Understanding Bitcoins

                                            PART-1                     

Bitcoin-a virtual currency

Bitcoin is a cryptocurrency and worldwide payment system.It is the first decentralized digital currency, as the system works without a central bank or single administrator.The network is peer-to-peer and transactions take place between users directly, without an intermediary.These transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.

Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Research produced by the University of Cambridge estimates that in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.

HISTORY


On 18 August 2008, the domain name "bitcoin.org" was registered.In November that year, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto implemented the bitcoin software as open source code and released it in January 2009 on Source Forge.The identity of Nakamoto remains unknown. In January 2009, the bitcoin network came into existence after Satoshi Nakamoto mined the first ever block on the chain, known as the genesis block.Embedded in the coin base of this block was the following text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".

 This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking. One of the first supporters, adopters, and contributors to bitcoin was the receiver of the first bitcoin transaction, programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction.

Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. In the early days, Nakamoto is estimated to have mined 1 million bitcoins.In 2010, Nakamoto handed the network alert key and control of the Bitcoin Core code repository over to Gavin Andresen, who later became lead developer at the Bitcoin Foundation.Nakamoto subsequently disappeared from any involvement in bitcoin.Andresen stated he then sought to decentralize control, saying: "As soon as Satoshi stepped back and threw the project onto my shoulders, one of the first things I did was try to decentralize that. So, if I get hit by a bus, it would be clear that the project would go on."This left opportunity for controversy to develop over the future development path of bitcoin. The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John's.

 On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions were not properly verified before they were included in the blockchain, which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins.On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a single transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol. On 1 August 2017, a hard fork of bitcoin was created, known as Bitcoin Cash. Bitcoin Cash has a larger blocksize limit and had an identical blockchain at the time of fork.On November 12 another hard fork, Bitcoin Gold, was created. Bitcoin Gold changes the proof-of-work algorithm used in mining.