What is Bitcoin?
Bitcoin (BTC) is a decentralized digital currency originally¬†described in a thesis paper in¬†2008 and launched in 2009 by pseudonymous ¬†computer programmer Satoshi¬†Nakamoto. Bitcoins have real-world value and can be traded or exchanged for¬†almost any world currency, as well as an increasing number of goods and¬†services.
The production of Bitcoin and rate of introduction into the Bitcoin¬†economy is governed by an open-source program (the ‚ÄúBitcoin Protocol‚ÄĚ) designed¬†to decrease Bitcoin production by half every four years until 21 million Bitcoin¬†are produced in the year 2140, at which point Bitcoin production will¬†permanently stop.
The Bitcoin network operates on a peer-to-peer platform which¬†is powered by its users. It is not owned or operated by any central authority or network, and is not directly regulated by any government.¬†There are two ways to acquire Bitcoin: by purchase or by mining. Bitcoins can¬†be purchased online ¬†using a number of online brokers and exchanges. Bitcoin¬†mining requires the miner to contribute significant ¬†computer processing¬†resources (and electricity) to the Bitcoin network in order to facilitate¬†Bitcoin transactions and maintain the security of the Bitcoin network. Whereas¬†banks and credit card companies facilitate credit & debit transactions,¬†Bitcoin transactions are facilitated by a vast peer-to-peer network of individual¬†miners.
 Although Bitcoin is¬†currently unregulated, the US Government has made recent efforts to regulate the¬†Bitcoin economy by requiring brokers and other Bitcoin intermediaries to comply¬†with recordkeeping and reporting responsibilities ¬†required by the Financial¬†Crimes Enforcement Network (FinCEN).
Bitcoin Addresses & Wallets
Bitcoin payments are made to Bitcoin addresses (‚Äúpublic keys‚ÄĚ) which are represented by an alphanumeric string about 33 characters in length and are associated with a ‚Äúprivate key‚ÄĚ contained in a secure, software-based Bitcoin ‚Äúwallet.‚ÄĚ Bitcoin wallets are used to store, receive, and transfer Bitcoins. A Bitcoin address and its associated private key are linked using cryptography.
The private key proves a person‚Äôs right to spend Bitcoin from a specific Bitcoin address through cryptographic signatures. The public key is a reference point for Bitcoin miners to verify transactions, but only the owner of a Bitcoin wallet has access to the private key which must be used to complete a transaction. Multiple Bitcoin addresses can be generated by one person and it is recommended for security purposes that Bitcoin users generate a new Bitcoin addresses for each transaction made.
Bitcoin is Not Entirely Anonymous
It is widely stated that Bitcoin addresses are anonymous, but they are in fact pseudo-anonymous. While no personal information is connected to any Bitcoin address, data on all Bitcoin transactions is permanently stored on a ‚Äúpublic key‚ÄĚ and can be viewed by anyone. Some Bitcoin transactions require buyers/sellers to provide some personal information. For example, many Bitcoin Exchangers requires significant verification (including bills containing a verifiable address) for members of its exchange. However, enhance anonymity can be achieved by using a different Bitcoin address for each transaction. (Bitcoin.org/en/you-need-to-know)
This public key functions as a reference point for Bitcoin miners to facilitate transactions by authenticating the transaction itself, as well as validating Bitcoin authenticity and proof of ownership.