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What is Bitcoin – When did it Emerge & How does it Work?

Who is Satoshi Nakamoto?

Satoshi Nakamoto is a pseudonym that is basically applied to the individual or group of individuals responsible for the creation of the cryptocurrency Bitcoin in 2009! This name appears in various online forums of technologists who were involved in the process, and it is also the name of the person who signed the Bitcoin white paper, which is considered to be a kind of philosopher’s stone for this whole new world.

His location on the map was abruptly erased in 2011, and the multiple attempts to determine his identity have yet to be conclusively proven. Having said that, there are many unanswered questions about how this odd new world operates. First and foremost, if it is not a central bank that issues money, then who is it that issues money knowing that, despite the sophistication of the financial markets, the money must represent or be proof of a specific amount of value? What makes you think you can put your trust in these coins?

The answer most likely explains why Bitcoin is referred to as a “proof of work” cryptocurrency, as it is issued primarily as a result of a demonstration of “work done.” Through the use of a computer that possesses a set of features that enable it to connect to a network of computers capable of certifying transactions by solving a type of mathematical problem, a transaction can be validated and recorded. As a result, the network that makes up what we know as Blockchain is strengthened.

Bitcoin Transaction Example

Bitcoins are cryptocurrencies, which means they are digital assets; however, what does it mean to be virtual imply? They are made up of an encrypted code, which must be validated in order for its value to be recognised and the code to be recognised as valid. To put it another way, if we buy a car using Bitcoins, we don’t have to write a check or provide a bank transfer order.

We use a digital wallet, also known as a wallet, for both ourselves and the purchasers (in order to make the payment) as well as, of course, the seller (to receive it). We would use this wallet to pay the value of the car directly to the individual who sold it to us in Bitcoins, rather than going through a bank or a third party in the transaction.

What is the Process of Purchasing or Obtaining Bitcoins or Cryptocurrencies?

There are two ways in which we can obtain them. The reason for this is either because we “earned” them by participating in the network’s validation processes, or that we purchased them from a company that transforms euros (or any conventional currency) into virtual currencies. In other words, we convert our fiat money into cryptocurrencies. The exchange houses that are typically utilised for this are referred to as ” Exchange “, and they can be either centralised or decentralised in nature.

The validation of the encrypted code intrinsic to Bitcoins, which must transit through the Blockchain, is required in order for the purchase and sale activity to be possible. The fact that one of the primary objectives for this technology is the decentralisation of financial control means that the validation does not take place in the banks, but rather in a collection of computers that pool their computing resources in order to interpret and validate the transaction.

There is no validation of any transaction by any of these machines; the procedure is divided into blocks, which is one of the grounds stated in defence of its security and transparency, among other things.

Bitcoin is Totally De-Centralized!

Anyone or everything has the final say or total power. The computers that are capable of decoding and validating the codes used in this transaction are the ones that “resolve” this process the quickest, because they are more powerful. And the network they are mining on, rewards them for their efforts. In this particular instance, we are referring to bitcoins!

Due to the minimal number of transactions made and the small number of validators present in the early days of cryptocurrency, simply downloading software onto a computer was sufficient to gain entry into the validation network in those early days. However, as the number of transactions in Bitcoin or other virtual currencies has increased, the level of difficulty has increased, necessitating the use of computers with ever greater computational power, resulting in the need for a large amount of data to be mined.

These “supercomputers with specific capabilities” also entail a bigger financial investment on the part of those who purchase them, making the entire process, on the one hand, more demanding and, on the other hand, more professional for everyone involved.

Bitcoin works on Proof of Work!

Because miners are responsible for the selection and validation of work using the Proof of work (POW) approval algorithm, which was developed for Bitcoin and is now used in a variety of other cryptocurrencies, they are referred to as “miners.” Miners are individuals or businesses who contribute computational power in order to ensure that transactions are legal and true. In this context, the term “mining” refers to the process of addressing problems that are computationally complicated.

To put it another way, the miners compete for the validation of the operation, that is, for the resolution of the mathematical problem, and the first to solve the problem receives the reward for mining that block, so it is not a decision made by a human, but rather the transaction is validated by the Blockchain. To put it in another way, Virtual currencies operate on a transaction system in which the money they represent circulates without the intervention of a “central authority,” such as a bank, government, or credit company, making the reliability of the encryption algorithm/decryption critical to their operation.

As a result, Blockchain technology itself strives to increase trustworthiness, which is, in fact, one of the primary arguments advanced by those who believe that this system will be the money of the future!