It is estimated that by the year 2140, the total number of Bitcoins will reach 21 million, after which no more will be generated.

In the realm of economics, the value of anything is determined by its scarcity. When no more Bitcoins can be created, it is anticipated that the currency’s price will increase. It’s worth noting that due to various reasons, such as forgotten passwords, over 4 million Bitcoins have been lost and might continue to increase over time.

Are Bitcoin Transactions Anonymous?

While Bitcoin transactions do not require personal information, the blockchain and the Bitcoin network are entirely transparent. One can trace a specific transaction or address from its origin to its destination. In essence, Bitcoin transactions are semi-anonymous; they are not entirely anonymous, as transaction details are recorded on the blockchain. Information such as public wallet addresses is documented within the blockchain.

Who Controls Bitcoin?

Some computers in the network act as mere holders of a copy of the blockchain, while others actively participate in Bitcoin mining. The decisions regarding the rules, capabilities, and software codes of Bitcoin are made by the community of miners. Anyone can propose changes for Bitcoin within specified standards. These proposals are voted on among miners, and if there is sufficient support, they are implemented into Bitcoin.

How is the Price of Bitcoin Determined?

Bitcoin has faced various challenges and fluctuations in price and acceptance since its inception in 2009. Different events have had positive and negative impacts on its price and adoption, causing it to double or drop to its lowest levels.

The determination of Bitcoin’s price is one of the essential questions that always linger in the minds of digital currency enthusiasts. In general, the most critical factor in Bitcoin’s price determination is supply and demand. Additionally, factors such as legislation, the cost of Bitcoin mining, halving events, news, social networks, large purchases of Bitcoin by prominent companies like PayPal, and the behavior of whales (individuals holding significant amounts of Bitcoin) can all influence the increase or decrease in Bitcoin’s price.

It’s essential to bear in mind that the digital currency market is still relatively new, with a limited number of participants globally. Compared to traditional financial markets, the value of this market is still significantly lower. These factors lead to the volatile fluctuations in cryptocurrency markets, witnessing momentary increases and decreases in digital currency prices.

Can Bitcoin be Used for Purchases?

Currently, thousands of online and physical stores accept Bitcoin as a method of payment, offering their services and goods in exchange for Bitcoin. People can make their purchases from these stores using Bitcoin.

One of the problems with this route was the transaction fee for Bitcoin transactions, which could be problematic for small purchases. The transfer fee in Bitcoin is such that sometimes it is even more expensive than the price of the goods themselves.

This issue was resolved with the launch of the Lightning Network, and now even the smallest payments are possible with Bitcoin.

What Threatens Bitcoin?

There are many threats to the cryptocurrency Bitcoin, perhaps the most prominent of which are governments. The goal of the introduction of Bitcoin from the very beginning was to cut the hand of the government from the people’s assets. This is naturally not a matter of pleasure for regulatory bodies.

Governments around the world are still struggling with how to regulate and legislate cryptocurrencies. If they are strict in this regard, it will lead to restrictions on their use and popularization of cryptocurrencies.

One perpetual threat to blockchain networks like Bitcoin is the 51% attack. This event occurs when a group of network nodes gains control of over 50% of Bitcoin’s computational power. The cost of executing such an attack is substantial, and many believe no one would be willing to bear this cost. The aftermath of such an attack would inevitably lead to a plummet in Bitcoin’s value, making it economically unjustifiable.

Another threat looming over Bitcoin is the advent of quantum computers, which possess exceptionally high processing speeds. After quantum computers are introduced, current encryption algorithms will lose their security, allowing easy access to private keys and digital currency funds.

However, anti-quantum algorithms also exist, and the competition between these two technologies makes the outcome unpredictable. It’s worth noting that this concern is not limited to blockchain and cryptocurrencies but extends to various other technology sectors.

Can Bitcoin be Hacked?

In theory, Bitcoin hacking is possible. However, it would require an immense amount of capital and powerful computers, making it practically impossible or economically unviable.

Additionally, there might be vulnerabilities in Bitcoin’s code that could potentially be exploited, leading to network damage or unauthorized Bitcoin creation.

However, due to Bitcoin’s decentralized and open-source nature, with thousands of developers working on it, the likelihood of such events is nearly zero.

Frequently Asked Questions (FAQ)

What is Bitcoin?

Bitcoin is a decentralized digital currency created to eliminate the need for centralized authorities like banks and governments. Bitcoin utilizes blockchain technology to facilitate semi-anonymous and secure transactions between users.

What is the goal of Bitcoin?

The primary goal of Bitcoin is to enable decentralized money transfers, acting as an alternative payment system outside traditional banking and intermediary institutions.

What is the unit of Bitcoin?

Bitcoin, like fiat currencies, has smaller units such as Millibitcoin and Microbitcoin. The smallest unit, named Satoshi, equals 0.00000001 Bitcoin. Each Bitcoin consists of 100 million Satoshis.

What Happens After All Bitcoins are Mined?

Once 21 million Bitcoins are mined, no new coins will be generated. Miners’ revenue will solely come from transaction fees.

Is there free Bitcoin?

Definitely not. Bitcoin’s value keeps increasing, and renowned companies worldwide are embracing and accepting it. The creation of new applications for this network and digital currency enhances its popularity.

How is Bitcoin Mined?

Bitcoin is obtained through the process of mining, where complex mathematical equations are solved by miners. Miners verify transactions and secure the network, receiving rewards for their efforts.

How long does it take to mine one Bitcoin?

Typically, it takes about 10 minutes for the network to confirm block mining and generate a Bitcoin reward. The reward for mining one block is 6.25 Bitcoins. This translates to approximately 100 seconds to mine 1 Bitcoin.

Does the price of Bitcoin affect the prices of other cryptocurrencies?

Bitcoin cannot directly dictate the prices of other digital currencies. The price of each digital currency is determined by various factors, such as the amount of coins available in the market, founders, and development roadmaps. However, the growth or decline in the price of Bitcoin can indirectly influence the prices of other digital currencies, leading to their growth or decline.

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