Bitcoin

Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto. The name refers both to the open source software he designed to make use of the currency and to the peer-to-peer network formed by running that software.

Unlike some other digital currencies[citation needed], Bitcoin avoids central authorities and issuers. Bitcoin uses a distributed database spread across nodes of a peer-to-peer network to journal transactions, and uses digital signatures and proof-of-work to provide basic security functions, such as ensuring that bitcoins can be spent only once per owner and only by the person who owns them.

Bitcoins, often abbreviated as BTC, can be saved on a personal computer in the form of a wallet file or kept with a third party wallet service, and in either case bitcoins can be sent over the Internet to anyone with a Bitcoin address. The peer-to-peer topology and lack of central administration are features that make it infeasible for any authority (governmental or otherwise) to manipulate the quantity of bitcoins in circulation, thereby mitigating inflation

Operation

Users of bitcoin interact with a wallet which may be either stored on their computer by the bitcoin software or hosted on a third-party website. The wallet shows users their available bitcoin balance, transaction history, and the collection of bitcoin addresses they may use to send and receive bitcoins with other users. Because all transactions are added to the transaction log in the bitcoin block-chain, which is a distributed database formed by all the bitcoin participants, a user's bitcoin software does not need to be running in order for that user to receive bitcoins.

Transactions

Bitcoins contain the current owner's wallet address. A user can create as many wallets as they wish. When a bitcoin belonging to user A is transferred to user B, then A’s ownership over that bitcoin is relinquished by adding B’s address to it and signing the result with the private key that is associated with A’s address.[17] Because of the asymmetric cryptographic method, nobody else can grant this signature, and the private key cannot be determined based on the signed bitcoin. The resulting bitcoin is broadcast in a message, the transaction, on the peer-to-peer network. The rest of the network nodes validate the cryptographic signatures and the amounts of the transaction before accepting it