Bitcoins – A simple understanding of How Bitcoin Works

Bitcoin is a digital currency created in January 2009 after the housing market crash. This idea came about out of the idea set out in a whitepaper of an unidentifiable person but a group known as Satoshi Nakamoto. This technology still remains a mystery as the person who created the technology is unidentifiable. The system of this technology is totally independent of the government’s authority as it takes a regular lower transaction fee other than a traditional online payment mechanism. Moreover, this can be traced to be associated with the person or group/association called Satoshi Nakamoto.

Bitcoins – A simple understanding of How Bitcoin Works

It is surprising enough that this Bitcoins is a no physical element that is kept on a public ledger which everyone has transparent access to and in sum; the whole system of the transaction is verified by a massive amount of computing power.  In a real sense, Bitcoins are not issued by any back neither is it backed by governments in as much as it is not legal tender. Many other hundreds of virtual currencies (Altcoins) have been triggered into launch.

Bitcoins

Bitcoins is the world’s largest cryptocurrency by market cap and the earliest cryptocurrency to meet widespread popularity and success.

A simple understanding of Bitcoin

Blockchain and Bitcoins: Bitcoins are a collection of computers. Running Bitcoin’s code and with the use of Blockchain, store them. Blockchain in the sense that it is the collection of blocks and this implies. That for every transaction, there is a Blockchain. The system is transparent as long. As the computes running the Blockchain are having the same list of blocks. And transactions, making it impeccable for someone to cheat the system. Bitcoins currently have over 10,000 nodes and this number growing. Making it possible for anyone who does not have a node to see the transactions live. If peradventure would be a nefarious act, it should be that the person has 51% of the computing. Power that makes up Bitcoin. But this is not seen oftentimes.

Generally, Bitcoin is a type of Cryptocurrency. Which maintains a regular security pattern using public and private keys of long chains of. Numbers and letters over a mathematical encryption algorithm created by the Bitcoiner. I mentioned public and. Private Key, what is all about?

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The Public Key:

The public key serves as the address which is visible and known to the world to enable others to send Bitcoins. In other words, it is more like a comparable account number.

The Private Key:

The private key should be kept private as the name sounds and usable to authorize Bitcoins transmissions. In Other Words, it is like an ATM Pin.

Note: Do not mistake the “Key” for “Wallet” because the wallet is a physical and digital device that enables trading of Bitcoins and allows users to track ownership of coins. Often times, this could be misunderstood as Blockchain.

How Bitcoin Works

This is the first digital currency that makes use of peer-to-peer technology to facilitate instant payments. The system is independent of Government as it comprised of Nodes and miners who could be individuals or companies. The Miners are those who process the transactions on the Blockchain are said to be accountable for enforcing the credibility of the Bitcoins network. New Bitcoins are being released to the miners at a fixed, but the periodically declining rate (this means that the rate can decline anytime) such that the total supply of bitcoins approaches 21 million.

Bitcoins Mining

Bitcoin mining is the process that upholds the release of bitcoins circulations. This is not easy at all because it requires solving computationally difficult puzzles to be able to discover a new block. When found, it is added to the Blockchain. Over the Blockchain, the mining contributes by adding ad verifying transaction records across the network. For adding to the Blockchain as a miner, there is a reward that awaits you that is inform of new bitcoins and is halved every 210,000 blocks.

In 2009, the block rewards were 50 new bitcoins and currently, it is now 12.5. Of course, the next halving comes up on May 11th, 2020 with rewards for each block discovery brought down to 6.25 bitcoins.

How can I Mine?

There are varieties of hardware that can be used to mine Bitcoins but some can yield higher rewards than others. Chips like the ASIC are capable of yielding more rewards and as well the advanced processing units like GPUs. Often time, we refer to these mining chips as “Mining rigs.

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We get to tell that one Bitcoins is divisible to eight decimal places and the smallest unit referred as to Satoshi.

Why do people invest in Bitcoins?

For the sake of the principle of buying low and selling high has made many invest in bitcoin. This is because the principle is uncommon in other business you can think of investing in. There are other ways in which you can earn and own bitcoins but many purchase Bitcoin for their investment value other than as a medium of exchange. And the truth is that the most popular way of amassing the currency is through buying on a Bitcoin exchange.

Many Bitcoin supports belief in the future of digital currencies because it is a fast, with a low-fee payment system for transactions across the globe. Furthermore, Bitcoin can be exchanged for traditional currencies. One more reason could be as a result of the way Bitcoin acts as an alternative to national fiat money and traditional commodities e.g. Gold.

Abbreviations &Meaning

Application-Specific Integrated Circuits – ASIC

Graphic Processing Units – GPUs

The Bitcoin of today

Do you really want to know more about the whitepaper published on Bitcoins.org? (Peer-to-peer Electronic Cash system).

Visit this weblink as this paper reviews how Bitcoins operates today.  http://www.bitcoin.org/bitcoin.pdf.”

Security Risk of Bitcoins

Probably, most individuals who make use of Bitcoins did not acquire tokens through mining operations. But they buy and sell Bitcoins and other digital currencies may be from Bitcoins exchanges or from popular online markets. This is actually a risk to security operation because virtually the system can be at risk of malware, hackers, and operational glitches. What if the thief gets to hack your security key and get your Bitcoins transferred to another account. Hackers can also target Bitcoin exchanges because there are thousands of accounts and if successful, they can access thousands of accounts and digital wallets where bitcoins are stored.

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