bitcoin explained: how do cryptocurrencies work
Bitcoin is a decentralized digital currency that uses cryptography for security and is not controlled by any central authority, such as a government or financial institution. It was created in 2009 by an unknown individual or group of individuals under the pseudonym Satoshi Nakamoto.
Cryptocurrencies, of which bitcoin is the most well-known, work using a technology called blockchain. A blockchain is a decentralized, distributed ledger that records transactions on multiple computers, called “nodes.” Each node has a copy of the entire blockchain, which is constantly updated as new transactions are added.
When a transaction is made using bitcoin, it is broadcast to the network of nodes. The nodes then verify the transaction using complex algorithms and consensus rules, and add it to the blockchain if it is valid. Once a transaction is added to the blockchain, it is considered to be permanent and cannot be altered.
The decentralized nature of the blockchain means that it is not controlled by any single entity, and is therefore resistant to fraud and censorship. It also enables transactions to be made directly between users, without the need for a central authority or intermediaries.
Bitcoin and other cryptocurrencies are stored in digital wallets, which are software programs that allow users to store, send, and receive cryptocurrencies. A bitcoin wallet contains a public address, which is used to receive bitcoins, and a private key, which is used to sign and authorize transactions.
Cryptocurrencies have gained popularity in recent years due to their potential to disrupt traditional financial systems and offer a more secure and efficient way to make transactions. However, they are also highly volatile and subject to regulatory risks, and their use is not yet widespread.
In summary, bitcoin and other cryptocurrencies are decentralized digital currencies that use blockchain technology to enable secure, transparent, and efficient transactions. They are stored in digital wallets and can be used to make payments directly between users, without the need for intermediaries.