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The Bitcoin System and Its Components

What is Bitcoin?

While “Bitcoin” is usually mentioned as a cryptocurrency, it’s more than that.

Bitcoin is actually a system.

Like with any system, the Bitcoin system is a collection of elements or components that work together as a whole.

Let’s take a look at the different components of Bitcoin.

The Bitcoin system is basically just a bunch of computers that “talk” to each other over the internet.

To be able to talk to each other, Bitcoin software is installed on each computer.

The Bitcoin software is open source which means anybody can look at the source code.

Open source means that the software is not owned by anyone or any company. It is free to use and modify. Open source software is code that is designed to be publicly accessible. This means that anyone can see, modify, and distribute the code as they see fit.

This software, known as the Bitcoin client, was created by Satoshi Nakamoto in late 2008.

The original implementation of the software is now known as Bitcoin Core. Satoshi Nakamoto served as the original maintainer of Bitcoin Core until he disappeared in late 2010,

Since then, a bunch of other individuals, called “Core developers” have taken over and now maintain the software.

What does the software do? It runs the Bitcoin protocol.

A protocol is a set of rules or procedures that govern a system. So the Bitcoin protocol is the set of rules that define how the Bitcoin system operates.

For example, there’s a rule that specifies a predetermined amount of bitcoins to ever be in circulation. Another example of a rule specifies what determines a transaction to be valid.

This protocol, or rules, can be described in writing, but in Bitcoin’s case, are expressed in computer code. This computer code is then compiled into software.

Compiled just means that the human-readable computer code written by a programmer(s) is translated into computer-executable machine code.

Anybody can download and install this software.

Because Bitcoin Core’s code is open source, there are now multiple implementations of Bitcoin’s code. But Bitcoin Core remains the most popular, and used as the reference version by other Bitcoin software.

Currently, this software is installed on thousands of computers spread out across the world.

These computers are called Bitcoin nodes.

If the computer (“node”)  is connected to the internet and starts running the software, it becomes part of the Bitcoin network.

Once nodes are connected to the Bitcoin network, they start communicating and sharing information with each other.

All right, let’s list out components of the Bitcoin system that’s been mentioned:

  • Bitcoin software
  • Bitcoin protocol
  • Bitcoin nodes
  • Bitcoin network

We’re still missing components, but no worries. all will be covered slowly in later lessons.

For now, let’s draw a “map” of the Bitcoin system of what you’ve learned so far.

The “map” looks pretty small right now but just you wait!

As you learn more concepts, we will see it grow! Be prepared to be amazed! 

Let’s now learn more about the Bitcoin network..

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