Bitcoin is a decentralized digital currency that operates on a peer-to-peer network without the need for a central authority, such as a government or bank.
- Decentralization: No single entity controls Bitcoin; it operates on a distributed network of computers (nodes). Transactions are verified through a consensus mechanism called Proof of Work.
- Blockchain Technology: A blockchain is a public, distributed ledger that records all Bitcoin transactions in chronological order. Once recorded, data in the blockchain cannot be altered.
- Limited Supply: Bitcoin has a finite supply of 21 million coins, making it deflationary. Approximately 19.5 million bitcoins are already mined (as of late 2024).
- Anonymity and Pseudonymity: Bitcoin transactions do not require personal identification. Users transact using unique addresses, offering pseudonymity (not complete anonymity).
- Global Accessibility: Bitcoin is accessible to anyone with an internet connection. Transactions can be sent or received anywhere in the world.
- Transactions: Users send and receive Bitcoin using digital wallets, which generate cryptographic keys (public and private keys). Public keys act as addresses, while private keys are used to authorize transactions.
- Mining: Bitcoin transactions are grouped into blocks, which miners compete to validate by solving complex mathematical puzzles. The first miner to solve the puzzle adds the block to the blockchain and earns a reward in Bitcoin (block reward) plus transaction fees.
- Halving: Bitcoin rewards are halved approximately every four years (210,000 blocks) in an event called halving, reducing the supply of new bitcoins over time.
- Security: Bitcoin's security is maintained through cryptography and its decentralized nature, making it resistant to fraud and censorship.
- Decentralized and Transparent: No central authority; all transactions are publicly recorded.
- Limited Supply: Acts as a hedge against inflation, similar to digital gold.
- Borderless Transactions: Enables fast, low-cost international transfers.
- Security: Cryptographic techniques make Bitcoin resistant to counterfeiting.
- Financial Inclusion: Provides access to financial services for the unbanked.
- Volatility:Bitcoin's price is highly volatile, driven by speculation, market sentiment, and regulatory developments.
- Energy Consumption:Mining Bitcoin requires significant computational power, raising environmental concerns.
- Scalability:The network can process about 7 transactions per second, slower than traditional payment systems like Visa.
- Regulatory Uncertainty:Governments worldwide are divided on how to regulate Bitcoin, affecting its adoption.
- Illicit Activities:Bitcoin has been associated with illegal transactions due to its pseudonymous nature.
- Digital Payments:Used as a medium of exchange for goods and services.
- Store of Value:Viewed as "digital gold" for long-term investment.
- Cross-Border Transfers:Facilitates quick, low-cost international remittances.
- Decentralized Finance (DeFi):Enables peer-to-peer lending, borrowing, and other financial services.
- Hedging Against Inflation:Serves as a store of value in countries experiencing currency devaluation.
