What is Bitcoin?
Bitcoin is the first global, decentralized currency that allows you to send money from one person to another without involving a third party broker, such as a bank. You only need your computer to make transactions because Bitcoin is fundamentally software.
As a decentralized currency, Bitcoin isn’t controlled by anyone. It’s open so that anyone can benefit from it.
You might think that the lack of control could mean chaos, but that’s not true at all. That’s because Blockchain, the technology behind Bitcoin is one of the most accurate and secure systems ever created.
How Does Bitcoin Work?
A blockchain is a ledger that keeps records of digital transactions. Instead of having a central administrator, like a bank or the government, blockchain organizes data in batches (What is a blockchain, and why is it growing in popularity?) called blocks. These data batches use cryptographic validation to link themselves together. In other words, each block identifies and references the previous block by a hash value (Hash function - Wikipedia), forming an unbroken chain.
Blockchain solves two of the most challenging problems of digital transactions (There is a 'game changer' technology on Wall Street and people keep confusing it with bitcoin): controlling the information and avoiding duplication. When a purchase is carried out, the ledger records it and sends it out to the entire network. Computers all over the world then compete to confirm the operation by solving complex math equations. The first to figure out the answer and validate the block receives a reward in Bitcoins (this process is called mining.)
The validated block is timestamped and added to a chain in chronological order. The entire chain is continually updated so that it’s always an accurate representation of who owns what at any given time.
Is it Legal?
The legality of Bitcoin depends on where you’re located. Bitcoin was legalized as a formal method of payment in Japan this year, and India might be next. In most countries, however, it somewhat operates in a gray zone, with no official ban or approval of Bitcoin.
Who’s Behind it?
The founder of Bitcoin is Satoshi Nakamoto, an anonymous online alias for a forum poster. The founder remains unknown, and no one truly knows who the actual founder is.
At the moment, Bitcoin is owned by the community as a whole, as it is an open source initiative, with no single owner behind it. It is a community movement.
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