What is Bitcoin?

what is bitcoin

Bitcoin is a decentralized electronic and a digital currency that was developed back in the year 2009 by a programmer who used the name Satoshi Nakamoto to publish a proof of this concept. In this amazing digital currency, transactions are fully decentralized and are made without any middle party like a bank or any payment gateway. Transactions related to bitcoins are also irreversible and no authority like government or bank can block one from sending or receiving them anywhere in the world. However, this freedom is accompanied by the responsibility of not making any mistakes in the transactions since there is no any central authority to complain to if things go wrong. Bitcoins are not printed like dollars or any other common currency but they are produced by computers using some sophisticated free software. Basically, they are used to book hotels, buy Xbox games or shop things among other uses but the main hype is always getting profits by trading bitcoins.

How it works

The main challenge with most of the online transactions has always been that digital records are prone to manipulation and possibly, people can find themselves spending the same amount of money twice if the system is broken into by the hackers with the right kind of interface but in bitcoin, the system will catch up with the double spending and automatically negate the second transaction. With systems such as Paytm and PayPal, the company authenticates every transaction and keeps records. On the other hand, bitcoin uses a blockchain to maintain the records. The blockchain is simply a public worldwide ledger of every bitcoin transaction conducted and is always distributed to every computer connected to the Bitcoin network. This blockchain exists forever and this makes it totally impossible for anyone to edit the information. Instead, if any kind of transaction takes place, all the computers connected to this network will check the balances of bitcoin addresses and automatically edit the ledger. Basically, within seconds any bitcoin transaction is detected by the entire network and recorded in the blockchain.

What is bitcoin mining?

Probably you may ask where do bitcoins come from? How are they issued? Or what determines their value? Bitcoins are mined by performing combinations of advanced mathematics plus accurate record-keeping. Using sophisticated and energy-intensive hardware, miners converts the blockchain to a sequence of codes and the miner that produces a perfect version up getting paid. Alternatively, some users dedicate their computers to verifying bitcoin transactions on the peer to peer bitcoin network and in return, the miners are given a proportionate amount of currency. By this, anyone who has a good internet connection and the necessary hardware can participate in bitcoin mining.

How much is a bitcoin worth?

Like in any other market, the value of a bitcoin is always determined by the forces of demand and supply. The price of a bitcoin had been exponentially rising for the past several years as the number of bitcoin users increased. The price of a bitcoin in terms of the traditional currency may fluctuate especially because this digital currency is not used by many. However, they are expensive and currently, a bitcoin is worth about $11534. Bitcoins according to their design by the lead programmer; Nakamoto, they are based on a system of scarcity. A successful miner is always rewarded new Bitcoins although this number is always halved every four years and eventually the number is expected to go down to zero after some time.

Buying bitcoins

One can acquire bitcoins in several ways but the most convenient one is to use the trusted digital currency exchanges like Coinbase, Kraiken, CEX, and Coibmama which is currently the largest market. Starting up is very simple since one just needs to sign up an account in the choice bitcoin market. One then makes a deposit in the virtual wallet and once it is funded, one can buy bitcoins using the traditional currency. These exchange marketplaces; similar to the traditional banking system may have slightly different rates. If there is a great difference, traders tend to buy low on one exchange market and sell at higher prices to another and thus they use this gap to make a profit. Before settling on a certain exchange market, one has to research and find a trustworthy exchange. It is also advisable that you should have a personal wallet for one to have complete control over your funds as a person.

You can basically use bitcoin to buy various things some merchants or sell when the value appreciates and earn a profit.  There is no transaction fee charged in these transactions although Coinbase and other exchanges typically charge a small fee when one buys or sells. As any other investment and a currency, bitcoin is associated with a great risk since it value keeps on fluctuating. Unlike a dollar, the value of a bitcoin cannot be predicted since it is highly volatile and may change within a day or even hours.

In conclusion, bitcoins have received much attention because this technology has enabled many people to break free from the traditional form of banking and own their money in a different and a unique way. The value of bitcoins has been skyrocketing and they have turned out to be a good way of not only investing but also storing one’s wealth in a virtual form where the control of wealth is always in one’s hand.

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