What Is Bitcoin, and How Does It Work?

Bitcoin is a decentralized cryptocurrency that you can buy, sell and exchange directly, without an intermediary like a bank. Its creator, Satoshi Nakamoto, originally described the need for “an electronic payment system based on cryptographic proof instead of trust.”

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People should remember that every Bitcoin transaction that’s ever been made exists on a public ledger accessible to everyone, making transactions hard to change and very hard to fake. 

Hopefully, that’s by design: Core to their decentralized nature, they aren’t backed by the government or any issuing institution, as well as there’s nothing to guarantee their value apart from the proof baked in the heart of the system.

Since its public launch more than a decade in 2009, the world’s first decentralized cryptocurrency has risen dramatically in value.

As a reminder, its supply is limited to 21 million coins, and many people expect the price of Bitcoin only to keep rising as time goes by, to a great extent as more and more institutional investors begin treating Bitcoin as a sort of digital gold to hedge against market volatility and inflation. 

You might ask, “How Does Bitcoin Work?”

It is worth noting that Bitcoin is built on a distributed digital record called a blockchain. Moreover, as its name suggests, a blockchain is a linked body of data made up of units called blocks. They contain information about each transaction, including date and time, total value, buyer and seller, as well as a unique identifying code for each exchange. Notably, entries are strung together in chronological order, creating a digital chain of blocks.

No one is in charge of the blockchain as it is decentralized. According to Buchi Okoro, CEO and co-founder of the African cryptocurrency exchange Quidax, “It’s like a Google Doc that anyone can work on.” He also mentioned that “Nobody owns it, but anyone who has a link can contribute to it.”

Without a doubt, while the idea that anyone can edit the blockchain might sound risky for many people, it’s actually what makes the above-mentioned cryptocurrency trustworthy and secure. For a transaction block to be added to the Bitcoin blockchain, a transaction block must be confirmed by the majority of all Bitcoin holders. Moreover, the unique codes that recognize users’ wallets and transactions must conform to the right encryption pattern.

Furthermore, these codes are long, random numbers, making them very difficult to produce fraudulently. Besides, the level of statistical randomness in blockchain verification codes, which are needed for every transaction, significantly reduces the risk anyone can make fraudulent Bitcoin transactions.

Do you know how to buy the world’s largest cryptocurrency?

The vast majority of people buy Bitcoin via cryptocurrency exchanges. They (cryptocurrency exchanges) allow you to buy, sell and hold cryptocurrency. Don’t worry; it is quite easy to create an account. Notably, you’ll have to verify your identity and provide some funding source, such as a bank account or debit card.

Major exchanges include Coinbase, Gemini, and Kraken. It is also possible to buy Bitcoin at an online broker like Robinhood.