About Bitcoin and Blockchain
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto, who published the invention in 2008 and released it as open-source software in 2009.
The system is peer-to-peer; users can transact directly without an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger
called the block chain. The ledger uses bitcoin as its unit of account. The system works without a central repository or single administrator,
which has led the U.S. Treasury to categorize bitcoin as a decentralized virtual currency. Bitcoin is often called the first cryptocurrency,
although prior systems existed. Bitcoin is more correctly described as the first decentralized digital currency. It is the largest of its kind in terms of total market value.
Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger.
This activity is called mining and miners are rewarded with transaction fees and newly created bitcoins.
Besides being obtained by mining, bitcoins can be exchanged for other currencies,
products, and services.
Users can send and receive bitcoins for an optional transaction fee.
Bitcoin as a form of payment for products and services has grown, and merchants have an incentive to accept it because fees are lower than the 2–3% typically
imposed by credit card processors. Unlike credit cards, any fees are paid by the purchaser, not the vendor. The European Banking Authority and other sources
have warned that bitcoin users are not protected by refund rights or chargebacks.
The block chain is a public ledger that records bitcoin transactions. A novel solution accomplishes this without any trusted central authority: maintenance of the block
chain is performed by a network of communicating nodes running bitcoin software. Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this
network using readily available software applications. Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast
these ledger additions to other nodes. 8 The block chain is a distributed database; to achieve independent verification of the chain of ownership of any and every
bitcoin (amount), each network node stores its own copy of the block chain. Approximately six times per hour, a new group of accepted transactions, a block, is created,
added to the block chain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent,
which is necessary in order to prevent double-spending in an environment without central oversight. Whereas a conventional ledger records the transfers of actual bills or
promissory notes that exist apart from it, the block chain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.