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4 Key Concepts of Bitcoin

  • Last Updated : 13 Sep, 2021

There are a number of currencies in this world used for trading amenities. The rupee, dollars, pound, euro, and yen are some of them. These are printed currencies and coins and one might have one of these in your wallet. But bitcoin is a currency one can not touch, one can not see, but one can efficiently use to trade amenities. Bitcoin is a decentralized digital currency that can be transferred from user to user via the peer-to-peer bitcoin network without the use of intermediaries. Network nodes use cryptography to validate transactions, which are then recorded in a public distributed ledger known as a blockchain. The cryptocurrency was created in 2008 by an unknown individual or group of individuals under the pseudonym Satoshi Nakamoto. The currency was first used in 2009 after its implementation was released as open-source software.

Bitcoin Key Concepts: There are four key concepts in Bitcoin that are as follows-

1. Disintermediated:  When users send money over the Internet, there is a need for a third party, such as a bank, to manage all the transactions. However, in Bitcoin, transactions are made directly over the Internet to another party. This transaction is carried out on the Bitcoin network. This network is in charge of confirming and verifying that the two parties actually exchanged value. This is known as disintermediation. The act of removing the middleman is known as disintermediation. It is one of the key components that make the blockchain so valuable because it eliminates the unnecessary inefficiency that occurs when a third party is used to transfer value between parties.

2. Distributed: The entire bitcoin network is powered by a network of thousands of distributed computers that share the workload. As a result, rather than having a single centralized computer handle the workload, the workload is distributed across multiple computers. Because there is no single point of failure, the distributed network is more reliable. The workload is distributed across thousands of computers that are all running and sharing the workload.

3. Decentralized: Bitcoin is a decentralized currency. It means that there is no central command, no central data repository, and no middle management to oversee what Bitcoin does. As a result, there isn’t a solitary point of failure.

4. Trustless: Bitcoin is called Trustless because no third party, such as a bank, is required to certify and trust the entire transaction process. Instead, the blockchain and the way Bitcoin processes transactions enable trust via Distributed Trustless Consensus, in which all nodes agree that a transaction took place.

Many skeptics are beginning to question whether the “year of blockchain” will ever come to pass. Blockchain announcements continue, albeit with less frequency and fanfare than in previous years. Nonetheless, blockchain technology has the potential to completely transform the financial services industry’s competitive landscape. It is also the most successful of hundreds of attempts to create virtual currency using cryptography, which is the science of creating and breaking codes. Hundreds of imitators have followed in Bitcoin’s footsteps, but the cryptocurrency remains the largest by market capitalization, a position it has held for the past decade.

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