What is Bitcoin?

Bitcoin is the first cryptocurrency, which means it’s an encrypted digital currency, which is used as a form of payment for services and goods on the internet. Coin-cash-get it? Transactions are secured through a server called a miner. No, not that kind! A group of developers called Satoshi Nakamoto first developed this virtual currency in 2008, a peer-to-peer electronic cash system.

A digital wallet, (or wally as I call it) is an electronic device that holds your personal information so that you may purchase goods online. Your bank account may be accessed using a digital wallet. The technology behind these wallets has three major parts: the system (the electronic infrastructure) and the application (the software that operates on top) and the device (the individual portion). (Just hand me a Coach wally and I’m perfectly happy, just saying.)
Bitcoin addresses; you can have multiple addresses where you hold your Bitcoins. There is a (public key) that vendors can access, and a private key for your access.(the link for private key is now redirected to the public key).
Bitcoin mining; (here is where the little miners come in), this is a distributed timestamp server as a peer-to-peer network, Bitcoin uses a proof of work system.

New transactions are broadcast to all nodes. (Calling all nodes! Anybody confused yet?)

  1. Each miner node collects new transactions into a block.
  2. Each miner node works on finding a difficult proof-of-work for its block.
  3. When a node finds a proof-of-work, it broadcasts the block to all nodes.
  4. New Bitcoins are successfully collected or “mined” by the receiving node which found the proof-of-work.
  5. Nodes accept the block only if all transactions in it are valid and not already spent.
  6. Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash.
  7. Repeat. (Wash, rinse, repeat)
(And of course by this time I was completely lost. Sounds like Greek to me)

A Bitcoin is defined by a chain of digitally-signed transactions that began with its creation as a block reward through Bitcoin mining. Each owner transfers a number of Bitcoins to the next by digitally signing them over to the next owner in a Bitcoin transaction. A payee can then verify each previous transaction to verify the chain of ownership. Each new ledger update creates some newly-minted Bitcoins.

New Bitcoins created in each update is halved every 4 years until the year 2140, (wow) when this number will round down to zero. At that time no more Bitcoins will be added into circulation and the total number of bitcoins will have reached a maximum of 21 million Bitcoins.

All of this information is according to the wiki on Bitcoins, and I tip my hat to whoever wrote the jargon on the wiki page. Good grief Charley Brown! There is so much information on Bitcoins and so confusing in so many different areas that I will be writing about Bitcoins for some time to come. Next article up will delve into the vendors themselves. That is really some interesting stuff!

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