The Bitcoin protocol is an open source software project that was started by the anonymous founder Satoshi Nakamoto who published the idea in a cryptography mailing list back in late 2009.
By the start of 2010 Satoshi and other volunteers helped start running the network by becoming miners (Back then mining was done on normal computers) and writing the software for the wallets to conduct transactions. It must be said that even though Satoshi started the project he/she or no one else had any special control over this open source protocol.
What is Bitcoin?
Bitcoin is a decentralised digital protocol to transfer value directly between participants without the need to for third parties or central intermediaries to come between or govern transactions. Bitcoins are also the name of the token on the network and each bitcoin can be divided by up 8 decimal places – So you can send 0.00000001 BTC
How many Bitcoins are there
In total, there will only ever be 21 million bitcoins ever created. So far just under 18 million have already entered circulation with the remaining three million to be mined between now and the year 2140 with an ever-decreasing rate of supply. Currently the supply increases by 12.5 Bitcoins every 10 minutes.
How does mining work
Anyone in the world can become a miner, all you need to do is buy some specialist hardware and connect it up to the Bitcoin network. As a miner your hardware will consume electricity to solve a difficult maths problem by using a trial and error approach. As a miner you will partially share in the new Bitcoins created every 10 minutes proportional to your share contributed to solving the problem. Currently there is about $1.3 billion of mining hardware deployed on the network that is competing for the reward of new coins.
How can you buy them?
Just like trying to by other currency like euros or dollars you can buy Bitcoins through an exchange? There are various types of exchanges that you can use like online exchanges on websites or apps, physical exchanges like shops or ATMs or maybe even P2P exchanges where you meet someone to trade Bitcoins at the local coffee shop in person.
How is the price determined
The price like all other markets is determined through supply and demand of buyers and sellers. Every day around $4 billion worth of Bitcoin is traded and these traders help find an equilibrium price for the day. One thing to note is that depending on where you may buy there may be a premium or discount. For example, if you only want to buy from an ATM the price may be higher than online exchanges quote due to the cost of initially buying and maintain a physical terminal versus a website.
How do you store Bitcoins and make transactions?
Bitcoins are stored in wallets. Different types of wallet exist like mobile wallets, website wallet, paper wallets and hardware wallets. All these wallets can store and send Bitcoins to each other but they each offer different level of security, functionality and ease of use.
Where can I spend Bitcoins?
Bitcoins can be sent via your wallet to anyone else who also has a wallet. Today there are over 100,000 merchants accepting Bitcoin as a form of payment and there are many websites that track and compare merchants – spendbitcoins.com or coinmap.org
What are Private Keys?
Private keys are secret passworda that are required to make Bitcoin transactions from a wallet holding funds. These are stored inside your wallet but some wallets allow you to export them and see the keys. They look like this: 5JiPnCbT3ywe9WNJdNvhFq4P2U6rC3pr6yJ83ooDLLuk2o76Vf9 (Or can also be shown pictorially as a QR code). If someone gains access to your private keys then they can steel your Bitcoins without any way to reverse the transaction. If you lose your private keys then you will also lose the ability to ever send the Bitcoins you have in your wallet.
What does it mean when they say Bitcoin is decentralised?
First you must understand that decentralisation for any project fits on a scale between high and low. Today Bitcoin is far more decentralised than any other open blockchain out there, meaning it is more resistance to forms of attacks on its key attributes (like being secure, reliable and censorship-resistant). This highly decentralised property has emerged from a complex game theory incentive structure that is in place between five key network participants (developers, miners, node operators, exchanges and users). Without going into too much detail, each participant is heavily incentivised to play by the rules of the network and stay in consensus with each other. If they try and cheat, its going to cost them financially.