Friday, September 25, 2020

What is Bitcoin?

The Takeaway:

What is Bitcoin? Bitcoin is the first and most successful cryptocurrency, a form of electronic cash. It is a decentralised currency without any central authority and generated by computers throughout the world. The first-ever Bitcoin was generated in 2009 by the alias Satoshi Nakamoto. The idea behind the protocol was to induce a means of exchange possible to transfer electronically in a secure and unalterable way. Bitcoin is bifurcated into two segments - as the virtual coin with codes (BTC), and as a distributed protocol that records the balances of the currency, the bitcoin blockchain. The process of mining assists the creation of bitcoins that proves transactions and adds them to the Blockchain.

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Bitcoin is the talk of the crypto world. It is described as the most popular cryptocurrency. But what is Bitcoin in real? Or what is a cryptocurrency?

A cryptocurrency is an entirely virtual currency accessible on the internet. In simple words, it is digital cash. The concept of digital money is abstract. We cannot touch or see this money, but, we can possess it on the internet world, and it does carry a value of its own.

What is Bitcoin? Bitcoin is the first and most successful cryptocurrency, a form of electronic cash. It is a decentralised currency without any central authority and generated by computers throughout the world. Bitcoin is bifurcated into two segments – as the virtual coin with codes (BTC), and as a distributed protocol that records the balances of the currency, the bitcoin blockchain.

Bitcoin uses the peer-to-peer network, that requires no intermediaries, for its transfer. It is an open-source system with a public design.

 

Creation

The first-ever Bitcoin was generated in 2009 by the alias Satoshi Nakamoto who later developed the website bitcoin.org. The idea behind the protocol was to induce a means of exchange possible to transfer electronically in a secure and unalterable way. The process of mining assists the creation of bitcoins that proves transactions and adds them to the Blockchain. The mining works on the proof-of-work system where miners compete with each other to solve the numerical code accompanying each block. The miner who does the work first is rewarded in terms of the cryptocurrency.

 

Working

Bitcoin works on the public ledger system called Blockchain. It is the technology that maintains the details of transactions processed across several computers on the global level. The blockchain technology includes the initiation of blocks which hold particular information about a distinct trade. A block once created, becomes immutable, and the data once captured in it is unalterable. For any alterations in the previous block data, a separate block is created and attached to the initial block, thus creating a blockchain. This technology bears similarity with the ancient ledger system.

 

Decentralised bitcoin network

BTC network has no single administrator. The ledger system is distributed and public. The identity of users stays hidden, whereas the transactions are entirely transparent. The problem of double-spending of digital coins is solved through cryptography. Anyone can create a new bitcoin address, and anybody can become a miner. However, once a transaction is processed, it is irreversible. With no arbitrator to solve any disputes, it is impossible to modify the transaction.

 

What is Bitcoin Wallet and Exchange?

The most prior requirement for trading bitcoin is the bitcoin wallet. A digital wallet is a program that stocks our currency and stores the secret key essential to approach the BTC address and funds. The cryptographic key is a 256-bit long number selected aimlessly at the time of wallet concoction. The wallet is a direct pathway for bitcoin transactions. Bitcoin is sold and purchased on various digital currency exchange platforms or bitcoin exchanges. These platforms help in sending and receiving bitcoins. The exchange is further added with a small transfer fee.

 

Buy Bitcoin

There are several ways to buy BTC.

  1. Online in exchange for the fiat money. Different exchange websites permit the use of bank accounts, credit cards, debit cards, etc. to buy the currency.
  2. In-person – Buying BTC in cash is a personal and fast method. You can find a seller near you and trade your money for BTC. The best platform for buying bitcoin in person is LocalBitcoins.com.
  3. Bitcoin ATM – Locate a nearby crypto ATM and exchange your cash for BTC.

 

Limited Supply

Unlike the fiat currencies which have an unlimited supply, Bitcoin asserts a limitation upon its production. The intrinsic value cash can be issued as much as wanted by the central banks, but the fundamental algorithm tightly bottles the BTC supply. Bitcoin can be generated up to a limit of 21 million to avoid its inflation in the crypto market. Besides, it adds up to the value it acquires as more demand and less supply itself ascends the rate of the coin.

 

Future of Bitcoin

What happens to BTC after all 21 Million are mined?

Following the limits of bitcoin generation, once all 21 million BTC are mined, the supply cannot boost, irrespective of the demand. However, satoshi, the smallest unit of bitcoin equivalent to one hundred millionths of the currency, may still allow microtransactions and miners would continue making profits by collecting transaction fees.

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Disclaimer: The article reflects the opinions of the author and is not representative of Chaintimes’ views.
The article does not offer any investment advice. User discretion is advised when investing in or trading with cryptocurrency. Extensive and diligent research should be carried out by the reader before making a decision.

Charles Carter
Charles Carter
Charles is an experienced researcher with a Master of Public Administration degree from Humber College, Canada. Apart from being fascinated about blockchain and cryptocurrencies, he loves to drive around the town in his collection of cars.

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