Bitcoin operates on a decentralized network of computers, known as nodes, which use blockchain technology to record and verify transactions. The blockchain is a distributed ledger that contains a chronological record of all transactions ever made on the network. Each block in the blockchain contains a batch of transactions, cryptographically linked to the previous block, forming a chain of blocks.
Key features of Bitcoin include:
Decentralization: Bitcoin operates without a central authority or single administrator. It is maintained by a network of nodes that validate and record transactions, ensuring the security and integrity of the network.
Limited Supply: The total supply of Bitcoin is capped at 21 million coins, making it a deflationary asset. This scarcity is designed to mimic the scarcity of precious metals like gold and can potentially increase the value of Bitcoin over time.
Peer-to-Peer Transactions: Bitcoin enables peer-to-peer transactions without the need for intermediaries such as banks or payment processors. Users can send and receive Bitcoins directly to and from each other, anywhere in the world, quickly and with low transaction fees.
Security: Bitcoin transactions are secured using cryptographic techniques. Each transaction is verified by multiple nodes on the network and added to the blockchain through a process called mining, which involves solving complex mathematical puzzles.
Pseudonymity: While Bitcoin transactions are transparent and recorded on the blockchain, the identities of the parties involved are often pseudonymous. Users are identified by cryptographic addresses rather than personal information.
Bitcoin has gained widespread adoption as a digital currency and store of value, attracting investors, traders, and users worldwide. It has also inspired the creation of thousands of other cryptocurrencies, collectively known as altcoins, and has had a significant impact on the development of blockchain technology and the broader cryptocurrency ecosystem.