What is Bitcoin?
There are a number of currencies in this world used for trading amenities. Rupee, Dollar, Pound Euro and Yen are some of them. These are printed currencies and coins and you might be having one of these in your wallet. But bitcoin is a currency you can not touch, you can not see but you can efficiently use to trade amenities. It is an electronically stored currency. It can be stored in your mobiles, computers or any storage media as a virtual currency. Bitcoin is an innovative and digital payment system. It is an example of a cryptocurrency and the next big thing in finance.
Value of Bitcoin
A normal piece of paper and a currency note is physically same but the value of the note is decided by an authority or a centralized government. But Bitcoin is a currency which does not have any centralized government or authority to control and decide its value. It is a decentralized digital currency. As of now, the value of 1 bitcoin is 114350.58 Indian Rupees but this value fluctuates as there is no centralized authority to control. In December 2011, the value of a Bitcoin was estimated to be 2 US dollars, in december 2013, it went up to about 1000 US dollars.
“Satoshi Nakamoto” is presumed to be the pen name for the person or people who designed the original bitcoin. Bitcoin was first introduced in the year 2009 as a medium of exchange. The Bitcoin then started as a peer-to-peer network to generate a system for electronic transactions. Since then, there has a been a rapid growth in the usage as well as the value of bitcoin and is a popular system of digital currency.
How Bitcoin Transactions work?
Bitcoin transactions are digitally signed for security. Everyone on the network gets to know about a transaction. A transaction contains 3 pieces of information . The first part contains the bitcoin wallet address of the sender, the second part contains the amount that has been sent, and the third part contains the bitcoin wallet address of the recipient. A bitcoin can also be considered as an invisible currency with only the transaction records between different addresses. Every transaction ever made using Bitcoin is stored in a public ledger called a Blockchain.
A Blockchain is a digital ledger or simply a database that is shared across networks. Any bitcoin transaction that has ever been executed is present in this database as a record or a block. It is a growing database. The blocks are added in a blockchain in a linear, chronological order. It is a public ledger, therefore it is transparent and everyone can view it. This blockchain helps in many ways , there can be no human errors or no more missed transactions. It is a secure database, hence it cannot be corrupted.
There are 3 ways you can get a bitcoin in your electronic storage:
- Trade money for bitcoin : Say that the value of a bitcoin is 1 lakh rupees, so if you want a bitcoin, you can trade a bitcoin in place of 1 lakh rupees. This Bitcoin will further be stored in your electronic storage media which you can further use.
- Trade goods for bitcoin : Say that the value of a bitcoin is 1 lakh rupees and you have a commodity that has its value as 1 lakh rupees, so you can trade that commodity in place of a bitcoin and the bitcoin will be stored in your electronic storage media.
- Mine Bitcoins: Other than trading, you can also mine bitcoins. Since it is a decentralized currency, there is no authority that brings bitcoins in the market. Bitcoins only come in the market by mining them.
How Bitcoins come in Market?
Since Bitcoins is a decentralized currency, they aren’t printed, like rupees, they’re produced by people, and big companies, running computers all around the world, using software that solves mathematical problems. Bitcoins are mined using computing power of distributed network. This network also processes transaction made using Bitcoin. Since the Bitcoins are mined on the basis of computing power, so they take time to be generated. To keep it valuable, it has been stated that only 21 million bitcoins can be created by miners. By the year 2140, all the bitcoins will be created. Around the world, thousands of computers with very high computing power are processing transactions and securing the network by solving complex mathematical calculations and are collecting new bitcoins in exchange.
There are a number of cryptocurrencies nowadays but some of the most popular are –
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