What is Bitcoin
Bitcoin is a digital currency operating on a decentralized blockchain, which functions as a public ledger. Unlike traditional currencies like the dollar or euro, Bitcoin is not managed by any central authority, such as a bank or government. It is created through a process called mining, where individuals use computer power to solve complex mathematical problems.
The primary distinction between Bitcoin and conventional currencies is its entirely digital nature. Bitcoin exists only on the internet, without any physical form like paper or coins. Additionally, there is no central organization overseeing Bitcoin; it operates on a peer-to-peer network, allowing transactions directly between users without intermediary institutions.
Introduced in 2009 by an anonymous individual or group known as Satoshi Nakamoto, Bitcoin is often referred to as a cryptocurrency due to its foundation in cryptographic principles. Mining involves using a computer's processor to perform calculations, with more powerful processors enabling faster problem-solving and thus quicker Bitcoin generation.
Bitcoin's anonymity can lead to misuse in illegal activities. For instance, in 2013, the US FBI shut down Silk Road, an illicit marketplace, and seized a significant amount of Bitcoin. Different countries have varying regulations regarding Bitcoin; while the US allows more freedom, China prohibits trading Bitcoin for its currency and restricts bank involvement with Bitcoin exchanges.
Bitcoin inspired other digital currencies, leading to the creation of over 60 cryptocurrencies, of which at least six function as actual currencies. Despite being independently managed, Bitcoin and similar cryptocurrencies share underlying principles.
Blockchain technology, which underpins Bitcoin, is a novel internet system where digital information is visible to everyone but cannot be copied. Every ten minutes, transactions are verified and recorded in a block, visible to all users on the network.
Although Bitcoin transactions are designed to be anonymous, each transaction is linked to a coded address that can be traced. It's reported that a small number of entities control a significant portion of the Bitcoin market, earning them the moniker "Bitcoin whales."
Satoshi Nakamoto stated that only 21 million Bitcoins will ever exist, with 17 million already mined. Mining becomes increasingly difficult as more Bitcoins are produced, with the rate of new Bitcoin creation halving approximately every four years. By 2140, the total supply of 21 million Bitcoins is expected to be reached.
Bitcoin ATMs, known as BTMs, first appeared in 2013, allowing users to buy and sometimes sell Bitcoin. By mid-2019, there were over 5,000 BTMs globally, with more than 2,000 in the United States alone. While many BTMs enable purchasing Bitcoin with cash, selling Bitcoin for cash remains limited and often costly.
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