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What is Bitcoin and How Does it Work?

Updated: Apr 3, 2022




Bitcoin is a form of money that operates entirely online.


Hundreds of millions of transactions have been made in Bitcoin ever since it was first introduced in 2009.


Governments have debated on its existence and use, some have put strong measures for its use, while some have completely banned the use of it.


Even though Bitcoin has had all this attention, too many it still remains unknown and untrusted.


You may have probably heard of bitcoin as a Cryptocurrency, asset, or payment system or you may have never heard of bitcoin before.


The goal today is to help you get the basic knowledge of what bitcoin is and how you can it works.



How it all started…


To start from the beginning, Bitcoin was first introduced in late 2008 written under the name “Satoshi Nakamoto” describing a way to make peer-to-peer secure transactions. You can read about the original white paper here.


By then, it was just an idea but after a few months of core coding and sleepless nights of programming, the first block (Genesis block) was made and after about 1 year the first transaction was made.


This first real-world transaction was the born of bitcoin as a means of exchange and currency. 10,000 coins were paid for a couple of pizzas.


Bitcoin increased in value, making other people more interested in investing in bitcoin which made the value grow even more. Soon bigger organizations also started to invest in bitcoin and some made it one of their payment options.




With the overwhelming growth in the value of bitcoin, it attracted a lot of attention from the governments and regulators and if you fast forward to 2020, a number of countries have made bitcoin a legal tender.


What makes Bitcoin special?


The most interesting part about bitcoin is it only works on the internet plus it’s the fastest way to send and receive money from one person to another across the globe.


If you wanted to send bitcoins to someone, you can do it instantly without the interaction of the bank or any other third-party involvement.


How does Bitcoin work?


Bitcoin uses cryptography (security mechanism) to operate and for one to send or receive bitcoin, each individual has a public key which is like an account number in the Banking world and a private key which is like your PIN number if you were using Mobile Money.




Remember, anyone with the private key can access your bitcoins.


Let’s say you wanted to send me some bitcoin, first of all, you would need a wallet and address. Using your bitcoin wallet on the phone or computer to enter the amount of the bitcoin you want to send me and my wallet address.


From there you press send (consider minimal transaction fees).


The balance on your wallet will go down by the amount you have sent to me and the balance on my wallet will go up by the number of bitcoins received.


Within a few minutes, the transaction will be completed.


Now, the transactions take place on a public ledger known as the block-chain, the blockchain is managed by different people around the world with huge power machines that help to solve the blocks (transactions) and this is how bitcoins come into existence (a process called mining).


When it comes to mining bitcoin, it has increasingly become difficult to impossible using your laptop to mined bitcoin. You now need a huge amount of processing power not to mention graphics processors.


There fore many companies have come up with a way to rent machine power to allow you mine bitcoins with their powerful bitcoin mining dedicated machines. (cryptocurrency mining farms)I use Bitmine to mine bitcoin and I trust them because whenever i wanted to withdraw my bitcoin, they have never given me a hard time. It's almost instant.



Conclusion


Hopefully, this helps open your mind to the world of bitcoin how you can use bitcoin as a means of storing money or making quick transactions.


One of the best resources out there is at bitcoin.org.


If you would like to learn more about Bitcoin, I invite you to the Bitcoin Academy, a deep dive into the fundamentals of Bitcoin, from creating your wallet and address to making your first transaction and in the course we dive deeper into the world of bitcoin mining and some of the Best cryptocurrency mining farms out there.



With this general knowledge about Bitcoin, you are now able to disrupt the bitcoin economy.

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