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| == Appendix == | | == Appendix == |
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| === How does Bitcoin work? ===
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| Bitcoin operates using a technology called blockchain, which is a decentralised ledger system. Here's a simplified explanation of how it works:
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| # '''Transactions:''' Every Bitcoin transaction is a data unit that includes a few different items: the amount of Bitcoin being sent, the sender's address (public key), and the receiver's address.
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| # '''Blockchain:''' A blockchain is a chain of blocks, where each block contains a number of transactions. Once a transaction is initiated, it is broadcast to a network of peer-to-peer computers scattered across the world.
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| # '''Mining:''' To add a transaction to the blockchain, a process called mining must take place. This involves computers solving a complex mathematical problem that ultimately verifies the authenticity of the transaction. The first miner to solve the problem gets to add the block of transactions to the blockchain.
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| # '''Proof of Work:''' This mathematical problem is part of a system called proof of work, which is what prevents fraudulent transactions. It ensures that altering any single record (or block) in the chain would require re-mining not just the block with the transaction, but all the subsequent blocks.
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| # '''Decentralisation:''' Unlike traditional currencies, there is no central authority like a bank or government backing Bitcoin. Instead, it relies on this decentralized network of computers (miners) to process transactions.
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| # '''Bitcoin Wallets:''' To use Bitcoin, you need a digital wallet. This wallet doesn't actually store your Bitcoin; instead, it holds the private keys that allow you to access your Bitcoin address (public key).
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| # '''Public and Private Keys:''' A Bitcoin wallet contains a public key and a private key, which work together to allow the owner to initiate and digitally sign transactions, providing proof of authorization.
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| # '''Supply Limit:''' Bitcoin also has a stipulated supply limit of 21 million coins, which is expected to be reached around the year 2140. This limited supply is one of the factors that contributes to Bitcoin's value.
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| # '''Market-Driven Value:''' The value of Bitcoin is determined by what people are willing to pay for it, making it highly volatile. It's influenced by factors like supply and demand, investor sentiment, market news, and government regulation.
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| # '''Anonymity and Transparency:''' While Bitcoin transactions offer some level of anonymity, all transactions are publicly recorded in the blockchain, making it transparent.
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| Bitcoin's complex nature combines elements of mathematics, computer science, and economics. It represents a shift in how we think about money in the digital age.
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| === Cryptocurrencies comparisons === | | === Cryptocurrencies comparisons === |
