One of the main concerns people have when it comes to investing in bitcoin is who is in charge of it. It’s a fear that comes from the distrust some people have of banks or financial institutions.
Logically, we’d all like to know where our money is really going. But with bitcoin, you have nothing to worry about. Sit back and let the decentralization take over.
What Is A Decentralized Network?
You may know that bitcoin is a decentralized digital currency, but what does that mean? It basically indicates that there is no central entity involved in monetary issuance or control.
A decentralized system is a departure from traditional financial systems. Control and decision-making move from a single entity to a distributed network.
A decentralized network depends on all nodes and participants in the network. In other words, there is no single body making decisions for all network participants.
Decentralized systems have as their primary function the elimination of trust between parties. This means that no one person can exercise authority over any other person or the network.
Decentralization and its Benefits for Bitcoin
Bitcoin has no feelings. Thus, it cannot be manipulated. And since it cannot be manipulated, it is easier to trust it.
Given that the blockchain is public, everyone can see the new blocks filling up with transactions. Everyone can see the entire bitcoin transaction history on the blockchain. It is as transparent as it gets — no one can cheat the system.
So, instead of putting your trust in a centralized entity, you put it in a place that is run by the people and for the people.
There are no old-school tricks. Bitcoin is open and free for everyone.
There is no single administrator. The ledger is maintained by a network of equally privileged miners. Even the person or group that created bitcoin is not in charge of it today. It’s for everyone, everywhere.
And while the most common way to get bitcoin is through a centralized exchange, you can easily withdraw your bitcoins from there and regain control over them.
Bitcoin Consensus: The Mother Of It All
All of this is possible thanks to bitcoin’s consensus algorithm.
Consensus is the algorithm that the blockchain uses to record transactions. Once the algorithm settles a transaction, it automatically becomes true on all nodes of the network.
This algorithm is based on the creation of blocks through proof of work. Each transaction needs to be solved through complex hash calculations. Once verified, it is recorded on the blockchain.
As it is on the blockchain, it becomes unalterable. In other words, it is not possible to change an already registered block. These blocks are intertwined with each other, referencing the previous block and the calculation of its hash.
Everything is linked and it is not possible to change a block in the past without changing all the following blocks.