How does bitcoin work? If you already know "what bitcoin is," it's time to learn how it works. Although on the surface, things may look remarkably similar to the end user, on the inside centralized systems are very different from decentralized ones. However, before we can holistically answer the question "how does bitcoin work?", there are a few questions we need to answer: what is most important about a monetary system; the circulation of money; and the evolution and development of the above two points. 1st generation - Shells, coins, bills In the case of banknotes or coins, the matter is simple. By giving a banknote to another person, we give up our rights to it by verbal agreement. The disadvantage of such a system is that someone dishonest after the transaction can simply roll up on us with our banknotes, after which not even a trace will be left. It is also much more difficult to send bills or coins to another country instantly - money transfers take days and cost up to several % of the transfer amount. Storing banknotes or coins is also risky and vulnerable to damage or theft. The low cost of counterfeiting banknotes or coins is also a big and massive problem. Generation II - Electronic Banking The Internet revolution has made it possible for us to send money to theoretically anywhere in the world in a relatively quick and efficient manner. Making an online transfer, the bank transfers our money to the recipient's account, charging a fee for intermediation. In the case of international transfers the commissions can be considerable and the transfer time is not satisfactory. Another disadvantage of such a system is the fact that the bank has control over our money - this means a whole range of possible errors due to human factor. It is the bank that deducts funds
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