By The Buyt Desk
A bitcoin is a virtual or digital currency. You can’t see it or touch it but can buy it. The bitcoin has shown a hike of 349% in its prices, making it the fastest-growing currency. Currently, the cost of one bitcoin is worth more than Rs 21 lakh.
A bitcoin represents a string of numbers with unique mathematical properties. Anyone with an internet connection can transact in bitcoins. You need a Bitcoin client to either send or receive bitcoins. Bitcoin is a decentralized electronic payment system wherein no other party except the two transacting individuals are involved. It is not a physical entity and shows as a balance in the public ledger. Blockchain is the ledger that keeps a record of every bitcoin transaction. Bitcoins have innate worth; can be converted to real cash at Bitcoin Exchanges. People have faith in this digital currency and are willing to trade goods and services with it or save it as an investment.
The concept of Bitcoin originated in 2009; however, the identity of the inventor is unknown. The individual or the group of individuals behind the origin of Bitcoin go by the pseudonym of Satoshi Nakamoto. The purpose of creating this cryptocurrency was to provide the global population with an alternative other than fiat currency.
[Note: While referring to the concept, the word Bitcoin is capitalized. However, while referring to the money unit, the word bitcoin is not capitalized.]
Benefits of using bitcoins
You may question the need for bitcoins, especially while electronic payment systems for mainstream currencies are available. There are many advantages to bitcoins:
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Ease of transaction: Firstly, you do not require a bank account or credit/debit card to transact in bitcoins. An internet connection alone is sufficient to transact in bitcoins from anywhere in the world. Bitcoin is a highly suitable concept for international transactions. There is no problem of conversion among international currencies like seen for platforms like PayPal. Moreover, the Bitcoin transactions are fulfilled within seconds.
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Low transaction fee: The transaction fee of a Bitcoin transaction is lower than the transaction fee of mainstream electronic transfer systems.
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Decentralization: No central authority, like banks, control the operation of bitcoins.
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Privacy: You can spend bitcoins anonymously. Though every transaction is recorded publicly, the identity of the user is hidden. You do not divulge any personal information to transact using bitcoins.
Procurement of bitcoins
On solving complex mathematical problems using advanced computing power, you can earn bitcoins as a reward. The process is termed Bitcoin mining. However, with passing time, the mathematical problems are becoming more challenging, and mining bitcoins is not child’s play. You can also receive bitcoins upon selling products and services. Another way to procure bitcoins is to purchase them with real money at Bitcoin Exchanges like Coinbase, Bitfinex, and Bitstamp. The exchange rate for a bitcoin is decided beforehand by the advanced cryptographic Bitcoin code.
Safety of Bitcoin
High-level of cryptography has been used to create the Bitcoin concept. Bitcoin network comprises computers (referred to as nodes) that run the code of Bitcoin and store the associated blockchains. A block stores Bitcoin transactions and blockchain is a group of blocks. Every node has the same list of blocks and transactions. Anyone, even outside the network, can see any and every bitcoin transaction happening live. Thus, Bitcoin is a highly secure system.
Working of the Bitcoin system
The design of Bitcoin allows the nodes (participating computers/miners) to verify and complete a transaction. Using cryptography, Bitcoin creates mathematical proofs to secure the blockchain and safeguard the user’s transaction. Miners try to solve these mathematical proofs in discovering new blocks, which are added to the blockchains. Miners earn bitcoin rewards for the discovery of new blocks. During this process, miners add and verify transactions across the Bitcoin network. Miners use high-end computing hardware like Application-Specific Integrated Circuits (ASIC) to mine bitcoins.
Future of Bitcoin
The future of Bitcoin is obscure. Bitcoin gives competition to traditional currencies. As a result, governments across the world may set up a regulatory system for Bitcoin.
