What is bitcoin and how it works?

[ankurguta87]

There is a lot of misunderstanding and confusion when it comes to bitcoin. Mainly because it is relatively new and now it became popular in the mainstream media there have been lot of here say of how the bitcoin works.

I am new when it come to bitcoin but I have read some articles about it. This is basically what I understand correct me please if I am wrong
I have read that it is not a code or a data that can be stored and downloaded but it is more like a mutual agreement. Is that right?
And that all transaction is stored in the blockchain, which is a connection of all the computer which is running a bitcoin client.

This how I understand bitcoin.

Bitcoin was the first cryptocoin currency ever invented. No one knows exactly who created it – cryptocurrencies are designed for maximum anonymity – but bitcoins first appeared in 2009 from a developer supposedly named Satoshi Nakamoto. He has since disappeared and left behind a Bitcoin fortune.

Bitcoins are completely virtual coins designed to be 'self-contained' for their value, with no need for banks to move and store the money. Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.

Bitcoins are traded from one personal 'wallet' to another. A wallet is a small personal database that you store on your computer drive (i.e cold storage), on your smartphone, on your tablet, or somewhere in the cloud (hot storage).

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[DiceDies]

Welcome to the crypto space! Yes, all transactions are stored on the blockchain and it's not a 'code' per se. Bitcoin is best described as a virtual currency. There are no physical cash forms, coins, or tokens, they exist electronically based on an open-source software released by an unknown developer under the pseudonym Satoshi Nakamoto.

The Bitcoin network is decentralized in that no central authority controls the amount of bitcoin in circulation. Bitcoin doesn’t need a banking system or government for bitcoin tokens to be created, exchanged, or stored, and is not involved in traditional exchange rates. Instead, Bitcoin leverages a peer-to-peer network commonly referred to as the ‘blockchain.’ The blockchain technology used in Nakamoto’s software is the key to Bitcoin’s defining characteristics.

We expand on this in our BTC 101 guide, feel free to check it out, it's a great place to start for beginners! http://[Suspicious link removed]/Bitcoin101Guide

Cheers!

Thanks for the explanation.

[arvindjais1234]

There is a lot of misunderstanding and confusion when it comes to bitcoin. Mainly because it is relatively new and now it became popular in the mainstream media there has been a lot of here say of how the bitcoin works.

I am new when it comes to bitcoin but I have read some articles about it. This is basically what I understand correct me please if I am wrong
I have read that it is not a code or a data that can be stored and downloaded but it is more like a mutual agreement. Is that right?
And that all transaction is stored in the blockchain, which is a connection of all the computer which is running a bitcoin client.

This how I understand bitcoin.

Bitcoin

* Bitcoin is a peer-to-peer cryptocurrency which is created and held electronically. It allows you to send and receive BTC internationally.
All the transactions are recorded in public ledger which is called as Bitcoin blockchain. The information available on the blockchain is permanent and publicly viewable but it cannot be edited or deleted.

* It runs independently without any central authority or banking institution to eliminate the need of a middleman.

* BTC offers various benefits like low transaction fees, international payments, security through encryption, and irreversible transaction for merchants.

* Bitcoin is not owned by any authority or person. Anyone can use it but there is no identity or company which takes a charge of it.

* The BTC transactions are irreversible which means there is no one (such as a bank or government entity) which can restrict you from sending or receiving BTC with anyone, anywhere in the world.

How does Bitcoin work?

1 – Users only see the amount of BTC in their wallet and their final transaction results.

2 – But, behind the curtain Bitcoin network shares a public network called a “blockchain”.

3 – This ledger contains the data of every transaction ever processed on the network. All records of digital transactions are combined into “blocks”.

4 – If anyone is trying to edit or change any letter or number of the block transactions then it will leave drastic changes on all the following blocks.

5 – As the blockchain offers a public ledger, all users are aware that each transaction and any mistake or fraud attempt can be easily notified and modified by anyone.

Read more details about Bitcoin such as who controls the network?, Why trust Bitcoin?, Characteristics of BTC?, Benefits of Bitcoin?, How bitcoin is different from traditional currencies?, How to mine Bitcoin? , What does Wallet mean?, How to buy Bitcoin? etc: cryptocoinjudge.com/bitcoin/

[Labonikhatun]

Bitcoin is a cryptocurrency and worldwide payment system.It is the first decentralized digital currency as the system works.A transaction is a transfer of value between bitcoin wallets that gets included in the block chain.

[Chienna]

Bitcoin is a cryptocurrency or digital currency and it is a system enables payments to be sent between users without passing through a central authority,  Bitcoin hold in a digital wallet. When you send or receive coins, they are verified by a digital signature.

[Chris Hauer]

Bitcoin is a type of virtual currency brought to life by the internet, very powerful computers and the willingness of lot of people looking to embrace new forms of monetary exchange.

[Daniel Brian 1508]

From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them. This is how Bitcoin works for most users.
Behind the scenes, the Bitcoin network is sharing a public ledger called the ""block chain"". This ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending bitcoins from their own Bitcoin addresses. In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in bitcoins for this service. This is often called ""mining". 
Enjoy

[Maame Esi Sergio]

Bitcoin basically works on blockchain technology. literally block of chains with codes and nodes. This was created after the dying hard of some crypto enthusiast to serve as decentralized currency but I don't see it as a currency. Bitcoin is an asset.

[Briannass]

I just know : Bitcoin is a digital currency. That’s a concept that might be more complex than you realize: it isn’t simply an assigned value of money stored in a digital account, like your bank account or credit line. Bitcoin has no corresponding physical element, like coins or paper bills (despite the popular image of an actual coin). The value and verification of individual Bitcoins are provided by a global peer-to-peer network.

[valeria isa]

Bitcoin and its many derivatives are known as cryptocurrencies. The system uses cryptography—extremely advanced cryptography called a blockchain—to generate new “coins” and verify the ones that are transferred from one user to another. The cryptographic sequences serve several purposes: making the transactions virtually impossible to fake, making “banks” or “wallets” of coins easily transferable as data, and authenticating the transfer of Bitcoin value from one person to another.

[jack ryan]

Bitcoins are blocks of ultra-secure data that are treated like money. Moving this data from one person or place to another and verifying the transaction, i.e. spending the money, requires computing power.The very process of moving Bitcoins from one user to another creates the demand for more processing power donated to the peer-to-peer network, which generates new Bitcoins that can then be spent. It’s a self-scaling, self-replicating system that generates wealth…or at least, generates cryptographic representations of value that correspond to wealth.

[luke liam]

Bitcoins are blocks of ultra-secure data that are treated like money. Moving this data from one person or place to another and verifying the transaction, i.e. spending the money, requires computing power. Users called “miners” allow their computers to be used by the system to safely verify the individual transactions. Those users are rewarded with new Bitcoins for their contributions. Those users can then spend their new Bitcoins on goods and services, and the process repeats

[Edsel_Miller]

Bitcoin was the first cryptocoin currency ever invented.  Bitcoins are completely designed to be 'self-contained' for their value, with no need for banks to move and store the money. Once you own bitcoins, they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.

[Miaaajos]

Bitcoin was the first cryptocoin currency ever invented. I dont know exactly who created it – cryptocurrencies are designed for maximum anonymity – but bitcoins first appeared in 2009 from a developer supposedly named Satoshi Nakamoto. He has since disappeared and left behind a Bitcoin fortune.
Bitcoins are completely virtual coins designed to be 'self-contained' for their value, with no need for banks to move and store the money. Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.