16.3 Bitcoin Overview

In this section we provide a brief overview of Bitcoin. For those interested in the broader issues behind the design of cryptocurrencies like Bitcoin, we refer to the next section.

Bitcoin is an example of a ledger-based cryptocurrency that uses a combination of cryptography and decentralized consensus to keep track of all of the transactions related to the creation and exchange of virtual coins, known as bitcoins.

Bitcoin is a very sophisticated collection of cryptography and communication protocols, but the basic structure behind the operation of Bitcoin can be summarized as having five main stages:

  • Users maintain a transaction ledger;

  • Users make transactions and announce their transactions;

  • Users gather transactions ...

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