Bitcoin simplified: Part I(Introduction)
This article is for absolute beginners. I will write it in multiple parts. I will try to simplify the working of cryptocurrencies like Bitcoin, Dogecoin, and Litecoin. All of these use Blockchain technology invented by an anonymous individual/group named Satoshi Nakamoto.
The domain name “bitcoin.org” was registered on 18 August 2008. On 31 October 2008, 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. Nakamoto’s identity remains unknown.
“So how exactly does it work?”
To know this, we first need to focus on the flaws of the traditional banking system. All of us have a Bank account which we use to store/transfer/deposit/withdraw/borrow money.
Let’s you want to transfer Rs.150 to your friend Neha. You would first deposit the money in your bank. You will inform the bank about your will to transfer the required amount to Neha. The bank initiates the transaction. Neha receives the money.
Where are the flaws? You might ask. Notice how much trust you are putting on a single entity, the bank. What if an employee of the bank miscalculates some amount? What if someone steals the money from the bank? There are many other ways in which things can go wrong without a single fault of your own. Cryptocurrencies solve this problem.