welcome in this video we will explore the basics of Bitcoin and understand what it is and how it works Bitcoin is a digital currency and payment system that utilizes a decentralized peer-to-peer Network and a public transaction Ledger called the blockchain it allows for the transfer of value between users without the need for a central Authority or intermediary Bitcoin transactions are recorded on a public Ledger making it transparent and secure Bitcoin is fast secure and borderless making it the perfect form of money for the internet unlike traditional currencies Bitcoin is entirely virtual and there are no physical coins users of Bitcoin own keys that allow them to prove ownership of Bitcoin in the Bitcoin Network with these keys they can sign transactions to unlock the value and spend it by transferring it to a keys are often stored in a digital wallet on each user's computer or smartphone new owner possession of the key that can sign a transaction is the only prerequisite to spending Bitcoin putting the control entirely in the hands of each user Bitcoin is a distributed peer-to-peer system as such there is no Central server or point of control Bitcoin is created through a process called mining which involves competing to find solutions to a mathematical problem while processing Bitcoin transactions any participant in the Bitcoin Network May operate as a minor using their computer's processing power to verify and record transactions every 10 minutes on average a Bitcoin miner is able to validate the transactions of the past 10 minutes and is rewarded with brand new Bitcoin this process decentralizes the currency issuance and clearing functions of a central bank and replaces the need for any Central Bank the Bitcoin protocol includes built-in algorithms that regulate the mining function across the network the difficulty of the processing task that miners must perform is adjusted dynamically so that on average someone succeeds every 10 minutes regardless of how many Miners and how much processing are competing at any moment the protocol also has the rate at which new Bitcoins are created every four years and limits the total number of Bitcoins that will be created to a fixed total just below 21 million coins the result is that the number of Bitcoins in circulation closely follows an easily predictable curve that approaches 21 million by the year 2140.
due to bitcoin's diminishing rate of issuance over the long term the Bitcoin currency is deflationary furthermore Bitcoin cannot be inflated by printing new money above and beyond the expected issuance rate the history of Bitcoin goes back to 2008 when a paper titled Bitcoin a peer-to-peer electronic cash system was published under the pseudonym Satoshi Nakamoto this paper outlined a completely decentralized electronic cash system that does not rely on a central Authority for currency issuance or settlement and validation of transactions the key Innovation behind Bitcoin was to use a distributed computation system called a proof-of-work algorithm to conduct a global election every 10 minutes allowing the decentralized network to arrive at consensus about the state of transactions this elegantly solves the issue of double spend where a single currency unit can be spent twice since its Inception in 2009 the implementation of the proof of work algorithm that provides security and resilience for Bitcoin has grown exponentially and now exceeds the combined processing power of the world's top supercomputers the identity of the person or people behind Bitcoin is still unknown however the system operates based on fully transparent mathematical principles open source code and consensus among participants Bitcoin represents a breakthrough in distributed computing and has wide applicability Beyond currency it can be used to achieve consensus on decentralized networks to prove the fairness of Elections lotteries asset Registries digital notarization and more we will Begin by discussing the different platforms on which Bitcoin wallets can be used including desktop mobile web and Hardware wallets we will also cover the concept of a paper wallet which is a low-tech but highly secure means of storing Bitcoin long term next we will discuss the different ways in which Bitcoin wallets can interact with the Bitcoin Network including full node clients lightweight clients and web-based wallets full node clients store the entire history of Bitcoin transactions and are the most secure but also require the most storage space lightweight clients on the other hand rely on full node clients to validate transactions and are less secure but more convenient web-based wallets as the name suggests are accessed through a web browser and store the user's wallet on a server owned by a third party ultimately the choice of a Bitcoin wallet will depend on your specific needs and level of expertise we recommend trying out several different wallets and experimenting with different platforms and features until you find one that fits your needs we will follow Alice as she acquires some Bitcoin and spends it to buy a cup of coffee at Bob's Cafe in Palo Alto we will see how easy it is to use her mycelium wallet to send and receive Bitcoin and learn about the basics of transactions and fees we will also explore the various exchanges and methods available for acquiring Bitcoin including buying it with fiat currency or trading it for other cryptocurrencies like this popular options coinbase a popular digital currency exchange that allows users to buy sell and store Bitcoin and other cryptocurrencies it also provides real-time Market data for various cryptocurrencies coin market cap a website that tracks the market capitalization price volume and other data for various cryptocurrencies Bitcoin average a website that provides the average Bitcoin price across various Global exchanges Bitcoin ticker a mobile app that provides real-time Market data for Bitcoin and other cryptocurrencies once Alice and Joe have agreed on the exchange rate Joe can send the Bitcoin to Alice's Bitcoin address this process is called transferring Bitcoin and it is done by broadcasting a transaction to the Bitcoin Network the transaction contains Alice's Bitcoin address as the recipient and the amount of Bitcoin to be transferred the transaction is then recorded on the blockchain the public Ledger of all Bitcoin transactions once the transaction is confirmed by the network the Bitcoin is transferred to Alice's wallet and she can now use it to make purchases or send it to other Bitcoin addresses in summary Alice has acquired her first Bitcoin by buying it from her friend Joe for 10 US dollars Joe used his mobile Bitcoin wallet to send the 0.10 BTC to Alice's Bitcoin address which was displayed as a QR code on her mycelium wallet the transaction was transmitted via the peer-to-peer protocol and quickly propagated across the Bitcoin Network Alice's wallet received the transaction and it was displayed as unconfirmed until it is recorded in the blockchain which happens every 10 minutes on average now that Alice has her first Bitcoin she is ready to start using it for transactions and purchases
