What is bitcoin for in simple words

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Pseudonymous[ change change source ] One of the differences between using bitcoin and using regular money online is that bitcoin can be used without having an internet connection to link any sort of real-world identity to it. Unless someone chooses to link their name to a bitcoin address, it is hard to tell who owns the address.

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Bitcoin does not keep track of users; it keeps track of addresses where the money is. Each address has two important pieces of cryptographic information, or keys: a public one and a private one.

The public key, which is what the "bitcoin address" is created from, is similar to an email address; anyone can look it up and send bitcoins to it. The private address, what is bitcoin for in simple words private key, is similar to an email password; only with it can the owner send bitcoins from it.

Because of this, it is very important that this private key is kept secret.

what is bitcoin for in simple words

To send bitcoins from an address, you prove to the network that you own the private key that belongs to the address, without revealing the private key. This is done with a branch of mathematics known as public-key cryptography. Public Key[ change change source ] A public key is what determines the ownership of bitcoins, and is very similar to an ID number.

If someone wanted to send you bitcoins, all you would need to do is supply them your what is bitcoin for in simple words address, which is a version of your public key that is easier to read and type. Anyone using the system can see how much money "ABC" has and how much money "DEF" has, but they cannot tell anything about who owns the address. But Bob and Alice each have a second key which only they individually know.

what is bitcoin for in simple words

This is the private key, and it is the "other half" of a Bitcoin address. The private key is never shared, and allows the owner of the bitcoins to control them.

However, if the private key is not kept secret, then anyone who sees it can also control and take the bitcoins there. The person who took it, told others about it later, saying "I'll send it back once Matt gives me a new address, since someone else can sweep [empty] out the old one.

Blockchain is a record of all transactions that have taken place in the Bitcoin network. It also keeps track of new bitcoins as they are generated.

With these two facts, the blockchain can keep track of who has what is bitcoin for in simple words much money at all times.

How is cryptocurrency different from digital currency?

However, the difficulty of the math problem depends on how many people are mining for bitcoin at the moment. Because of how complicated the math problems usually are, they must be calculated with very powerful processors.

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The process of generating the bitcoins is called mining. Miners either compete with one another or work together in groups to solve a mathematical puzzle. The first miner or group of miners to solve the particular puzzle are rewarded with new bitcoins. The puzzle is determined by the transactions being sent at the time and the previous puzzle solution. This means the solution to one puzzle is always different from the puzzles before.

what is bitcoin for in simple words

Attempting to change an earlier transaction, maybe to fake bitcoins being sent or change the number of someone's bitcoins, requires solving that puzzle again, which takes a lot of work, and also requires solving each of the following puzzles, which takes even more work. This means a bitcoin cheater needs to outpace all the other bitcoin miners to change the bitcoin history.

What is cryptocurrency in simple words? What is bitcoin meaning?

This makes the bitcoin blockchain very safe to use. QR Codes[ change change source ] A paper printable bitcoin wallet consisting of one bitcoin address for receiving and the corresponding private key for spending. A popular image associated with Bitcoin is a QR code.

QR codes are a group of black and white boxes that are similar to barcodes.

What is a cryptocurrency?

Barcodes are a row of lines, and QR codes are a grid of squares. Bitcoin uses QR codes options trading for dummies they can store more information in a small space, and a camera such as a smartphone can read them.

what is bitcoin for in simple words

The two QR codes on the Bitcoin note are the public and private addresses, and can be scanned with a number of online tools. Exchanges[ change change source ] An actual bitcoin transaction from a web based cryptocurrency exchange to a hardware wallet. Everyone in the Bitcoin network is considered a peer, and all addresses are created equal. All transactions can take place solely from peer to peer, but a number of sites exist to make these transactions simpler.

UTC Updated Dec 17, at p. I have one apple with me, I give it to you. You now have one apple and I have zero. That was simple, right? You know it happened.

These sites are called exchanges. Exchanges provide tools for dealing in Bitcoin.

So, what exactly is Bitcoin?

Some allow the purchase of Bitcoin from external accounts, and others allow trading with other cryptography-based currencies like Bitcoin. Most exchanges also provide a basic "wallet" service. Wallets[ change change source ] Wallets provide a handy way to keep track of all of a user's public and private addresses. Because addresses are pseudo-anonymous, anyone can have as many addresses as they want.

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A wallet holds all of this information in a convenient place, just like a real wallet would. A backup of a wallet prevents 'losing' the bitcoins. Popularity[ change change source ] Bitcoin adoption and use continues to grow a lot every year. SinceBitcoin has gained the attention of the mainstream media; one way is the WannaCry ransomware created in May Specifically, the survey found that 9. Bitcoin remains by far the most popular choice, followed by Ethereum and Litecoin.