HOW DOES BITCOIN WORKS

BITCOIN
by shyam Bharvad

HOW DOES BITCOIN WORKS

       Bitcoin is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world. It’s the first example of a growing cat.

       According to the Bitcoin Foundation, the word “Bitcoin” is capitalized when it refers to the cryptocurrency as an entity, and it is given as “bitcoin” when it refers to a quantity of the currency or the units themselves. Bitcoin is also abbreviated as BTC. Throughout this article, we will alternate between these usages.

What Is Bitcoin?

          Bitcoin is a form of currency that was created in 2009 and has since become an increasingly popular way to shop and sell online. The currency works much like standard currency, but it exists only as digital information. As such, users can buy bitcoins with their computers or smartphones without having to use a bank or other financial institution. Bitcoins are stored in anonymous “electronic wallets,” which exist either on the user’s computer as software or on third-party servers as websites. These wallets allow users to send and receive bitcoins via the Internet anonymously. However, anonymity comes at a price: each transaction made using bitcoin is recorded indefinitely within its system’s publicly distributed ledger–or blockchain–to guard against any attempts at fraud or duplication of purchases (Mullins).

How does Bitcoin work?

       The network is peer-to-peer and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009. Bitcoins are created as a reward for mining; they can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.

Bitcoin Terms :-

block chain - public ledger

      The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. It allows wallets to calculate their spendable balance so that new transactions can be verified, thereby ensuring they’re actually owned by the spender.

Transactions - private keys

      Transfer of value between two bitcoin wallets are transactions where a wallet contains a secret piece of information called a private key or seed, which is used to sign transactions, providing mathematical proof that it has come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued.

Processing - Bitcoin Mining

       Mining is a way to pay for things over the internet. It’s based on the blockchain technology and it generates bitcoins which you can determine to use as currency or spend on ANYTHING you want! It makes sure that transactions are processed and confirmed in a timely manner so there is no confusion about who has received what. Remember – once you purchase bitcoin, it’s yours forever!

      Mining is a way for bitcoin transactions to be verified and added to the public ledger, known as the block chain. Mining requires miners to solve a mathematical problem before it can add new transactions to the block chain. Anyone can become a miner by using special software and/or hardware designed for mining purposes.

     In addition Bitcoin is a completely self-sufficient digital currency and does not require a bank to record or execute transactions. Bitcoin can also be traded from one person’s wallet to another, and this person could be just a trader or a big company. Bitcoins are stored in digital wallets that can be accessed from mobile phones and computers. The process of creating Bitcoin is so complex that it is almost impossible to hack into the system. This helps make Bitcoin counterfeit resistant.

How do you get bitcoins?

         The most common way of getting bitcoins is buying on an exchange. This is like a stock exchange or currency exchange in that you place your buy or sell offer and get matched with someone who wants to buy or sell bitcoins. Unlike the stock exchange where people are buying and selling stock, people who use bitcoin exchanges are not actually buying bitcoins. They are simply trading different currencies for bitcoins. This is similar to the way people trade foreign currencies for dollars or euros. You can trade your dollars or euros to someone who wants the dollars or euros in exchange for their local currency. This is called trading. When you buy bitcoins on an exchange, you are trading your local currency for bitcoins.

Where can you spend bitcoins?

        The question that has been on everyone’s mind, however, is whether or not you can actually spend your bitcoins anywhere. The short answer is yes. As the popularity of this cryptocurrency has grown over the past few years, more and more stores have started accepting it as payment, whether you want to buy a new pair of jeans or a digital camera.

What are the risks of using bitcoins as a currency?

      Every transaction is recorded publicly so it’s very difficult to copy Bitcoins, make fake ones or spend ones you don’t own.It is possible to lose your Bitcoin wallet or delete your Bitcoins and lose them forever. There have also been thefts from websites that let you store your Bitcoins remotely. The value of Bitcoins has gone up and down over the years since it was created in 2009 and some people don’t think it’s safe to turn your ‘real’ money into Bitcoins

     On the other hand Bitcoin exchanges have been the target of several high profile thefts, but these services were storing bitcoin on behalf of customers. In every case, the website was hacked and not the bitcoin network.

        The world of bitcoin can be a little confusing, but once you understand how it works, you’ll see that it’s actually pretty simple. In this article, we’ve tried to explain the basics of bitcoin and how they work. If you have any questions about bitcoins or this article, feel free to comment below! We’d love to answer any questions you might have about the digital currency revolution.

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