Bitcoin is a virtual monetary unit and therefore has no physical representation. A bitcoin unit is divisible and can be divided into 100 million ''Satoshis'' the smallest fraction of a bitcoin. the bitcoin blockchain is a data file that carries the records of all past bitcoin transactions, including the creation of bitcoin units. it is often referred to as the ledger of the bitcoin system. the bitcoin blockchain consists information about new bitcoin transactions. the average time between bitcoin blocks to 10 minutes. the first block was created in 2009 and at the time of this writing was appended as the most recent block to the chain. because everyone can download and read the bitcoin blockchain, it is a public record, a ledger that contains bitcoin ownership information for any point in time.
The word ledger has to be qualified here. there is no single instance of the bitcoin blockchain. instead every participant is free to manage his or her own copy of the ledger accounts. instead there is a predefined set of rules and the oppurtunity for individuals to also has to be qualified because the owners of bitcoin units usually remain anonymous through the use of pseudonyms. to use the bitcoin system, an agent downloads a bitcoin wallet. a bitcoin wallet is software that allows the receiving, storing, and sending of bitcoin units. the next steps is to exchange fiat currencies, such as the U.S dollar, for bitcoin units. the most common way is to open an account at one of the many bitcoin exchanges and to tranfer a fiat currency to it. the account holder can then use these funds to buy bitcoin units or one of the many other cryptoassets on the exchange. due to widespread adoption of bitcoin, the pricing on large exchanges is very competative with relatively small bid ask spreads. most exchanges provide order books and many other financial tools that make the trading process transparent. a bitcoin transaction works in a way that is similar to a transaction in the yap payment system.
for a virtual currency to function, it is crucial to establish at every point in time how many monetory units exist, as well as how many new units have been created. there must also be a consensus mechanism that ensure that all participants agree about the ownership rights to the virtual currency units. in small communities as with the yap islanders everyone knows everyone else. the participants care about their reputation and conflicts can be disputed directly. in contrast within the bitcoin system the number of participants is substantially larger, and network participants can remain anonymous.
