What is Bitcoin? How does Bitcoin Work? How to buy Bitcoin?
In recent days, we have been hearing so much about the rise of Bitcoin (known as the digital currency) to a remarkable extent.
For the first time in last month, Bitcoin has ridiculously pushed its value to reach $10,000 mark, which is just twice its price a month ago. In other words, it has raised it’s value ten times higher in just January.
Everybody is making their way to own some Bitcoin these days. Talking about owning it some people are even ready to sell their own house for the share of Bitcoin.
But what is Bitcoin? Here we learn about the currency which only exists in digital form, that everyone is mad about in this 21st-century cyberspace.
What is Bitcoin?
In 2009, Bitcoin was formed by an anonymous person using the alias Satoshi Nakamoto Bitcoin and the first cryptocurrency known to the world.
It was usually created for the purpose of making a money which cannot be controlled by any government or business institutions and could be traded all over the world without having to reveal one’s true identity.
So, they are nothing like having money in your purse or wallets. With the help of this digital currency, transactions can be made without any intermediaries i.e. banks or any financial institutions. These forms of digital money are encrypted which means any transactions made using it are secure and hard to trace.
You can usually use Bitcoin to pay for your hotel charges on Expedia, furniture on Overstock and also buy some Xbox games. But these days, it is only being traded for the hype of getting rich. As I mentioned earlier, the value of Bitcoin skyrocketed in 2017 in thousands of value.
The digital currencies made after Bitcoin are called Altcoins i.e. alternative coins. Some of them are Litecoin, Peercoin, Feathercoin, Ethereum and so on.
How does Bitcoin work?
Once you get the idea about Bitcoin and the purpose of its formation now let’s move on how does actually Bitcoin work.
You can easily start a Bitcoin as a new user without having the proper knowledge and technical details. All you need to do is download and install application known as Bitcoin wallet on your personal computer or mobile phone.
Once installed, you will get your first Bitcoin address from which you can generate your first ever Bitcoin and the process continues as same.
You can share your address with the ones you trust for doing transactions and payments. Actually, it is not that difficult, it is pretty similar to you email procedure.
No One can reach you without having your address and you hold the sole right to share it with whomever you want. But remember, Bitcoin addresses should only be used once for more privacy and security.
How does Bitcoin work! here is a sketch.
All the Bitcoin networks are dependant upon a shared public ledger which is commonly known as blockchain in the community. Each and every successful transaction using bitcoins are included in this ledger for the purpose of calculating spendable balances and to keep track of new transactions.
Every confirmed transaction of the spender needs to be verified for the sake of duplicacy and concurrency. So, it is recorded with integrity and sequential order which are imposed using cryptography for the greater security.
Transactions (Private keys)
Moving on to the transactions, it is generally a transfer of value from one Bitcoin wallet to another. As I mentioned earlier, all of these transactions are thoroughly recorded in the blockchain.
Every Bitcoin user possesses a secret and a unique piece of data commonly known as a private key to perform any kind of transactions. In other words, we can say these private keys are the mathematical proof that coins are suspended from owner’s wallet himself/herself.
Also, these unique digital signatures are used to prevent the altered transactions which have already been issued. Transactions are just communicated between the active parties and generally affirmed by the system in 10 minutes of time period through a procedure known as mining.
Mining is a shared consent system, which is used to confirm transactions by recording them in a blockchain. While being recorded in a blockchain, it generally invokes a chronological order which is used for protecting the neutrality of the network. Mining allows different computers to agree on the state of the system.
For the transactions being confirmed, it needs to be packed in a block and also fits a very difficult and secure cryptographic rule that is only verified by the network. The idea behind this organized system it to prevent transactions from being modified and not invalidating the following transaction blocks.
Mining additionally makes what might as well be called a focused lottery that keeps any person from effortlessly including new blocks continuously in the blockchain. Along these lines, no one can control what is incorporated into the blockchain or supplant parts of the block anchored to move back their own spends.
10 Interesting Bitcoin Facts
Here are some interesting facts about the buzz-making word Bitcoin you must know.
- Bitcoin founder, Satoshi Nakamoto is still an anonymous figure
Actually, the name Satoshi Nakamoto was a fake name used by the person who formed bitcoin. There is still no any proof of real identifies regarding the creator of bitcoin.
Over the years, most of the people have been linked with the name such as Craig Steven Wright, Dorian Nakamoto, Nick Szabo, Hal Finney, and the list just goes on. It was assumed that Nakamoto is the name used by the team of people to anonymously create bitcoin.
By 2017, this anonymous Nakamoto is said to have about 1 million bitcoins which worth more than $2 billion in its name.
- Bitcoins are limited in number
We have been hearing so much about mining bitcoins and its generating procedure being digital. This gets you think that the number of bitcoins till now is uncountable and infinite. Well, that’s not the case here, actually, there is a limited number of bitcoins in this predefined schedule network.
Talking about the numbers, bitcoins are gradually making their way to reach a total number of 21 million. And for your information, the process to mine a bitcoin is getting harder each day.
- Identities of sender/receiver remain anonymous
It is impossible to know the identities of sender or receiver in the network. The bitcoin address is unique and 34 characters long alphanumeric string which is just impossible to crack. For strengthening the privacy of each user, the wallet of each user is assigned with a unique portfolio ID, also used as a username.
This is the reason why people are using bitcoins anonymous quality for carrying out illegal transactions.
- Refunds are not possible in Bitcoin transactions
You don’t get a second chance to reverse back your transaction using bitcoin. Once a confirmed transaction is always a confirmed transaction.
In 2016, a bitcoin accidentally sent $137,000 instead of $5, which he could retrieve it in any way. There is just no way.
- First good to purchase by bitcoin was Pizza
The first ever transaction of bitcoin was between Satoshi and Hal Finney in 2009. After that, on May 22nd, 2010, the 10K bitcoin was used for purchasing Pizza pricing $25. By May 22nd, 2017, those bitcoins value was up to 20M.
- Bitcoin is powerful than 500 supercomputers put together
Bitcoin is more powerful than 500 supercomputers put together because it has a computing power of 2,046,364 Pflops/s. When you combine 500 most powerful supercomputers combined, it will only give fever of 274 Pflop/s.
- Bitcoin has been to the outer space
A bitcoin cloud mining provider known as Genesi Mining has sent bitcoin to the outer space in 2016.
3D bitcoin models and a paper wallet were used and tied up to a weather balloon to sent it to the outer space. The whole travel journey was recorded in a GoPro.
- FBI possesses one of the world’s largest bitcoin wallet
FBI became one of the world’s wealthiest bitcoin owner when they shut down the trades of Silk Road. They owned everything when they shut them down.
According to the report from Wired magazine, FBI owns the 1.5% of world’s bitcoin.
- Wallet Lost = Bitcoins lost Forever
Every bitcoins are stored in bitcoin wallet with a highly secure mechanism. The wallet access is only available to you means no one can access it from anywhere meaning if you lose the wallet your bitcoins are also gone forever.
James Howell once lost 7,500 bitcoins by throwing his harddrive away which was worth £4M.
If you have the address of your bitcoin, you can view the number of bitcoin owner poses.
- Bitcoin is highly volatile
Since the date of bitcoin formation, it has become one of the most important terms and phenomenon in the cyberspace network. It’s worth have skyrocketed in the last decade.
But this doesn’t mean it is stable at the moment, it still remains volatile and fluctuating. It has been forecasted that the value of bitcoin will decrease in the future if it continues the same path. Forecasters are a small group of people consisting 10.
This defeats the whole decentralized nature of cash.
How to buy a Bitcoin?
Once you have read so much about Bitcoin and its importance in this 21st century. Here are the steps which you need to follow to make your Bitcoin purchase.
Step 1: Find an appropriate Bitcoin Wallet
As we have already discussed, Bitcoin wallets are used to store the bitcoins unless you spend it. There are so many wallets to choose from in the market according to its platform, features, performance, and security. So make sure, you do your research on wallets while purchasing one.
If you are a beginner in this procedure then start it with a simple wallet which makes your transfer easy and simple. Remember, it is FREE to download the bitcoin wallet but requires fees when making your transactions.
Step 2: Choose the right Bitcoin trader
Usually, we see many people taking the assistance of brokers to acquire Bitcoins. But you can do it without them with the help of exchange. There is a number of exchanges available in the market as per your requirement.
While working with any exchanges, care to look for fee charges for transaction, payment options, and trustworthy factors.
Step 3: Select your payment method
Exchanges accept a numerous payment option based on their credibility. This is kind of a sore point for some trades since some installment strategies have been utilized to trick dealers for a quick buck previously.
Financial balance and Visa exchanges are ordinarily acknowledged by most trades, with a few impediments. Wire exchanges are more all in or all out, and PayPal exchanges may not be permitted. Coinbase, be that as it may, considers all these installment strategies, which is the reason it remains a simple proposal for novices.
Step 4: Use your Bitcoins
Finally, you can use your bitcoin as your wish. You may sell it or use it purchase something but be ready to do it after doing some research because as we know, it is highly volatile and fluctuating.
Planned it out before what you want to do with it so that you won’t have to face a panicked and rush moment where everyone is trying to do so.