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Bitcoin
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== Operations == === How did the idea of Bitcoin come about? === The idea of Bitcoin, as well as the broader concept of cryptocurrencies, originated from a long-standing interest in digital cash and decentralised financial systems. Bitcoin itself was first introduced in a 2008 white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" by an individual or group using the pseudonym Satoshi Nakamoto. Several key factors and ideas contributed to the development of Bitcoin: # '''Cypherpunk Movement:''' The Cypherpunk community, a group of activists advocating for the use of cryptography to bring about social and political change, laid much of the philosophical and technical groundwork for cryptocurrencies. They promoted the idea of using cryptographic techniques to create secure, anonymous digital currencies and transactions. # '''Earlier Digital Cash Experiments:''' Before Bitcoin, there were several attempts at creating digital cash systems, like David Chaum's DigiCash, which used cryptographic protocols to ensure privacy. While these systems had innovative ideas, they often relied on central authorities and didn't achieve widespread adoption. # '''Double Spending Problem:''' A significant challenge in digital cash is preventing double spending, where the same digital token is spent more than once. Traditional digital transactions require a central authority, like a bank, to validate transactions. Nakamoto's Bitcoin solved this with a decentralised ledger, the blockchain, which is maintained by a network of nodes following a consensus protocol. # '''Blockchain Technology:''' The introduction of blockchain technology was a key innovation of the Bitcoin paper. It's a decentralised ledger that records all transactions across a network of computers. This makes Bitcoin resistant to fraud and censorship. # '''Economic and Political Context:''' The development of Bitcoin was also influenced by the economic environment, particularly the financial crisis of 2007-2008. This period led to increased skepticism about traditional banking systems and interest in alternative forms of currency that weren't controlled by governments or central banks. # '''Influence of Previous Concepts:''' Bitcoin combined concepts from previously proposed systems like b-money and Bit Gold, which outlined ideas for decentralised digital currencies, but never fully developed them into working systems. === What's the mission of Bitcoin? === The mission of Bitcoin, as outlined by its creator Satoshi Nakamoto, is to provide a decentralised digital currency that enables peer-to-peer transactions without the need for a central authority, such as a bank or government. This is aimed at creating a financial system where transactions are transparent, secure, and accessible to everyone, regardless of their location or status. Bitcoin's design seeks to offer an alternative to traditional financial systems, emphasising financial freedom, privacy, and reduced reliance on centralised institutions. This mission is rooted in the belief that a decentralised approach to currency can offer enhanced security, lower transaction fees, and resistance to censorship. === What's the main problem that Bitcoin is designed to solve? === The main problem that Bitcoin is designed to solve is the issue of trust in financial transactions. Traditionally, trust has been established through intermediaries like banks or financial institutions. Bitcoin, through its decentralised blockchain technology, solves this problem by allowing for peer-to-peer transactions without the need for a centralised authority. This design addresses several key issues: # '''Double Spending:''' It prevents the same digital currency from being spent twice. # '''Censorship Resistance:''' Transactions cannot be easily blocked or censored by governments or institutions. # '''Reduced Dependency on Intermediaries:''' It minimises the need for third parties, reducing potential points of failure and costs associated with transactions. # '''Global Accessibility:''' Bitcoin offers a global, digital form of currency accessible to anyone with an internet connection, not limited by national borders or traditional banking systems. === What is Bitcoin? === Bitcoin is a currency. === What's unique about Bitcoin? === What makes Bitcoin unique is that it operates on a decentralised network (i.e. without the need of a central entity, such as the Bank of England), and the supply of the currency is limited (at 21 million coins). The main benefit of operating on a decentralised network (rather than a centralised network) is that within the network, there is no single point of failure. In a centralised network, if the central entity that operates the network fails, then the whole network - and the currency that operates on the network - fails (i.e. there is a single point of failure in the network), whereas in a decentralised network, becasue there is no central entity, there is no single point of failure, and therefore the network - and currency - is likely to last for much longer, possibly forever. For example, the world's first ever known currency was operated by a central entity (The Kingdom of Lydia). When the central entity failed, so did the currency. [[File:Value of U.S. Dollar - Log.jpg]] [[File:Bitcoin purchasing power.jpg]] Another key benefit of transacting on a decentralised network is that transaction costs are likely to be lower.
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