Bitcoin (BTC-USD) is a virtual currency that’s used as an investment and a form of payment for goods and services. It’s known for its volatility, so it’s important to understand how bitcoin works. Here’s what you need to know so you can make informed, risk-aware decisions about buying and using bitcoin.
Learn more: How to start investing: A 6-step guide
Bitcoin is a type of cryptocurrency, which is a currency that exists only in digital form and operates without government or banking oversight. By comparison, the U.S. dollar, the EU euro, the Canadian dollar, and other national currencies have paper versions and are issued by their respective governments.
Bitcoin relies on a public digital ledger that validates and records transactions and verifies bitcoin ownership. This ledger is called the blockchain, and it is globally distributed — that is, decentralized — across a broad, worldwide network of servers.
Decentralization is a fundamental aspect of cryptocurrencies. Decentralization facilitates peer-to-peer payments with no banking intermediary, enhanced security, and defends against manipulation attempts.
Learn more: Read all the latest crypto and bitcoin news at Yahoo Finance
Bitcoin is a technology innovation with a specific vocabulary. Here are some terms you should know:
Block. A block is a permanent digital record of validated transactions within the Bitcoin blockchain. Each block references the block that came before it, which hardens the chain against tampering.
Node. A node is a computer, server, or similar device that stores the Bitcoin blockchain. Nodes monitor blockchain activity and can reject noncompliant transactions. There are over 18,000 Bitcoin nodes.
Bitcoin address. A Bitcoin address is a unique number that references a destination for Bitcoin payments.
Cryptography. Cryptography is a mathematical system that the Bitcoin blockchain uses to verify and secure transactions.
Bitcoin mining. Mining is the process of confirming transactions and adding blocks to the blockchain. Miners earn bitcoins for their work.
Bitcoin exchange. This is an…
..
