Money is one thing around which the whole world dances. People are always chasing after those rectangular pieces of paper. But it is time to leave behind the physical concept of money. With the advancement in technology and the internet, the concept of digital money emerged.
Bitcoin is the first cryptocurrency that was created in 2009 by a mysterious and anonymous person Satoshi Nakamoto. There was a time when 10,000 Bitcoins were used to buy 2 pizzas. Now considering the tremendous rise in the value of Bitcoin you can enjoy pizza for a lifetime with 10000 BTC.
The majority of people have heard about cryptocurrency and Bitcoin. It is another thing that they don’t really understand about Bitcoin. But they have surely heard about it from news updates, friends, family or colleagues.
As soon as someone says Bitcoin people shut off their minds thinking it’s hard to digest all the technicalities.
Today we will leave behind the technical terms and translate Bitcoin into simple English.
What is bitcoin?
Bitcoin is a decentralized digital currency or cryptocurrency. It uses peer-to-peer technology for instant payments. It was created in 2009 by anonymous person Satoshi Nakamoto. Not much is known about the founder. We even don’t know if it’s a group of companies, a genius man or woman.
market statistics of bitcoin
- As of 13 October 2021, Bitcoin is trading at $56000.
- The current overall market capitalization of Bitcoin is $1 Trillion.
- In April 2021, Bitcoin touched an all-time high of $64000.
- Standard Chartered report has predicted that Bitcoin will reach $100k by the year 2022.
Bitcoin simplifies the process of a transaction between two people. In the case of Bitcoin, the whole process is decentralized. This means that no bank, government or institution governs the transactions.
The peer to peer technology enables direct interaction between the sender and receiver. This eliminates the role of governing third party. Bitcoin is free of any central control.
For example, when you pay for your shopping bill with your credit card, you don’t directly transfer the money. It is your bank that transfers the money on your behalf.
In the case of Bitcoin, you directly transfer to the individual you wish. Another great thing about Bitcoin is that all the Bitcoin transaction data is stored in a decentralized manner.
Bitcoin, unlike fiat currencies, is the currency of the internet. Anyone with access to the internet can buy, sell, send and receive Bitcoin. Fiat currencies like the Dollar, Euro, Rupees are currencies of specific nations.
Bitcoin is a digital currency. But it does not belong to any country, institution, company or individual. This makes Bitcoin independent of any monopoly or governance. Instead, Bitcoin is governed by common people on the internet like you and me.
The merits of Bitcoin over fiat currencies makes it the best option for cross border transactions.
Today if you need to transfer money from India to the US, you must take into account these important points:
- High currency conversion rates
- Bank service fees
- Payment gateway fees to carry out the transaction
In simple words, you are paying a lot of money to banks and payment gateways to securely transfer the money on your behalf. Moreover, your every transaction data is being recorded and governed by the bank and the government.
Don’t get fooled by the digitalization of money. Only the money is being transferred from one account to another digitally. You are still paying huge amounts of money to the bank for securing your payment transactions.
The best thing about Bitcoin is that you can transfer it to anyone worldwide without conversion fees. The transaction fee is very low as compared to the banks. You only have to pay $2 – $3 for every Bitcoin transaction.
understanding bitcoin in simple points
- Bitcoin is a cryptocurrency or a digital currency.
- It was created in 2009 by Satoshi Nakamoto.
- Currently, Bitcoin is the world’s largest cryptocurrency.
- Anyone who has access to the internet can own Bitcoin.
- It works on peer-to-peer technology for transfers.
- It is decentralized meaning the absence of a governing third party.
- It has lower transaction fees than banks.
- The bitcoin protocol is based on a blockchain network to store all the Bitcoin transactions.
- Bitcoin is created through Bitcoin mining.
What is bitcoin mining?
Bitcoin mining is the process to create new Bitcoins by solving complex mathematical equations. Those who create Bitcoins are called miners.
These miners participate in the Bitcoin network as an authority that verifies the transactions.
Bitcoin mining is the process of adding and verifying transaction records across the Bitcoin network. The reward for miners is bitcoin, which is half every 210,000 blocks. In 2009, the block reward was 50 new bitcoins. The third halving occurred on May 11th, 2020, lowering the reward for each block discovery to 6.25 bitcoins.
Bitcoin can be mined with a variety of machines. Some, on the other hand, pay off more than others. ASICs, or Application-Specific Integrated Circuits, and more modern processing units, such as Graphics Processing Units (GPUs), can reap greater benefits. People call these complex mining machines “mining rigs”.
The smallest unit of bitcoin is called a Satoshi, and it is divisible to eight decimal places (100 millionths of a bitcoin). Bitcoin could someday be made divisible to even more decimal places if necessary and if the participating miners accept the change.
Do you know that only 21 million Bitcoins can ever be created? At present, 18.8 Million Bitcoins have already been mined.
how does bitcoin work?
All the transaction data are recorded over a network of interconnected computers across the globe. Bitcoin uses a Blockchain network to store the transaction records in a decentralized and transparent way.
You must be wondering what is Blockchain?
- Blockchain is a database that records data in blocks.
- In a Blockchain network, all the blocks containing data are chained together in chronological order.
- Blockchain can record all types of data.
- The most common use of Blockchain is as a ledger to record transaction data.
- It is a system of recording data that makes it impregnable. It’s near to impossible to crack, hack or cheat the system to steal or view the data.
- Bitcoin uses blockchain in a decentralized way.
- The decentralized blockchains feed irreversible data.
All bitcoin transactions are recorded in a public ledger, and copies are stored on servers all around the world. A node is a server that can be set up by anyone with a spare computer. Rather than relying on a central source of trust like a bank, consensus on who owns which coins is reached cryptographically among these nodes.
Every transaction is broadcast to the entire network and shared across nodes. Miners consolidate these transactions into a group known as a block and add them to the blockchain permanently every ten minutes or so. This is the bitcoin account book.
When a block is uploaded to the blockchain, it becomes available to anyone who wants to look at it. Thereby, acting as a public record of cryptocurrency transactions.
While the idea of everyone being able to change the blockchain may appear dangerous, it is precisely what makes Bitcoin trustworthy and secure. To be included in the Bitcoin blockchain, a transaction block must be validated by a majority of all Bitcoin owners, and the unique codes used to identify users’ wallets.
Moreover, the transactions must follow the correct encryption pattern. Because these codes are long, random numbers, counterfeiting them is extremely difficult.
How to buy bitcoin?
The majority of Bitcoin is purchased through exchanges such as Coinbase. You may buy, sell, and hold cryptocurrencies on exchanges. Opening an account on the Bitcoin exchanges is similar to opening a brokerage account. You will need to authenticate your identity and give financial details of your bank account or debit card.
You’ll need a digital wallet to hold your Bitcoin regardless of where you buy it. It’s possible that this is a hot wallet or a cold wallet.
An exchange or a provider stores a hot wallet (also known as an online wallet) in the cloud. Exodus, Electrum, and Mycelium are examples of online wallet providers.
A cold wallet (also known as a mobile wallet) is a Bitcoin storage device that is not connected to the Internet. Trezor and Ledger are two mobile wallet solutions.
conclusion
Bitcoin is on the way to transform the way we make transactions in future with the increase in its adaption. Most of the countries are accepting Bitcoin as verified and legal.
El Salvador on 7th September adopted Bitcoin as legal tender in the country. The US is also looking forward to introducing cryptocurrency into its financial system.
This detailed guide must have cleared all your doubts about Bitcoin. Interested to know more?
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