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Bitcoin (₿) (BTC) is a decentralized virtual digital currency that can be sent between users through the Bitcoin peer-to-peer network, without the need for intermediaries like banks or governments. It was the first example of a cryptocurrency, a growing asset class that shares some characteristics of traditional currencies, but has verification based on cryptography.
The term ‘Bitcoin’ can refer to the token (a snippet of code that represents ownership of a digital value) or it can refer to the technology (a distributed network that maintains the ledger of balances of the Bitcoin token).
The idea for Bitcoin and blockchain was first published in an online cryptography forum in November 2008, by an anonymous person (or group) called Satoshi Nakamoto. The white paper, entitled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ outlined an electronic payment system based on mathematical proof, and explained how the different parts of the Bitcoin protocol would operate and be kept secure. It further described how a new type of database called a blockchain would keep track of the history of all Bitcoin transactions, and be maintained by everyone in the network.
Bitcoin was first released as version 0.1 in January 2009, by Satoshi and was published on SourceForge, an online collaboration platform for developers. Anyone could download the source code and run it to join the network. Satoshi continued to write the Bitcoin code until 2010 and then handed it over to the open source community. The smallest unit of a Bitcoin is called a Satoshi after its founder(s) and represents one-hundred-millionth of a Bitcoin. The first Bitcoin was created when Satoshi mined the first block of the chain, known as the genesis block.
There is said to be a limit of ₿21 million which can be mined. The supply is tightly controlled by an underlying algorithm. So, like gold, there is a limited and finite supply. Unlike the currencies issued by banks and governments, Bitcoin is not vulnerable to losing its value if the centralized issuing authority breaks down. The decentralized system can continue to operate as long as there are members in the network.
The managing of transactions and the issuing of Bitcoins is carried out collectively by the network. Bitcoin is open-source, its design is public, nobody owns or controls Bitcoin and everyone can take part. It is maintained by a group of volunteer coders and run by an open network of dedicated computers spread around the world.
Bitcoins are created as a reward for a process known as mining, which comprises adding transaction records (or blocks of code) to Bitcoin's public ledger (or chain) of past transactions and keeping them in the queue. Blocks are chopped off as each transaction is finalized, codes deciphered, and Bitcoins passed or exchanged. Miners use special software to solve the math problems that keep the Bitcoin process secure and are issued a certain number of Bitcoins in return. This provides a smart way to issue the currency and also creates an incentive for more people to mine.