How Far Do You Know About Bitcoins

What is Bitcoin?

This sounds like a simple question but it tends to get some complicated answers.The correct answer is “The first decentralized digital currency”, but that’s quite a mouthful. Bitcoin is a virtual currency that was created in 2009 by an unknown computer whizz using the alias Satoshi Nakamoto.On 18 August 2008, the domain name "bitcoin.org" was registered.In November that year, 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.

Bitcoins aren’t printed, like pounds, dollars or euros, they’re produced by people, and increasingly businesses, running computers all around the world.The total value of all Bitcoin in existence is now more than £112billion.Transactions are made with no middlemen – meaning, no banks! So there are no transaction fees and no need to give your real name.Individual Bitcoins are created by computer code.More businesses are beginning to accept them and in some parts of the world, you can even buy pizza with Bitcoins.In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation.Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value. You can set up a virtual wallet websites like Blockchain to store,  keep track and spend your digital money.You are also able to purchase Bitcoin through an online exchange or Bitcoin ATM.It’s the first example of a growing category of money known as a cryptocurrency.

How does Bitcoin work?

Bitcoin is actually a software. Don't be fooled by stock images of shiny coins bearing modified Thai baht symbols. Bitcoin is a purely digital phenomenon, a set of protocols and processes. Yet Bitcoin is also very different from traditional currencies. Unlike dollars or pounds, Bitcoin isn't backed by any government.Businesses have started accepting it all around the world, some big names include Microsoft and TigerDirect and a whole bunch of airlines. There are websites to help you find Bitcoins accepting businesses.

Bitcoin isn’t only offering an economic alternative, but also a technological alternative. After all, Dollars today are numbers on a computer which represent numbers on a paper which used to represent hard metals, according to laws written hundreds of years ago. When you think about paper money, for someone who uses gold their whole life, paper money is a hard sell. Trust paper instead of metal? Well, paper money actually started out as just a representation of gold. The US Dollar was originally just a “gold certificate”.The banks use today is a “centralized” solution.They keep a ledger on their computer which keeps track of who owns what. Everyone has an account and this ledger keeps a tally for each account.Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online buying drugs or other illicit activities.Bitcoin was born in the 21st century, which is why it is able to do lots of things that make people call it “smart-money”.

Transactions

A transaction is a transfer of value between Bitcoin wallets that gets included in the blockchain.People can send bitcoins to each other using mobile apps or their computers. It’s similar to sending cash digitally. Spending or receiving Bitcoin is as easy as sending an e-mail, and you can use your computer or your smartphone. That simplicity belies the fact that there's a whole lot of complicated math protecting all of these transactions to maintain their legitimacy and security.Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet.All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.

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To receive a Bitcoin, a user must have a Bitcoin address - a string of 27-34 letters and numbers - which acts as a kind of virtual postbox.These addresses are in turn stored in Bitcoin wallets are used to manage savings.You can use Bitcoin for all sorts of real transactions. To do so, you first buy bitcoins however you like, either through your credit card, a bank account or even anonymously with cash. Since there is no register of these addresses, people can use them to protect their anonymity when making a transaction.Then your bitcoins are transferred directly into your Bitcoin wallet, and you can send and receive payments directly to a buyer or seller without the need for a typical go-between, such as a bank or credit card company.By skipping the middleman in the transaction, you pay far less in associated fees.

One of the first supporters, adopters, and contributors to bitcoin was the receiver of the first bitcoin transaction, programmer Hal Finney. Finney downloaded the bitcoin software the day it was released and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction.

What is mining?

The process that maintains this trustless, the public ledger is known as mining.To process Bitcoin transactions, a procedure called 'mining' must take place, which involves a computer solving a difficult mathematical problem with a 64-digit solution.People compete to “mine” bitcoins using computers to solve complex math puzzles. This is how bitcoins are created. Currently, a winner is rewarded with 12.5 bitcoins roughly every 10 minutes.For each problem solved, one block of Bitcoin is processed.In addition, the miner is rewarded with new Bitcoin.Only 21 million Bitcoins can ever be created by miners.These coins can be divided into smaller parts with the smallest divisible amount one hundred millionth of a Bitcoin.This is called a "Satoshi", after the founder.Transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks.Miners are turning to more powerful computers to complete these tasks and earn bitcoin.
                                             
As a result, mining is sucking up greater and greater amounts of electricity.Bitcoin transactions now use so much energy that the electricity used for a single trade could power a home for almost a whole month, according to Dutch bank ING.The bulk of Bitcoin "mining" is done in China, where energy costs are comparatively cheaper than in places like the UK or US. Mining is intensive, requiring big, expensive rigs and a lot of electricity to power them and also it's competitive - there's no telling what nonce will work, so the goal is to plough through them as quickly as possible. 

Where can I buy Bitcoin?

Several marketplaces called “Bitcoin exchanges” allow people to buy or sell Bitcoins using different currencies.Japan-based Mt Gox is the largest Bitcoin exchange. It was launched in July 2010, and by 2013 was handling 70 percent of all Bitcoin transactions.The value of Bitcoin has fluctuated wildly since they were introduced and have reached a record high.In 2013 when they first came to public attention, the value soared by 10,000 percent before the price crashed.A year ago in September 2016, a Bitcoin was being traded for around £469.In October 2017, a Bitcoin is traded for more than £4,000, according to currency tracker XE.com.Bitcoins are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Unlike bank accounts, bitcoin wallets are not insured by the FDIC.

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. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.
                               

Future of Bitcoin

No one knows what will become of Bitcoin as it is mostly unregulated.But some countries like Japan, China and Australia have begun weighing regulations.Governments are concerned about taxation and their lack of control over the currency.While it keeps Bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them.That’s why it has become the currency of choice for people online buying drugs or other illicit activities.And not many governments will put up with that for long.However, it is increasingly used in shops and restaurants - with a fraction of a bitcoin used to buy a pizza, for instance.

The Blockchain

Bitcoin is a network that runs on a protocol known as the blockchain.The blockchain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the blockchain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender."Blockchain" sometimes refers to the original, bitcoin blockchain; other times it refers to blockchain technology in general, or to any other specific blockchain, such as the one that powers Ethereum .Bitcoin's network is not totally anonymous, in other words, though taking certain precautions can make it very hard to link individuals to transactions.

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