The term Bitcoin world abuzz with a good reason - it has reached $ 1,064 in value against the US dollar. Perhaps you've read dozens of articles dealing with Bitcoin is still not able to understand what it is in reality. Let me be very frank - understand Bitcoin can be really tough. So, I'm here to help. It will help you understand Bitcoin in the simplest way to answer most of the questions surrounding it. Let me do a quick breakdown of how we will be learning about Bitcoin.
First, we'll go quickly through paper currency - established currency of money by government law. A quick look through it enables you to contrast with the way they operate Bitcoin. We'll also see briefly why exactly do you want to use Bitcoin on paper currency. Next, we will provide an understanding of the terminology actually Bitcoin, followed by how to deal Bitcoin takes place. In the last part, we will discuss why Bitcoin has value. show yourself. This will be a big, long read.
Traditional Fiat Currencies
Wikipedia says, paper currency is the currency as stipulated by law, the money the government. The US dollar, the euro, the Indian rupee, or much about any of the national currency come under this category. In any country, and the government and the World Bank are the regulators of paper currency. They control the production of the currency and make transactions on behalf of the user. The Bank is responsible for maintaining the ledger.
The ledger is a book account, where the bank is stored all the history of the relevant transactions for all its users. So for example, I decided to write a check for you. The bank will transfer the funds to your account and update to reflect Mr. Lee's new total balance.
Financial Censorship in Banks Accelerated Bitcoin’s Growth
Banks may be on the sets of problems including currency exchange fees, and lengthy delays or check bounceback. But more importantly, people are wondering the main topic - Why should governments and banks are allowed to carry out full control of the currency?
While there's no denying that the banks are highly organized systems, but all the power resting in the central authority constitutes a major threat to freedom. For example, I remember how close the Chase down the bank accounts of some pornstars in Los Angeles in 2014 without explaining them? Or how in 2011 the US government partnered with many banks around the world to prevent donations to WikiLeaks - the whistleblower organization for irregularities exposed government corruption. WikiLeaks turned to accept donations via Bitcoin and received more than 4000 BTC as of now. (1 BTC worth $ 1,064 as of today, so do the math!) What is Bitcoin exactly why WikiLeaks chose that?
What is Bitcoin?
Cryptocurrency Bitcoin is a decentralized, peer-to-peer virtual that can be used to make online payments.
Perhaps you've read this definition everywhere but still can not get over the information overload, is not it? Let me simplify you what it really means.
Bitcoin is Decentralised and peer-to-peer currency
Bitcoin is not controlled by governments, banks or any other central authority. It is controlled by people in all parts of the world combined. If you are part of a network Bitcoin, you are part of the dominant power.
You can pay anyone in the world without the need for any third party, such as Bank to check the health of the transaction. Bitcoin transactions are collectively by the network. This type of system where transactions take place directly between both parties known as peer to peer network.
Bitcoin Is a Virtual Cryptocurrency
Bitcoin is not the actual currency note / coin that you can hold in your hands. Instead, it is a virtual currency, which consists of two parts - a public key and a private key.
You can your public key presentation because they know where to send you money. Private key is, unsurprisingly, the private. It is used for "signature" package, so that other users can cross-check the network has actually been implemented deal from you. Anyone from accessing your keys can spend your Bitcoins. As there is no central governing authority, keeping the private key secret is of paramount importance.
Bitcoin and called on cryptocurrency because it is used mathematical encryption to generate and organize Bitcoin techniques. This will become clearer in the next section where we discuss how to create Bitcoin.
Blockchain is Bitcoin’s Public Ledger
When conducting transactions on the Bitcoin network, the change is reflected on the ledger. Contrary to the ledger to the bank, which can be seen only by select bank officials, Mr. Bitcoin is a general known as Blockchain. Transactions are recorded worldwide in the "bloc", and these blocks chained together known Blockchain. The establishment of the new block every 10 minutes, which is why in transactions over the network Bitcoin take 10 minutes to complete.
Blockchain and is in the heart of the Bitcoin network, it is also responsible for protecting the safety. For example, what if someone maliciously intended to tamper with the transaction data? Well, remember the private key? It is used to digitally "sign" all your transactions, so as to ensure that the deal has already been done by you. If someone is still going on one way or another tamper-deal data, it will invalidate the other blocks over the network will not agree with the data eased. Are we beginning to see the benefits of having a general ledger?
As Blockchain is public, anyone on the network can see Bitcoin transaction history and current balance associated public key. Of course, if someone knows that a specific public key belongs to you, you can uniquely identify it to your account. In fact, you can go to Blockchain site to find out all the transactions that take place in real time. Bitcoin were not made to be an unknown network, after all. As a result, some appeared cryptocurrencies other like "Dash" with a promise to add anonymity.
How is Bitcoin Generated?
It is known to generate Bitcoin mining process such as Bitcoin. Basically, it is forced miners with two different tasks:
The first one is to solve complex mathematical functions with the use of strong mining and client computers. Put these mathematical functions in place by Bitcoin algorithm to control the supply of Bitcoins globally. For example, it is granted that the solution to a specific problem takes a certain amount of time and resources pertinent computer. This ensures control over the generation of new Bitcoins. In fact, the algorithm has been designed in such a way that it does not exceed 21 million Bitcoins will be in circulation, ever.
Second, these mines are responsible for providing computing resources to update blockchain public to all users connected to the network. Everyone on the network holds a copy of this blockchain and can see past transactions made by anyone worldwide.
Miners are Rewarded with Bitcoins
In exchange for all this hard work, and pay workers back in Bitcoins. When Bitcoin was created initially, it was appointed a reward in 50 Bitcoins in mined mass. Reward halves every four years. There were two halvings until the end of 2016. In the last update, which is what happened in 2016, was reduced to 12.5 Bitcoins reward in mined mass.
Can I Become a Miner?
Definitely. The exploration in the earlier days of Bitcoin as possible via the regular desktop graphics processing. However, competition and encryption solutions has increased and it has become difficult to solve. Today, mining with your desktop CPU / GPU is no longer profitable. There are a large number of ASICs built especially for the purpose of mining, you will be required to buy one of these.
You also need to consider the consumption of electricity fees, as they will require to be active all the time. Also, consider the cooling charges and fees associated with renting space. Investment money to buy all the powerful stuff requires a lot of planning. This does not deter you from becoming a miner. With the appropriate hardware and software, mining, and you're good to go.
How Does a Bitcoin Transaction Work?
Enough with the terminology. Let's see what will happen when Ben decides to push through John Bitcoins.
- First, Ben enters the amount to send and enters the public address John. General title is a series of letters and numbers randomly, and that can be displayed publicly to get the money to your account. At the same time, the "signs" private key bin transaction is to verify that the deal has already been conducted for him.
- Now, the deal up Bitcoin network. Here, the miners work to verify and add to the mass treatment, which can last up to 10 minutes.
- The amount gets deducted from the account Ben and John gets the money. Now the deal reflected the Blockchain and publicly visible to anyone across the network.
One important thing to understand is that the Bitcoin is not actually refers to anything - not a digital or physical entity. Instead, there are the only record of transactions across the network.
Now that you've brushed up on terminology Bitcoin, I bet you still have a burning question unanswered
What Gives Bitcoin Value?
Let me start with a simple question. What makes a paper in your pocket is worth more than any other ordinary paper? It's just a piece of paper, after all. The answer is, you guessed it, backed by the government's mandate. Paper currency gains its value from the fact that it forced legal tender by the government.
Unlike paper currencies, Bitcoin value does not come from any legal force, but of opinions. So why did people arrive at a consensus to accept Bitcoin as a means of payment? Because Bitcoin resolves all of the issues plaguing the current central monetary system. For starters, here are some of the advantages of using Bitcoin:
- There will also be a maximum of 21 million Bitcoin in circulation, than ever before, it is not vulnerable to inflation.
- It can not be falsified because all transactions are stored in the general ledger.
- And it can be exchanged at any place in the world on the spot without the need for third-party institutions such as banks.
- It has a small transaction fee associated with it, unlike Western Union and similar services.
And more people are weighing the advantages against the traditional Bitcoin money, turning to Bitcoins. This leads to increased demand and thus climb the value of Bitcoins. Moreover, as a fixed Bitcoin supply, demand continues to rise, so will the prices for Bitcoin. Of course, there are a lot of factors, the most economical (outside the scope of this article) that control the price of Bitcoin. We'll comfort the case in the hands of economists from here.
Understand Bitcoin Better?
Bitcoin network can be complicated to understand. But I hope I got your hold on a little more stable Bitcoin system with this article. As this topic extensively, covering every aspect of a very challenging. Thus, I encourage you to shoot any doubts you have in the comments section below.
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