Bitcoin

From Canonica AI

Introduction

Bitcoin is a decentralized cryptocurrency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.

A close-up of a shiny, gold-colored coin with a "B" symbol, representing Bitcoin.
A close-up of a shiny, gold-colored coin with a "B" symbol, representing Bitcoin.

History

Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software.

Design

Transactions

Transactions are defined using a Forth-like scripting language. Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain.

Blockchain

The blockchain is a public ledger that records bitcoin transactions. It is implemented as a chain of blocks, each block containing a hash of the previous block up to the genesis block of the chain. A network of communicating nodes running bitcoin software maintains the blockchain.

A series of interconnected blocks, representing the concept of a blockchain.
A series of interconnected blocks, representing the concept of a blockchain.

Mining

Bitcoin mining is a record-keeping service. Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes.

Economics

Bitcoin is one of the first digital currencies to use peer-to-peer technology to facilitate instant payments. The independent individuals and companies who own the governing computing power and participate in the Bitcoin network, also known as "miners," are motivated by rewards (the release of new bitcoin) and transaction fees paid in bitcoin.

A computer setup with multiple screens displaying complex data, representing the process of Bitcoin mining.
A computer setup with multiple screens displaying complex data, representing the process of Bitcoin mining.

Legal Status, Tax and Regulation

The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed its use and trade, others have banned or restricted it.

Criticism and Controversy

Bitcoin has been criticized for the amount of electricity consumed by mining. As of 2018, it was estimated that bitcoin mining worldwide uses as much energy as some nations.

See Also