Hi there🙋🏼‍♂️,

here we are on the second appointment with Bitcoin. If you missed the first one, you can read it by clicking here.

In the previous article, I talked about the birth of Bitcoin, and the differences between a centralized and a decentralized financial system. It is important to understand how electronic payments work, as this is quite different from the traditional ones (cash). In this article, I would like to explain Bitcoin in more detail and present the starting points of how it works.

I concluded my introduction to Bitcoin by saying that Satoshi Nakamoto found a solution to the problem of double spending when, in a crisis scenario in 2009, he offered people an alternative to traditional money. Bitcoin: Digital money that allows direct interaction between two individuals, just like with cash, but on the internet. And this without resorting to central control or financial intermediaries.

Bitcoin is a decentralized digital financial system and a cryptocurrency (a means of payment) that allows us to exchange value online without the need to rely on financial institutions. The value of this asset is independent and stands on the demand&supply factor. We call Bitcoin with the “B” the system, and bitcoin with a “b” the cryptocurrency.

Decentralized, as Bitcoin is not managed by any central authority. To make it clearer; Bitcoin has no business, no buildings, no offices, and no employees. No one has control over it, which means no one can block a transaction, freeze an account or seize someone else’s bitcoins. Bitcoin as a system belongs to no one, but it is, at the same time, everyone’s — The people’s currency.

The technology on which the Bitcoin system relies is the so-called Bitcoin Blockchain. Instead of a central entity guaranteeing and registering each transaction in a single ledger, each active user participating in the system (a so-called node) records all transactions and, in the meanwhile, keeps a copy of the ledger. The Bitcoin Blockchain is, in other words, a public and immutable ledger of transactions. This allows the Bitcoin system to be completely transparent. Everyone can see the status of every existing account and every transaction; everything is indelibly written and traceable.

Bitcoin is, from one point of view, also anonymous. Or better, pseudonymous. No one can find out who's account it is and who sent bitcoin to whom. Let’s look at an example.

Three people, with pseudonyms A, B, and C, are trading Bitcoin between them. Each one has 10 bitcoins. Blockchain allows us all to see that people A, B, and C have 10 bitcoins. There is no way we can find out who is A, who is B, and who is C. Unless, of course, Adam tells us that he is A.

Having bitcoin simply means having access to a bitcoin wallet where, on the blockchain, everyone can see, that it contains some bitcoin.

And what is a bitcoin wallet?

It is a wallet in a digital form. It consists of two keys; a private and a public key. These keys are alphanumeric codes. The public key is an address that we share with others so we can receive a payment (we can compare it to an IBAN or an email address). The private key, instead, is a password that allows the owner to access their wallet.

The bitcoin wallet is based on asymmetric cryptography. We can obtain the public key from the private one at any time, but not the other way around. We cannot, in any way, obtain the private key from the public one. This is essential as the private key is the password of the bitcoin wallet and what allows us to move our bitcoins. In other words, the private key works as a “signature” or transaction approval. It is therefore indispensable that no one can obtain the private key from the public key.

A Bitcoin wallet is your pseudonym. Although it is public, visible to all, and indelible, no one can know it belongs to you.

I imagine these concepts may be foreign to you, and I understand if you find this terribly complicated. But I promise you it’s not like that. Often people think that to handle cryptocurrencies they need advanced skills in computer science and extensive knowledge of economics. This is not true at all. Just like everyone can use the web and the internet without knowing how it works.

I let you have fun creating Bitcoin wallets: https://www.bitaddress.org

• Photo by Joshua Woroniecki on Unsplash

Thank you for reading this article! I hope you found it interesting and helpful. If you want to support me, consider subscribing! You can associate an email to your wallet to get my new articles directly in your inbox! If you have a question or suggestion, DM me on Twitter and I will be happy to chat with you! 🙋🏼‍♂️

If you are feeling particularly generous and want to help a university student fund his studies, you can collect this on-chain entry as an NFT on Optimism and receive a visual representation of this article along with all the metadata!🙏🏼

Hi there🙋🏼‍♂️,

here we are on the second appointment with Bitcoin. If you missed the first one, you can read it by clicking here.

In the previous article, I talked about the birth of Bitcoin, and the differences between a centralized and a decentralized financial system. It is important to understand how electronic payments work, as this is quite different from the traditional ones (cash). In this article, I would like to explain Bitcoin in more detail and present the starting points of how it works.

I concluded my introduction to Bitcoin by saying that Satoshi Nakamoto found a solution to the problem of double spending when, in a crisis scenario in 2009, he offered people an alternative to traditional money. Bitcoin: Digital money that allows direct interaction between two individuals, just like with cash, but on the internet. And this without resorting to central control or financial intermediaries.

Bitcoin is a decentralized digital financial system and a cryptocurrency (a means of payment) that allows us to exchange value online without the need to rely on financial institutions. The value of this asset is independent and stands on the demand&supply factor. We call Bitcoin with the “B” the system, and bitcoin with a “b” the cryptocurrency.

Decentralized, as Bitcoin is not managed by any central authority. To make it clearer; Bitcoin has no business, no buildings, no offices, and no employees. No one has control over it, which means no one can block a transaction, freeze an account or seize someone else’s bitcoins. Bitcoin as a system belongs to no one, but it is, at the same time, everyone’s — The people’s currency.

The technology on which the Bitcoin system relies is the so-called Bitcoin Blockchain. Instead of a central entity guaranteeing and registering each transaction in a single ledger, each active user participating in the system (a so-called node) records all transactions and, in the meanwhile, keeps a copy of the ledger. The Bitcoin Blockchain is, in other words, a public and immutable ledger of transactions. This allows the Bitcoin system to be completely transparent. Everyone can see the status of every existing account and every transaction; everything is indelibly written and traceable.

Bitcoin is, from one point of view, also anonymous. Or better, pseudonymous. No one can find out who's account it is and who sent bitcoin to whom. Let’s look at an example.

Three people, with pseudonyms A, B, and C, are trading Bitcoin between them. Each one has 10 bitcoins. Blockchain allows us all to see that people A, B, and C have 10 bitcoins. There is no way we can find out who is A, who is B, and who is C. Unless, of course, Adam tells us that he is A.

Having bitcoin simply means having access to a bitcoin wallet where, on the blockchain, everyone can see, that it contains some bitcoin.

And what is a bitcoin wallet?

It is a wallet in a digital form. It consists of two keys; a private and a public key. These keys are alphanumeric codes. The public key is an address that we share with others so we can receive a payment (we can compare it to an IBAN or an email address). The private key, instead, is a password that allows the owner to access their wallet.

The bitcoin wallet is based on asymmetric cryptography. We can obtain the public key from the private one at any time, but not the other way around. We cannot, in any way, obtain the private key from the public one. This is essential as the private key is the password of the bitcoin wallet and what allows us to move our bitcoins. In other words, the private key works as a “signature” or transaction approval. It is therefore indispensable that no one can obtain the private key from the public key.

A Bitcoin wallet is your pseudonym. Although it is public, visible to all, and indelible, no one can know it belongs to you.

I imagine these concepts may be foreign to you, and I understand if you find this terribly complicated. But I promise you it’s not like that. Often people think that to handle cryptocurrencies they need advanced skills in computer science and extensive knowledge of economics. This is not true at all. Just like everyone can use the web and the internet without knowing how it works.

I let you have fun creating Bitcoin wallets: https://www.bitaddress.org

• Photo by Joshua Woroniecki on Unsplash

Thank you for reading this article! I hope you found it interesting and helpful. If you want to support me, consider subscribing! You can associate an email to your wallet to get my new articles directly in your inbox! If you have a question or suggestion, DM me on Twitter and I will be happy to chat with you! 🙋🏼‍♂️

If you are feeling particularly generous and want to help a university student fund his studies, you can collect this on-chain entry as an NFT on Optimism and receive a visual representation of this article along with all the metadata!🙏🏼