We all are aware of physical currencies that we use on a daily basis. We use our notes or coins to buy several goods. Now, the principle working behind these exchanges is, there is a governing authority which has marked the notes and the coins with certain values. The exchange of these physical entities actually refer to the exchange of the values they represent. For example, we buy a 10 rupees pen in exchange of a paper which carries the value of Rs 10. There are several such physical currency systems prevalent in different countries. Also, the exchange rates between such currencies varies with the systems being taken into consideration. Now, apart from these real world physical currencies there exists a currency system which has it’s existence only in the digital world. And in order to make you aware of this amazing system we have brought to you, Basics About Bitcoins You Need To Know.
Basics About Bitcoins You Need To Know
Bitcoin is basically the first decentralized digital currency. Which means that it is the first currency system that actually is in the digital world without any physical body or authority controlling it. To make things further clearer, bitcoins have no physical entity. Even during transactions, no bitcoin is transferred between devices rather computer encrypted data or codes are exchanged. There are only records of transactions between different addresses, with balances that increase and decrease. Every transaction that ever took place is stored in a vast public ledger called the block chain. If you want to work out the balance of any bitcoin address, the information isn’t held at that address; you must reconstruct it by looking at the blockchain.
How Does A Bitcoin System Works?
Bitcoin system works entirely on two points. Firstly, it is the exchange of encrypted codes. Secondly, bitcoins are mined into the market. Now, in order to use bitcoins one should have a bitcoin wallet installed in his or her device(app and application both available). Let us illustrate. For example, person A needs to send 1 bitcoin to person B. Now, person A signs a message with his private key(which a secret encrypted code)consisting of the bitcoin address , the amount (which is 1 in this case) and person B’s bitcoin address. The message gets into a wider bitcoin network where the transaction is being verified by miners by putting it in a transaction block and eventually solving it. So, it is shown that no bitcoin in an entity form is transferred, instead, it is the transfer of encryptions. Now, the question is how bitcoins arrive in the market? Bitcoins get into the market by a process called mining. Miners use several open source softwares for mining. For example –
In simple words, what happens is, miners get a small amount of bitcoins as reward for verification of each transaction and only by this bitcoins are generated in market. There can be only 21 million BTC available at a market at a time.
Advantages Of Using Bitcoins
The main purpose of writing this article, Basics About Bitcoins You Need To Know, was to aware you of the usefulness of bitcoins which is not really been made to exposure much. 1> The value of bitcoin with respect to the real world physical currencies is not fixed. The value changes with the market factors. Example, Now, 1BTC = 2779.20 US Dollars
So, you can basically buy a certain amount of bitcoin and sell it again when the market price hikes. This way it also acts somewhat as a stock market of shares and all.
2> It’s lesser hectic than bank transactions where a transfer passes through a lot of stages of verification. In case of Bitcoin system the entire transfer occurs on an anonymous platform.
3>You can earn by mining of bitcoins. You need to make sure that you have a very powerful GPU and the power consumption is lesser than what you earn from mining.
Bitcoins ain’t very popular now because of their market risks and also security issues. For example, If your wallet gets hacked all your bitcoin savings will be lost. But, nevertheless it is one of the most convenient monetary system now on a digital platform. It’s advantages attracts folks to use these for e-commerce. I sincerely hope the article, Basics About Bitcoins You Need To Know has enlightened you on the topic. For corrections and suggestions please comment below. Thank You .
Soumit is a tech enthusiast who is always on the hunt of doing something different to make the tech life of others easier.He has co-founded the blog "Focuspedia". Soumit has been recommended for his java project on LearnIt ,an opensource c++ learning standalone application.Apart from these he is a patron of music and art.