What is Bitcoin?
Bitcoin is a digital currency , that uses rules of cryptography for regulation and generation of units of currency. It is the first decentralized digital currency, as the system works without a central bank or single administrator. Because of bitcoin's decentralized nature, nation-states cannot shut down the network or alter its technical rules. Owners are anonymous; instead of using names, tax IDs, or social security numbers, bitcoin connects buyers and sellers through encryption keys. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. According to research produced by Cambridge University, there were between 2.9 million and 5.8 million unique users using a cryptocurrency wallet, as of 2017, most of them using bitcoin. It is commonly referred to with terms like cryptocurrency, digital cash, virtual currency, electronic currency or cryptocurrency.
Who created it?
Bitcoin falls under the scope of cryptocurrency and was the first and most valuable among them. Cryptocurrencies are designed for maximum anonymity, no one knows exactly who created it. On 18 August 2008, the domain name "bitcoin.org" was registered. In November 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. His stated goal was to create "a new electronic cash system" that was "completely decentralized with no server or central authority." Nakamoto's invention was controlled entirely by software, which would release a total of twenty-one million bitcoins, almost all of them over the next twenty years.
How does Bitcoin work?
Bitcoin is digital money that you can transfer to another person without the need of a third party, like a bank. As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one.
The bitcoin system process transactions in a peer to peer fashion, that is, transactions take place between users directly without any intermediary like bank, credit card companies etc. Bitcoins are stored in a digital wallet . These wallets may exist in the cloud, on your smartphone or computer. Most of the exchange also provide digital wallet. Yet, you can setup your own wallet in your cellphone or computer. All Bitcoin transactions are written down in a public ledger, known as the Block Chain . To spend an amount of bitcoin, you must use your private key to cryptographically sign the transaction, sending your bitcoin to another address. This message or transaction is then broadcast to the network, and the computers in the network begin working to write into the block chain (or public ledger) that your address no longer has the amount that was sent, but that that amount is now held at the receiving address. Each new set of transaction is recorded on the block chain, every 10 minutes as mentioned.
What determines the value of a bitcoin?
Bitcoins are generated following a strict mechanism and it is a product of math and not of monetary policy . Bitcoin is either a payment instrument or a commodity. Bitcoin supply is limited, given the absence of a monetary authority, the price is purely set by supply and demand . High demand and limited supply make Bitcoin most valued currency in the world. The public's opinion about bitcoin's future and its usefulness is, of course, a key determinant of its price in the long-run.
Bitcoin is sold in exchange for other currencies or goods or services. So very simply, the price of bitcoin is always 'calculated' as an average of what the buyers and sellers are matching their bids for at that moment across various bitcoin exchanges, per currency pair. As of now, the total number of coins in circulation is over 16.7 million BTC. The network is designed to add the supply of 21 million bitcoins. That's it. There will never be inflation.
A user can acquire bitcoins through bitcoin exchange or by accepting bitcoins as payment. The first step is to set up a wallet to store your bitcoin. Once you have a Bitcoin wallet, you use a traditional payment method such as credit card, bank transfer (ACH), or debit card to buy Bitcoins on a Bitcoin exchange (example: Coinbase). The Bitcoins are then transferred to your wallet. The wallet will have two keys: Private and Public key. The private key is used by the user to transfer ownership of the currency. The private key is confidential and is to ensure that only the owner is able to spend or transfer money from his wallet. The public key is available to all and other people will send money to this public key/ address. It is akin to an email address. The number of places where one can spend Bitcoins is increasing rapidly and includes some big retail players as well as many small businesses and retailers. Recently, Japan accepted Bitcoin as a payment mode.
What is the future of bitcoin?
No one knows what will become of bitcoin . Bitcoin is gaining popularity worldwide. It being accepted by many popular merchants like Expedia, Dell and Microsoft . It is mostly unregulated, but some countries like Japan, China and Australia have begun weighing regulations. Governments of nations are slowly showing their acceptance towards bitcoin. Also, Governments are concerned about taxation and their lack of control over the currency. One day, we might even consider using Cryptocurrency as our standard currency for a more universal transaction.
NEXT.....What Is HTTP Error 502: Bad Gateway