From bbf09ff7b342644dfd9a7e0c3b4f754cbc74354f Mon Sep 17 00:00:00 2001 From: =?UTF-8?q?C=C3=B8bra?= Date: Sat, 21 Jul 2018 21:49:23 +0100 Subject: [PATCH] What is Bitcoin script --- docs/what-is-bitcoin.md | 71 +++++++++++++++++++++++++++++++++++++++++ 1 file changed, 71 insertions(+) create mode 100644 docs/what-is-bitcoin.md diff --git a/docs/what-is-bitcoin.md b/docs/what-is-bitcoin.md new file mode 100644 index 00000000..7a2d33cd --- /dev/null +++ b/docs/what-is-bitcoin.md @@ -0,0 +1,71 @@ +## Overview + +Bitcoin is a peer-to-peer digital currency and network. Bitcoins can be sent and received through +the internet, and aren't centrally controlled by anyone. Unlike using a bank, this means nobody +can seize, block or take control of your money. Instead, Bitcoin is run and verified collectively by +its users, as a peer-to-peer network. Let's get started and explain the history behind Bitcoin +and how it works. + +## Background and transactions + +Bitcoin was first described in the Bitcoin whitepaper, by Satoshi Nakamoto, its first developer. +Before Bitcoin, digital currencies and payment systems all relied on trust, by either trusting a +company, or an individual. This made it easy for these trusted persons to block people's money, +or succumb to Government intervention. Satoshi figured out a way to overcome that, by inventing +a data structure called the blockchain, which is distributed between all users in a peer-to-peer network. + +Users of the Bitcoin network create transactions, and then digitally sign them with cryptographic +signatures. A transaction contains all the information necessary to send the bitcoins to its recipient. +Once the transaction is ready, it gets broadcasted to the Bitcoin peer-to-peer network so that it can +be included into the blockchain by the Bitcoin miners, a group of users and businesses who use special +hardware to solve really complex puzzles to secure transactions and extend the blockchain. But what +really is the blockchain? + +## Blockchain + +The blockchain is a chain of blocks, created by the Bitcoin miners by solving computationally +difficult puzzles using their specialised hardware. Each block is generated approximately every +ten minutes, and contains transactions between users. Miners compete to solve blocks so they can +claim the block reward and transaction fees. The block reward is a payout given to the miner that +solves the block, the payout amount halves every four years and is the way Bitcoin bootstraps its +circulating supply. + +Miners listen for incoming transactions between users, place them into blocks, and then compete +with one another to solve the computationally challenging puzzle. The first miner to solve the +puzzle announces their block to the network, and that block gets added to the distributed blockchain. +Once the block is added, other miners then abandon the old block they were working on, and create a +new block which builds on top of the recently announced block. This process builds a chain of blocks, +the blockchain. Every two weeks, the network uses an algorithm to limit the rate of block creation +to an average of one block every ten minutes. + +## Fees and the role of miners + +The amount of space available for transactions in each block is limited, so users pay transaction +fees to bid for space in the next block for their transaction. This means Bitcoin's transaction fees +can be higher during periods of heavy use, and lower during quieter times. The transaction fees are +always changing, but most Bitcoin wallet software uses smart algorithms to figure out the correct fee +to pay to get your transaction processed by the miners. It costs nothing to receive Bitcoin, the +transaction fee is only paid by the sender. + +The transaction fee goes to the miner who mined the block the transaction was included in. It's +important to understand that even though miners collect a fee, and create blocks, they do not +control the Bitcoin network. The blocks miners create are verified by the users who run the +Bitcoin software. Amongst other things, the software checks any new blocks to make sure the miner +isn't cheating by claiming a higher payout then they're entitled too or reversing any transactions. +Therefore miners are unlikely to attempt to misbehave. Miners just use their specialised hardware to +work on behalf of the users and must follow the rules of the network. + +## Ending Summary + +Bitcoin makes possible many new use cases that weren't possible before. Online shops can use +Bitcoin to receive payment for their goods, without worrying about charge backs and fraud. +Unlike banks and credit cards, you don't need to hand over any personal information to begin +using Bitcoin. The Bitcoin network never sleeps, and functions worldwide, with little to no downtime. +Through the power of Bitcoin, a business man in Russia can send bitcoins to a programmer in America, +without going through a middle man or asking anyone for permission. + +People living in countries suffering from hyperinflation can use Bitcoin as a store of value, +boosting their economic freedom. Bitcoin also has features which make possible a limited form +of smart contracting. Bitcoin is revolutionising finance the same way the web changed publishing. +You can get involved today, by downloading your first wallet. Visit Bitcoin.org for more information +to learn more about Bitcoin.