BCT CC UNIT 2 NOTES
BCT CC UNIT 2 NOTES
INTRODUCTION TO BITCOIN
Bitcoin is a decentralized digital currency, introduced in 2009 by an
anonymous person or group using the pseudonym Satoshi Nakamoto.
Unlike traditional currencies, Bitcoin operates on a peer-to-peer network
without a central authority like banks or governments. It allows users to
send and receive payments directly through a public ledger called the
blockchain, ensuring transparency and security.
Key features include:
Decentralization: No single entity controls Bitcoin.
Limited Supply: Only 21 million bitcoins can ever exist.
Transparency: Transactions are recorded on the blockchain,
accessible to anyone.
Borderless: Bitcoin can be used globally without exchange rates or
intermediaries.
BITCOIN MINING PROCESS
Bitcoin mining is the process of validating and adding transactions to the
blockchain. Miners use powerful computers to solve complex
cryptographic puzzles, ensuring network security and integrity.
Here’s how it works:
1. Transaction Validation: Miners verify transactions to ensure they are
legitimate (no double-spending or fraud).
2. Block Creation: Verified transactions are grouped into a block.
3. Proof of Work (PoW): Miners compete to solve a mathematical
puzzle. The first to solve it adds the block to the blockchain and earns
a reward in bitcoin (block reward + transaction fees).
4. Reward Halving: Approximately every four years, the reward for
mining is halved, reducing the rate of new bitcoin creation.
Mining ensures:
Security: Makes the network resistant to attacks.
Decentralization: Distributes control across multiple participants.
Incentive: Miners are rewarded, encouraging participation.