Hi Steemians,
This is my first post! Today I'd like to present this image to explain (or at least to try) how bitcoin works. Nowaday, there are millions of people without access to basic financial services. Bitcoin attempts to solve that problem. Nevertheless, Bitcoin is a new and complex technology. People need to understand that Bitcoin is just the top of the iceberg, this crypto asset is supported by blockchain technology. So one of my goals is to promote these technologies and their benefits.
Bitcoin is a digital cryptocurrency proposed in 2008 by a character under the pseudonym of Satoshi Nakamoto and it is considered the first public blockchain implementation. It uses cryptographic techniques and consesus mechanisms to solve:
- Double spending problem.
- Byzantine Generals problem.
At this moment (August, 2018) Bitcoin is equivalent to USD$7,525.75 according to the web site Coin Market Cap. However, in December 2017 its price was around USD$19K.
There are several blockchain definitions out there, however I'd like to define blockchain as follows: "Blockchain is a distributed database that stores a registry of immutable transactions across a trustless peer-to-peer network". Blockchain attempts to solve problems related to centralized systems. In a centralized systems a trusted third party is always needed to validate all transaction. Nevertheless, they represent a single point of failure or attack. Additionally, transactions (specially abroad) are very expensive and time consuming. We must also consider that machines and computational systems distributed on the internet have their own version of reality. As a consequence, auditability is a real problem.
We can think of blockchain as a log whose records are batched into timestamped blocks. These blocks have to be verified and create a consensus-based immutable ledger. Mining is the process of validating and recording transactions as a block into the Blockchain. Members (i.e., miners) validate and commit transactions in order to reach consensus.
This mechanism is designed to prevent dishonest nodes from adding false transactions and blocks. This removes the dependency on a trusted third party. Some benefits of blockchain and Bitcoin are: Transactions in a trustless environment, decentralization, immutable records, faster transactions, lower transactions cost and uncensored applications.
How does Bitcoin work?
In general this is how Bitcoin works:
- Suppose Bob wants to send 5 Bitcoins to Alice.
- Initially every node in the network shares the same information, i.e., a public ledger.
- The transaction is broadcast to all nodes in the network.
- Nodes compite to validate the transaction and to create a new block. The winner node receives a reward.
- Once the transaction is confirmed by the other nodes, the new block is added.
- Alice receives the Bitcoins
This is a very brief and non-technical introduction to Bitcoin. Visit bitcoin.org for further information. I'll keep posting more information related to blockchain, ethereum and other cryptocurrencies.
If you like the post don't be shy and feel free to upvote and resteem!
Best regards,