Bitcoin is not dependent on one organization or group of people. Bitcoin is a decentralized book, register or database of operations performed on bitcoin, i.e. transfer of funds, these operations are secured by special computers that secure the entire network through encryption.
A bitcoin book, or blockchain, cannot be deceived, erased or changed in an already stored database.
Decentralization of bitcoin means that nobody has total power over bitcoin, it is secured by computers all over the world, everywhere there is internet there everyone can buy and run a special computer, a machine (excavator) to secure the network by encrypting it and calculating subsequent blocks, such a machine earns on itself thanks to commissions from the operations of transferring funds which it secures.
Bitcoin can be considered a kind of modern currency that only exists in the Internet.
It has no paper version. Bitcoin is a decentralized currency, i.e. it does not have a central issuing institution and is completely independent from governments, banks or corporations. Wherever there is an internet you can use it.
Bitcoin is a currency that has no borders and can be instantly transferred from one end of the world to the other, avoiding intermediaries like banks and institutions that normally charge a commission for it.
Bitcoin works on an open source basis (open source code) so everyone can see how it works. Bitcoin code is available on GitHub.
Any changes to the bitcoin network must be approved by most of its miners, if, for example, some miners do not install new software on their machines, a so-called hard fork blockchain will be created.
Bitcoin has no owner or manager, works on a p2p network, is created by people for people.
Bitcoin’s operation is based on mathematics and cryptography, making it the safest currency in the world.
Bitcoin is limited in amount, it can be created only 21 million, so it is resistant to inflation.
Paying with bitcoins we need to know that this currency is divisible up to 8 decimal places, so we can pay for something like 0.00000001 BTC.
Bitcoin is a currency that is anonymous in the sense that you cannot see the data of the transferor or recipient, but you can check each transaction and the address of the wallet from which it was sent or received.
ADVANTAGES OF BITCOIN
- Security if we maintain a minimum level of security and wallet encryption.
- No intermediaries for transfers
- Anonymity of the transaction
- Speed of international transfer transactions
- Very low or no commissions
- Ease of use
- Resistance to inflation
- No manager – no one will block your account
- No revocation of transactions
HOW BITCOIN WORKS
Bitcoin operates on a p2p (peer to peer) network where the user network is a mining machine that confirms transactions. Each user of this network stores information about who the bitcoin data belongs to. This register is called a “block chain” or “transaction chain”. (blockchain).
Blockchain is a complete record of all transactions that have been carried out since the beginning of the Bitcoin system.
When sending a bitcoin to a colleague, for example, we do not send this information directly to him, but to the entire system network, asking him to confirm whether the transaction is correct. Confirmation of the transaction must come several times. Confirmation of a transaction is a complex cryptographic operation – SHA-256 which is calculated by special machines.
Transactions are recorded in so-called blocks, i.e. data packets. Each block has a hash of the previous block, the hash is cryptographically generated from the content of the block, so an attempt to change the content of an already existing block will not work, because then the hash will change and the next block will not match the previous one.
Thanks to this protection, it is impossible to change the saved transaction history, it stays there forever and is publicly available in any bitcoin block explorer, e.g.: blockchain.info, blockexplorer.com, blockcypher.com.
The computing power comes from bitcoin mines, many people and institutions make money with special ASIC machines to make bitcoin work, they call them miners.
Nowadays, bitcoin with earnings can be dug on machines with ASIC chips, e.g. Antminer S9 or Dragonmint T1. Of course, the transaction confirmation software can be installed on any computer, but due to the increasing difficulty it is no longer profitable – we will pay more for electricity than we will dig.
This method of confirming transactions is called Proof of Work (PoW)
Here you can read more about the Proof of Work algorithm.
Who pays the miners?
Part of the fee is from the commission and part is newly created bitcoins. One day the whole thing will be charged from the commission, because there can only be 21 million bitcoins.