Bitcoin is the first digital currency that was introduced to the world and started a revolution in the economy and financial affairs of the world. When Bitcoin started its work, no one could have imagined what changes this innovation would cause. Many predicted the early death of Bitcoin over the years, but what happened was that the king of digital currencies was here to stay.
In this article, we have tried to explain Bitcoin education in simple and concise language. If you are also curious about the king of digital currencies and want to know what features Bitcoin has, how it is stored and who controls it, watch the video below and stay with us until the end of this article to get answers to your questions.
What is Bitcoin?
Bitcoin (Bitcoin) with symbol BTC and symbol ₿ or ฿ is a completely digital currency which is Decentralized in bed Blockchain Bitcoin exists. Issuance, transfer and all Bitcoin transactions are done and recorded in a decentralized manner on the same blockchain. Bitcoin blockchain such as ledger The bank works, but it is decentralized and transparent, and anyone can have a copy of it.
In fact, Bitcoin is a type of electronic money that does not involve an intermediary institution in its distribution, transfer and management, and its control is in the hands of the people. With its emergence, Bitcoin fulfilled the long-standing dream of a completely digital money and put the world on the verge of a financial revolution. Today, this digital currency has become so popular that everyone is talking about it and wants to know what Bitcoin is.
In this monetary system, people are their own banks and transfer money to each other directly without the need for a bank or centralized institution. Suppose you want to send money to a friend in another country. If you want to do this with traditional methods and through the banking system, what troubles and costs await you? Now imagine that there is a system through which you can make this transfer directly without the need of any bank or intermediary at any moment of the day and night; Welcome to the world of Bitcoin.
Bitcoin in the simplest language
The simplest and at the same time the most comprehensive definition that can be given for the question “What is Bitcoin” presented, perhaps the title is the same article that “Satoshi Nakamoto” published in 2008 to introduce Bitcoin: Peer-to-peer electronic money system.
According to this definition, first, Bitcoin is money; It means that it has the same function as money that we all know and deal with every day and every hour. Second, this is electronic money; That is, it does not have a physical state; Rather, it is completely digital and its transmission also happens on a digital platform. Third, Bitcoin is peer-to-peer; This means that there is no middleman or central institution like a bank in Bitcoin; Rather, its transmission is carried out directly from one person to another.
Bitcoin; A global network
Bitcoin is a network of computers and servers around the world that are connected to each other via the Internet and run the Bitcoin core software. These computers, which are called nodes, have no superiority over each other and only store the Bitcoin database, which is called the blockchain. Anyone anywhere in the world can be a part of this network by running this software on any computer.
Read more: What is blockchain? Simple explanation with example + video
All people can transfer bitcoins to each other through the main software (Bitcoin Core) or Bitcoin wallet. This transfer (transaction) is received by nodes and recorded on the blockchain. Once a transaction is recorded on the blockchain, all nodes save it and no one can change or target this transaction.
The easiest way to understand what Bitcoin is is to compare it to the Internet of Money. The Internet is completely digital, no one owns or controls it, it is completely borderless, it is available 24 hours a day, 7 days a week, and everyone can easily send data to each other through it.
What are the features of Bitcoin?
We said that Bitcoin is functionally just like the money we know well. In this sense, Bitcoin is a tool for transferring value and an intermediary for the exchange of goods and services; But the nature of Bitcoin has serious differences with common money that we call fiat currency. In order to better understand what Bitcoin is and to understand its nature, we will examine its main features.
Decentralized
The term decentralized means that something is widely distributed and does not have a single, centralized place or institution. The technology and infrastructure that governs the production, supply and security of Bitcoin is not dependent on a centralized institution such as central banks or governments.
The Bitcoin network is completely public and anyone anywhere in the world with just a computer and an internet connection can connect to it and have a copy of it.
The management and administration of the Bitcoin network is also decentralized and at the disposal of network participants. Bitcoin is open-source and anyone can see its source code. Needless to say, the changes that are needed for the better administration of Bitcoin are approved and implemented by voting among the participants.
Limited supply
One of the important features of Bitcoin is its limited supply. Bitcoin is programmed in such a way that eventually only 21 million units will be released; That is, after the release of this number of bitcoins, no new bitcoins will be produced.
This limitation goes back to Satoshi Nakamoto’s most important concern, which was the indiscriminate printing of money by governments. Central banks print new money without regulation whenever the government wants it, and this issue reduces the value of money; The same thing we call “inflation”. This is despite the fact that no one can produce as many Bitcoins as they want.
Read more: Why is the supply of Bitcoin limited to 21 million units?
Unfakeable
The Bitcoin or Blockchain database is like an accounting ledger that anyone can have a copy of; For this reason, it is also called distributed ledger (DLT). Now imagine that hundreds of thousands or even millions of people each have a copy of this ledger and every time a new transaction is registered in the network, they all update their copy.
By using this technology, Bitcoin has eliminated the possibility of any forgery and arbitrary changes in this ledger. In fact, if someone wants to falsify a transaction or make a change in the ledger, they must apply it to all other copies as well; It is practically impossible.
Easy to carry
Bitcoin is on the blockchain network, and your access key to it is an encrypted phrase called a “private key” that works like a bank account password. You can store this phrase in a software wallet on your mobile or laptop or in a hardware wallet similar to flash memory. You can even write it on a piece of paper and keep it in your pocket. Even easier, you can even save your own private key.
With this possibility, wherever you go in the world and even leave the planet, you just need to have an internet connection; Because your bitcoins are in your hand; You don’t need a bank, no sending password by SMS, no authentication, no access to interbank transfer or SWIFT system and the like. You can easily carry anywhere from a few dollars to billions of bitcoins with you or transfer them to someone else with a small fee.
Read more: What is a digital currency wallet? Training to install and use a digital currency wallet
Semi-anonymous transactions
The main elements of every transaction in Bitcoin are: the sender and receiver and the amount of Bitcoin transferred. In Bitcoin transactions, the only thing that is recorded from the sender and receiver is their wallet address, and information that indicates the identity of the sender or receiver is not recorded in the Bitcoin ledger; Hence, Bitcoin transactions are neither completely anonymous nor completely traceable.
Each transferred bitcoin can be traced back to its first transaction, and at the same time, it is impossible to know who exactly played a role in these transfers; For this reason, Bitcoin transactions are described as “semi-anonymous”.
Irreversible transactions
If you remember, we said that no specific person or entity runs Bitcoin; Rather, a network of computers around the world do this. Therefore, in the Bitcoin network, once a transaction is recorded, no one can cancel or reverse it. Even if someone sends bitcoins to the wrong address, they still have to put their money back; Unless the other party (receiver) does this in a new transaction.
Irreversibility was created in Bitcoin with the aim of eliminating the possibility of cheating and spending again; It means that no one can spend one bitcoin twice.
The creator of Bitcoin is anonymous
Bitcoin was created by an unknown identity with the pseudonym “Satoshi Nakamoto”. No one knows who Nakamoto is or whether he was an individual or a group. There have been many speculations about Nakamoto’s identity; But none of these hypotheses have been proven and the identity of the creator of Bitcoin has always remained a mystery.
Read more: Who is Satoshi Nakamoto?
Where does bitcoin come from?
Bitcoin’s life cycle begins with a process called mining. Miners are the ones who secure the Bitcoin network and record transactions in the blockchain. Transactions are recorded in formats called “blocks” and entered into the blockchain or Bitcoin database. Whenever a miner succeeds in extracting a block, some new bitcoins are created and the system transfers it to the miner as a reward. This is where new bitcoins are born.
Bitcoin mining reward will reach zero in 2140; This means that no new bitcoins will be created after that.
Birth of Bitcoin with mining rewards
The block mining reward was initially 50 bitcoins; But according to Bitcoin rules, this amount is halved every four years. The process of halving the block mining reward is called halving. Currently, the reward per block is 6.25 bitcoins; It means that 3 halving events have happened so far. It is interesting to know that a new block is produced approximately every 10 minutes. The rules of Bitcoin are set in such a way that the duration of block mining always remains within this range.
What is the Bitcoin supply cap?
If until now you had a question about the mechanism by which the supply of Bitcoin is limited, now you should have got your answer. If you look at the Bitcoin halving model with a mathematical perspective, you will see that eventually, after several years, the Bitcoin reward will practically reach zero. Calculations show that this will happen in 2140.
Read more: 1402 digital currency report; How much digital currency do Iranian people have?
Where is Bitcoin stored?
You may have heard that Bitcoin is stored in your wallet; But this is not the reality. Bitcoin is not stored anywhere; Rather, it is these transactions that are recorded in the network and on the blockchain. Your balance is derived from the sum of your transaction output, also known as Unspent Transaction Output or UTXO.
Perhaps this issue can be explained better by mentioning an example. Suppose you have a bitcoin address and Ehsan transfers 50 bitcoins to your address. At this point you have 50 unspent bitcoins. Then, you transfer 10 bitcoins to the dynamic address and Mahsa transfers 5 bitcoins to your address. The unspent output of the dynamic transaction is 40 bitcoins (50 minus 10) and the unspent output of the Mahsa transfer is 5 bitcoins. Now your balance is equal to 40 plus 5 bitcoins, that is 45 bitcoins.
Read more: What is UTXO? Familiarity with the concept of unspent transaction output
How to receive and send bitcoins?
Everyone on the Bitcoin network is one “public key” (Public Key) and one “private key” (Private Key) The public key works like the account number and the private key works like the password to access the account. Bitcoin transfer is done in such a way that the sender sends a certain amount of Bitcoin, which is not more than his balance, to the recipient’s address or his public key and signs this transfer with his private key.
Read more: private key; Everything you need to know about private keys
Once the transaction is signed, it is sent to the Bitcoin nodes. Nodes check the validity of this transaction in terms of balance amount and private key validity. If everything was correct, the transaction gets the initial confirmation and enters the new block. When a new block is mined, the transaction within that block is entered into the Bitcoin blockchain or ledger. This transaction is now valid; But as more blocks are added to the blockchain after this transaction, the validity of that transaction increases.
Who made Bitcoin?
As we said, an anonymous identity created Bitcoin. The activities of this identity are registered on the internet with the username and email of “Satoshi Nakamoto”. Nakamoto started developing Bitcoin in 2007. During this time, he was in contact with a number of cryptographers.
Nakamoto registered the bitcoin.org domain in 2008 and launched a website with this address. In the same year, he published an article introducing Bitcoin, which is known as the Bitcoin White Paper.
Read more: Bitcoin official white paper in Farsi language
The first version of the Bitcoin software was released on January 9, 2009 on the Sourceforge website (sourceforge.net). Nakamoto mined the first block of the Bitcoin blockchain on January 3, 2009, and other people have since contributed to the network.
The disappearance of the creator of Bitcoin
By mid-2010, Satoshi Nakamoto was involved in the development of Bitcoin and made several modifications to it. Then, control the Bitcoin to programming called Gwen Anderson (Gavin Andresen) and ended his participation. In April 2011, Nakamoto posted a message saying that he was busy with other work and entrusted the bitcoins to the right person. This was the last known message from Nakamoto and he has not been heard from since.
Nick Sabo Nick Szabo Dorian Prentice Satoshi Nakamoto (Dorian Prentice Satoshi Nakamoto), Hal Finney (Hal Finney) and Craig Wright (Craig Wright) are among the famous people attributed to Satoshi Nakamoto; But either they themselves rejected this issue or it was rejected in court.
Who controls Bitcoin?
Bitcoin has no central entity. In fact, it is a network of computers around the world that all run the Bitcoin software and have a version of the blockchain.
Some computers only hold a copy of the blockchain, and others also mine Bitcoin.
All decisions related to the rules and capabilities and code of the Bitcoin software are made by the community of miners. Everyone can submit their proposed changes to Bitcoin in the form of specific standards. If these proposals attract enough support, they will be voted on by miners and, if approved, will be implemented in Bitcoin.
Can Bitcoin be hacked?
Theoretically, it is possible to hack Bitcoin; But this requires such huge capital and powerful computers that it makes hacking Bitcoin practically impossible or unprofitable. Also, there may be flaws in the Bitcoin code that someone could exploit to damage the network or generate Bitcoin for themselves; But because Bitcoin is decentralized and open source, with thousands of developers working on it, the possibility of this happening is practically zero.
What is the method of obtaining bitcoins?
Bitcoin can be obtained in different ways. Mining is the main way to earn bitcoins where you interact directly with the bitcoin network itself. At the same time, you can buy bitcoins or get bitcoins in exchange for selling something. Next, we will examine these methods.
What is bitcoin mining?
The Bitcoin mining method is a process in which people give the computing power of their computer or mining device (ASIC), i.e. CPU capacity, to the network and receive rewards from the network in return. The method of mining Bitcoin is that the miner connects his device to the Bitcoin network. The job of this device is to find the number that the Bitcoin network has determined for a block. Any miner who finds this number first will get the block reward.
See: What is Bitcoin mining?
Thousands or even millions of computers and devices are connected to the Bitcoin network, and someone with the most computing power is most likely to win the race. Some users combine their computing power to increase their luck; That is, they form a collection called mining pool.
Thousands of devices connected to the mining pool together form a mining unit and have much more luck. When this pool succeeds in mining a block, it distributes its reward among all its members in proportion to their computing power.
Some who have access to a lot of capital or have been able to attract capital, create a mining farm to produce a lot of computing power. A mining farm is actually a collection of thousands of powerful mining machines.
Trading with Bitcoin
One of the easiest ways to earn Bitcoin is to accept it as a payment method. For example, if you want to sell a product, sell it for Bitcoin; That is, give the product to the customer and the customer will pay bitcoins for it.
Buy Bitcoin
In addition to the mentioned methods, you can buy Bitcoin with common currencies such as Rials, Dollars, or Euros. At first, Bitcoin was traded in forums and chat rooms; But today, there are many exchanges around the world that have made it possible to trade Bitcoin to dollars and digital currencies.
In these exchanges, you can transfer money directly from your bank card to the exchange account and buy bitcoins in exchange. Only do this in reputable exchanges. Also, after buying Bitcoin, transfer it to your wallet and do not leave it in the exchange account. Remember, the best place to store bitcoins is your wallet.
Can you buy anything with Bitcoin?
Currently, thousands of online and physical stores accept Bitcoin as a payment method and offer their services and goods in exchange for Bitcoin. People can make their purchases from these stores with Bitcoin.
One of the problems of this path was related to Bitcoin transaction fees, which became problematic for small purchases. The transfer fee in Bitcoin is such that it sometimes exceeds the price of the goods themselves. This problem was solved with the launch of the Lightning Network, and now even the smallest payments are possible with Bitcoin.
See: What is the Bitcoin Lightning Network?
How to buy bitcoin?
The best way to buy bitcoins is to visit digital currency exchange websites. Iranian users can buy bitcoins from exchanges using one of the following two methods:
To buy and sell bitcoins in reliable Iranian exchanges, you can use the new function of digital currency and find the best exchange rate of bitcoins.
- Buying Tether or other stablecoin from Iranian websites and converting it to Bitcoin in foreign exchanges such as KuCoin
To buy bitcoin in Iran, you can search for the term “buy bitcoin” in Google to find those Iranian exchanges that sell bitcoin with Rials and bank cards. After registering on these websites, you can directly buy bitcoins with your bank card.
Sometimes, users may prefer to use the second method due to the low liquidity of domestic exchanges or the high cost. In this case, users can buy Tether or other stablecoins from domestic websites and then convert it to Bitcoins at foreign exchanges such as Kocoin. For selling, you can choose the best price of Bitcoin in the selling queue and sell it to that account.
What are Bitcoin wallets?
Digital currency wallets are generally divided into two types of hardware and software. All types of hardware wallets are the most secure; Especially if you are dealing with a large amount of bitcoins. There are different types of software wallets; Including mobile, desktop and web.
Next, we will introduce the best bitcoin wallets that you can choose according to your needs.
Read more: Introducing the top 15 Bitcoin wallets in 2024
| Name of the wallet | type | Download/access link | explanation |
| Trust Vault (Trust Wallet) | software (mobile) | Download (Android/iOS) | The best option for beginners |
| Types of ledger wallets Ledger | hardware | Physical (purchase from authorized stores) | The safest option |
| Types of treasure wallets (Trezor) | hardware | Physical (purchase from authorized stores) | |
| mycelium (Mycelia) | software (mobile) | Download (Android) | |
| Blue Wallet (BlueWallet) | software (mobile) | Download (Android/iOS) | |
| Electrom (Electrum) | software (desktop and mobile) | Download (for all operating systems) | The best option for professionals |
| exodus (Exodus) | software (desktop and mobile) | Download (Android/iOS/web/desktop) | |
| Blockchain.com | software (under the web) | access |
Frequently asked questions
At the end of the article, we answer some common questions related to Bitcoin.
Bitcoin is produced in the mining process and enters the market cycle. By participating in the Bitcoin network, miners ensure its security and produce new blocks. Every miner who succeeds in producing a block receives a reward from the network in the form of bitcoins, and this is the moment when new bitcoins are born.
Bitcoin can be bought from cryptocurrency exchanges. Many exchanges around the world sell bitcoins for common currencies. You can buy bitcoins from Iranian or foreign digital currency exchanges with a bank card or with currencies like Tether.
Bitcoin does not have a legally defined position in Iran; However, Article 2 of the General Penal Law states: “Nothing can be considered a crime; Unless punishment or preventive or educational measures have been determined for it according to the law. Therefore, buying and selling and keeping bitcoins is not a crime. However, Bitcoin mining has country restrictions that you should research before doing so.
The profitability of Bitcoin mining depends on many factors, including the cost of electricity, the price of the mining machine, and the price of Bitcoin in the market. Those who want to mine Bitcoin should consider these points. To calculate Bitcoin profitability, you can use Mining calculator Use digital currency.
When all 21 million Bitcoin units are mined, the only source of income for miners will be from transaction fees. At that time, the amount of fees and the price of Bitcoin in the market will determine whether it is profitable to operate as a miner or not.
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