What is Bitcoin? Bitcoins Explained In Detail
Bitcoin, world’s most popular currency as of now, whose creator is still unknown , and is a gaining so much popularity that it is often referred as “Virtual Gold”. Interesting thing which must be given a read, right?
So lets decode Bitcoin.
What is Bitcoin?
Bitcoin is the world’s first Decenteralized peer-to-peer Cryptocurrency invented by an unidentified programmer, or group of programmers, under the name of Satoshi Nakamoto.
Bitcoin was introduced on 31 October,2008 to a cryptographic mailing list. It was later released as an open-source software on January 3, 2009.
Bitcoin is often referred to as the world’s first cryptocurrency although prior systems existed such as b-money and bitgold. But Bitcoin distinguishes itself from other because of being decentralized.
Just like the conventional Fiat currencies (Dollars, Yen, Rupees and Euros) it can be traded, exchanged and holds a value in the market. Bitcoin is the largest of its kind in terms of total market value.
Conventional currency has been based on Gold or Silver. Theoretically, you know that if you hand over a Rupee at the bank, you could get some equivalent amount of Gold back (although this don’t actually work in practice as of now). But Bitcoin isn’t based on gold,it’s based on Mathematics.
Around the world, people are using software programs that follow a mathematical formula to produce new Bitcoins. The mathematical formula is freely available, so that anyone can check it.
Only 21 million Bitcoins will ever be created under the original specification. This means that after that, the number of Bitcoins won’t grow, so inflation won’t be a problem. In fact, deflation – where the price of goods and services falls – is more likely to happen in Bitcoin’s world.
In simple terms, Bitcoin is like having money online stored in an online wallet, which can be used as medium of exchange without any interference of any government or bank or any other third party. Purely peer-to-peer system where users can transact directly without any intermediary like a bank, a credit card company or a clearing house.
How are the transactions that take place are true and correct and, secondly what about the security when no regulatory is involved?
These transactions are verified by network nodes and recorded in a global public distributed ledger called the Blockchain, which uses Bitcoins as its unit of account. Since the system works without a central repository or single administrator, this is the reason Bitcoin is classified as a decentralized virtual currency.
These nodes are nothing but highly advanced computers with specific hard drive configurations, installed in Bitcoin network by people or group of people known as “Miners”.
How does Bitcoin works?
From the perspective of users, Bitcoin is just like a mobile app or computer software that provides a personal Bitcoin wallet where the Bitcoins can be stored and enables a user to send and receive Bitcoins.
But its not as easy and simple as it looks. Behind the scenes, the Bitcoin network is sharing a huge public ledger called the “Blockchain“. This ledger contains every transaction that ever took place which enables a user’s computer to verify the validity of each transaction and get Bitcoins in return as a reward. This process of verification is known as “Mining“. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses therefore allowing all users to have full control over sending Bitcoins.
Thus, there is no fraud, no chargebacks and no identifying information that could be compromised resulting in identity theft.
In simple words, any user can verify the transactions through Mining and can earn Bitcoins for it’s service provided.
Characteristics of Bitcoin
Bitcoin has several important features that set it distinguishes from traditional or fiat currencies:
1. It’s decentralized
The Bitcoin network isn’t controlled by any government or central authority of any country. It is a peer-to-peer system where in the users own their money and nobody owns the Bitcoin network.
2. It’s anonymous
Users can create multiple Bitcoin addresses, and they are not require to link it to their names, addresses, or any other personally identifying information.
3 . It’s transparent
Bitcoin network stores details of every single transaction that ever happened in the network in a huge version of a general public ledger, called the Blockchain.
When you send bitcoins to someone they’re gone forever, unless the recipient returns them to you.
5. It’s easy to set up
No long forms to be filled, no KYC to be uploaded as it is required by most of the banks while opening up an account. You can set up a Bitcoin address in seconds, no questions asked, and with no fees payable.
6. It’s fast
You can send money anytime,anywhere and it will arrive minutes later, as soon as the Bitcoin network processes the transactions.
KryptoMoney.com posts latest news and updates about Bitcoins, Cryptocurrencies and Blockchain Technology.
Rohit Kukreja is a Commerce graduate with Financial Markets expertise involving Stocks, Forex, Futures & Options Market and now Bitcoins & Cryptocurrency Markets. Blockchain Enthusiast but not a techie, Rohit is an active member of various Blockchain & Crypto communities all over India.