September 23, 2024 • Cryptocurrency
Bitcoin and the Bitcoin network
Bitcoin is an open-source, public, secure crypto-currency. It runs on its own network – a fully decentralized blockchain system, without a central bank, or a single administrator. That means that the majority of the network participants decide how the network functions and develops, instead of a single authority. We refer to it as “Bitcoin network”.
Bitcoin can be sent from one user to another directly, without the need for intermediaries. Since coming to life publicly in 2009, it’s network has never been hacked due to how its distributed ledger is set up.
Bitcoin’s importance comes from the fact that it is the first online system for transfer of value that solved the infamous problem of “double spending” without the need of a central figure. It is also the first crypto-currency system of its kind. The concept was invented in 2008 by an unknown person (or a group of people) hiding behind the name Satoshi Nakamoto. Bitcoin network, as we know it today, has no owner.
Transactions on the Bitcoin network are created and validated by the nodes on the network. Transactions are then added as blocks to the blockchain (ledger). Each node can do a special kind of work using its computing power to benefit the whole network – for example, validating and securing transactions. In the Bitcoin world, this kind of maintenance work is usually called “mining”. New coins are created by the network protocol and automatically sent to those maintenance workers as a reward for mining. For each transaction, the network also takes a small coin value as a transaction fee. We often refer to this kind of network setup as “proof-of-work”. Bitcoin and its network are considered to be the first generation of crypto-currency, and the “godfather” to all other crypto-currencies.
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