Although Bitcoin has been around for many years, there is still a number of people who still do not know what Bitcoin is. In this article, I will explain what is bitcoin and how it works.
What is Bitcoin
Well, Bitcoin is the first-ever digital currency that is produced, used, and distributed digitally. It is a decentralized currency as the control does not involve any central authority. (central banks and governments)
In fact, Bitcoin is produced collectively by the entire Bitcoin system.
Satoshi Nakamoto invented Bitcoin in 2008, however, many would argue Nakamoto was just a nickname for the real inventor or the group of inventors. Satoshi Nakamoto laid the foundation stone of Bitcoin’s roadmap, i.e, Bitcoin whitepaper and to date, it consists of the most viable description of Bitcoin
- Secure transactions and low fees
- Easy access
- Second to none security and technology
- Bitcoin is self-reliant
The innovation behind Bitcoin.
Because of the sophisticated technology associated with Bitcoin, people typically mistake Bitcoin for an innovative innovation. Nevertheless, Bitcoin itself is not advanced in nature. Blockchain technology, the innovation behind Bitcoin is mind-blowing and Bitcoin is a small yet crucial application of blockchain technology.
OK, blockchain technology is mind-blowing but what the heck is a blockchain? Blockchain is an issued ledger that keeps a record of the information transfer between every sender and receiver in the loop through the encryption method.
In particular, a blockchain consists of blocks chained together. Every block is filled with data. Once its storage capacity is filled then it is chained to the previous block forming the blockchain. The same procedure takes place when the next block is filled with data.
The distributed ledger has an edge over centralized systems as there is no chance of losing data. The distributed system takes care of every transaction that happens by keeping it tape-recorded firmly.
The following table shows how Bitcoin works.
How does Bitcoin work?
It is not necessary to fully understand the advanced technology involved in Bitcoin in detail. For new users, the working method of Bitcoin can be described in a nutshell.
When you buy a Bitcoin you will need somewhere to put it, you will need a wallet. Once you have a Bitcoin wallet installed on your computer or mobile phone, your first Bitcoin address is created. Bitcoin addresses can be produced numerous times as and when needed.
Blockchain innovation enables Bitcoin wallets to determine the balance that can be invested. This likewise helps in confirming the new transactions if they are in fact owned by the spender. Furthermore, cryptography enforces the integrity and chronological order of the blockchain.
Every Bitcoin wallet has a personal key that offers mathematical proof (signature) that the transactions have actually originated from the owner’s wallet, and that the owner consents.
The signature prevents the released transactions from being changed by anybody. Finally, the transactions are transmitted to the network which is generally confirmed within 10-20 minutes through a procedure called mining.
What is Bitcoin Mining
Mining is a process that verifies the pending deals through a dispersed consensus system by including them in the blockchain. The procedure involves the packaging of the transactions in blocks that observe cryptographic guidelines strictly. Cryptographic guidelines do not enable the adjustments of blocks, for that reason, deals as soon as carried out can not be reversed.
Is Bitcoin Valuable?
According to economics, if something is both rare and beneficial, consequently it is important. Bitcoin is limited, helpful and its worth is identified on the basis of the marketplace’s supply and demand. The supply of Bitcoin is topped at 21 million with 16.2 million currently in circulation. Thus, its supply is noticeably minimal making its shortage transparent.
How is the Value of Bitcoin Figured Out?
The value of Bitcoin is determined by demand and supply. When supply tops demand then its price drops. When demand is high and supply is limited then its price rises. The continuous trading interactions between buyers and sellers identify the precise rate of Bitcoin.
Given that the marketplace of Bitcoin is relatively small, compared to centralized currencies, it does not take a considerable quantity of cash to change the market cost, adding up to its volatility. Nevertheless, eventually, volatility is expected to drop.
Bitcoin is the king of cryptocurrencies. It is a decentralized currency that cannot be manipulated by bankers and governments. It is a digital currency and is set to change global payments forever. Through its groundbreaking technology, it ensures safe and secure transactions.
Bitcoin’s future looks awesome. The cryptocurrency has been embraced by a large number of people, many celebrities too, as well as a large number of corporations who accept Bitcoin as a means of payment.