What is Bitcoin?
Bitcoin is becoming more and more popular these days, and its usage has grown tremendously. But to understand its importance, it is becoming popular, and its usage lets first understand what exactly Bitcoin.
Bitcoin (BTC) is a digital currency. By digital currency, it means the existence of such currencies is purely electronic and is not tangible, like dollar note, coin, etc. Bitcoin is transferred using computers or technologies like smartphones, credit cards, a crypto exchange. Even though there are various currencies in crypto, Bitcoin is the most accepted and widely used currency making it most popular and valued.
Bitcoin is an emerging currency and needs to be purchased in return for the real currency. Once you have Bitcoins, you real money is in the form of electronic currency that is Bitcoins. Whenever you want to use this currency, you need to transact through technology, which allows you to exchange these Bitcoins from your wallet.
Bitcoins are created through mining. In this process, mining is performed by high-powered computers that unravels complex mathematical problems. New Bitcoins are created through solving the computational puzzle; complex machines are used to speed up the mining operations. The experts who perform this mining are called miners. MIning is required for maintaining the ledger of transactions. This ledger of transactions is the base of Bitcoins as they serve its features like transparency, Decentralisation, portability, quick exchanges, etc.
How does it work?
Purchasing Bitcoins means buying Bitcoins in return for real money. Once you have purchased these Bitcoins, they are stored as “computer file” in the digital waller or whichever technology you are using. You can buy, sell, or exchange things in return for Bitcoins. Since every transaction is recorded, it’s possible to trace every Bitcoin’s history that had been traded. The system does not reveal the holder’s name, but it has an account number that is tracked, and nobody knows whats your account number unless you tell them.
The transaction with Bitcoin is transparent, and every single exchange gets stored in a public ledger called Blockchain. Owning Bitcoins does not mean you have physical currency. It simply means you see a specific number of Bitcoins in your wallet, and you can transact with it and get to see the transaction details for every exchange you made. It is limited to your transactions, but every transaction that happens gets stored in the Blockchain, and one single mistake, fraud, or change in any transaction can affect the whole chain. It can be identified where is the mistake/fraud.
What makes Bitcoin useful?
Bitcoin was created in the year 2009, and its value has been going up and down since then. Because of its features, it became popular and stands highly usable.
Below are the characteristics of Bitcoin:
i) Decentralisation: It is said that the primary target of Bitcoin was independence from any governing authority. Freedom from controlling the transactions, processing fees, etc. The ease of Bitcoin transactions makes it possible to buy anything with BTC than any other currency. As there is no central system/bank to control, the BTC cannot be shut. The BTC operates on the rules and not the power of the authorities like other currencies. It is designed so that a single entity, business entity, mining system, and every machine involved becomes a part of the vast network. The exchanges, transactions, and creation of Bitcoins are stored and are trackable through the public ledger Blockchain.
Due to the decentralized system, there is no government, power, or ruling authority. As it is completely based on the network, the BTC still keeps moving in the other network even if anyone goes.
ii) Transparency: Bitcoin is designed in such a manner that no BTC can disappear. There is constant check through the networks and the entire ledger that is managed. Every transaction is recorded and traced to a public ledger, so there is no chance to deny or make a false claim he has not accepted the payment or hide the BTC behind some curtains.
Bitcoin’s transparency does not mean that anyone can check any person’s Bitcoin wallet, which is nearly impossible. Still, when it comes to publicly used wallet, an expert can carefully study the Blockchain and find out the balance and the earlier transaction history.
iii) Anonymous: The anonymity in BTC is relative as every transaction is tracked and stored and is accessible. The level of privacy it offers makes Bitcoin adoption more affordable for users.
Bitcoins operate through addresses and wallets in which the Bitcoins have been stored or kept. While transactions, it is also possible to exchange these Bitcoins without revealing the actual identity, but those identities can be accessed through private encryption keys and complicated strings. Most of the time, the Bitcoins are exchanged through linked banks, credit cards, and also requires documentation.
Experts who have hands-on cross-checking these details against Blockchain’s records can identify the owners with a sender and destination address. Though this requires time and a lot of matchmaking, it’s theoretically possible to link the transactions and determine the identities.
iv) Portability and Commission: The exchange of Bitcoins against goods and services is virtually making it portable and easy to use whenever or wherever possible. No intermediaries, no physical currency. All you need is internet access. What is unique is the no transaction fees or processing fees like any other currencies or centralized system.
There is always an option in Bitcoin to choose the transaction fee amount or choose not at all. These fees are completely voluntary and serve as incentives to the miners, enables the source of income to miners they would have received through traditional mining or sustain over some time when mining would stop when Bitcoin reaches to limit.
v) Security and Safety: The identification and personal information are always protected for BTC users as there is no requirement of disclosing it while making any payment. The owner wallet can control transactions, and no one can withdraw or transact without your concern. There is also no scope of false claims or fraud where Bitcoins disappear, making Bitcoin highly safe and controlled.
Due to the decentralized system, Bitcoins are not under any government control, and thus the currencies cannot e demonetized, seized, frozen, or evens stole by any means. Since Bitcoin is maintained on a worldwide blockchain, none of the above can occur and is safe and secured in the wallet due to electronic presence.
Bitcoins are a new emerging currency, and the more the future of blockchain technology, the more growth of the digital currency. Bitcoins have their features and benefits, and since it’s limited, the demand for Bitcoins is even more. It is critical to learn that a few governments do not recognize country-specific and Bitcoins’ legal constraints.
Even though Bitcoins are safe and secured and cannot be stolen, websites that make false claims let you store the Bitcoins. It’s always suggested to carefully analyze every step you take in BTC setup and transact.