Technology

What Is Behind Bitcoin And How It Works?

Bitcoin

Digital currency is the ‘it’ thing of today. Since the invention of the internet, it has given birth to several new business marketing and economy-based currencies, so we can say that Bitcoin is a product of those changes.

To put it simply, Bitcoin is a type of cryptocurrency. Now you may ask, what is cryptocurrency? It is a virtual currency—meaning money that exists digitally and is not visible. 

At the beginning of the cryptocurrency craze, there weren’t many variations in it. But, with the introduction of Bitcoin, other types of cryptocurrencies came into existence too.

Initially, it was not accessible to unauthorized personnel. It first became an open-source network in 2009. Though the owner/owners have not yet been identified, they are recognized under ‘Satoshi Nakamoto.’

What Does Bitcoin Actually Mean?

Commonly abbreviated as ‘BTC,’ it is the most dominant cryptocurrency of present times. Its value broke records in 2017. It is calculated in US Dollars by default. 

A blockchain is followed by Bitcoin. This chain includes the creation, distribution, trading, and storing of all the Bitcoins that exist. The blockchain monitors all transactions of each Bitcoin.

The Bitcoin network comprises numerous computers. Each computer is named a ‘Node/Miner.’ These nodes act as storage units of multiple Bitcoins. The following chart will give you a better understanding of its working.

Nodes/Miners

Blockchains

Collection of Blocks

Collection of Exchanges of each Bitcoin (Transactions)

What is Behind Bitcoin?

The reason behind such hype of Bitcoin is its ability to act as an alternative to currency exchange.

For example, if you are visiting/shifting to a country with the same currency as the one you currently live in, there is a need to perform currency exchange. This refers to converting your cash to the equivalent of the money you are visiting/shifting. A more straightforward analogy could be that it is one of the currencies of the planet Earth as a whole.

With Bitcoin, the hassle of currency exchange can be entirely avoided. You do not need to perform currency exchange. Instead, use your Bitcoin(s) as the currency to make any type of transaction. You can use Bitcoin for buying or selling anything which has value.

Two operations are involved in the transactions. These are combinations of characters, both alphabet and numbers, which act as encryptions. The first operation is Public, just like your Email ID; that is known to all, while the second operation is Private, just like your Password; only known to you.

The Public operation serves the function of your address to carry out transactions. The Private operation serves the function of providing permission for the transactions to take place. 

How does Bitcoin Actually Work?

Bitcoins are not always available to use. They need to be put into circulation for access. 

A process called ‘Bitcoin Mining’ is involved in the working of Bitcoin. This Mining releases Bitcoins into the circulation ring, now accessible for all amounts and types of transactions.

For mining to be done and to use Bitcoins, you will have to solve certain mathematical problems. Solving these will add a new Block to your Collection of Blocks (refer to the above flowchart) and, in turn, to the Blockchain. On solving these, the miners are given a few Bitcoins

The next query you might have is how to mine, right? A set of highly advanced computer programs are used to mine. Some examples are – Graphics Processing Units (GPUs) and Application-Specific Integrated Circuits (ASICs). You can open an account in Bitcoin Traders App and start investing in it.

Why Did the Bitcoin Market Experience a Crash Recently?

Two significant events led to the downfall of Bitcoin. One, China’s decision to ban Bitcoin transactions in any type or form. Two, Tesla’s owner, Elon Musk’s decision to reject Bitcoin Payments.

China, previously a major investor in Bitcoin withdrawing from the Bitcoin business, dropped its value by a generous margin. They passed a similar rule in 2017 too. The 2021 statement for taking such a decision is that ‘there is no real value of digital currencies.’

On the other hand, the electric carmaker’s statement of withdrawal is that ‘liquid cash is a better alternative to having virtual money.’ Also, a point to note is, he has not withdrawn any of his personal Bitcoins but rather 10% of Tesla’s Bitcoin share.

Examples of Bitcoin Usage

  • Big names like Tesla (previously), BMW, and Microsoft are part of the Bitcoin dynamic. You can even speculate that the Bitcoin market is held up primarily because of these companies.
  • International Restaurant Brands are known as major acceptors of Bitcoins. Examples include Popeyes, Burger King, Pizza Hut, Tim Hortons, etc.
  • Technology-based Companies also comprise most of the Bitcoin market. Some of the big names are PayPal, eBay, Xbox, and partially Amazon. Amazon does not directly accept Bitcoin payments; instead, you can use Bitcoin through their gift cards and vouchers.
  • A minor portion is also taken up by the famous beverage company Coca-Cola. On the contrary, another beverage-based business, Starbucks, is considered one of the weighty users of Bitcoin.

To Conclude

The user-friendly nature of using Bitcoin is responsible for its popularity. The idea of virtual currency, specifically Bitcoin being the future, has further boosted its opting. It is extensively used as an investment rather than a means of transaction because of its rapidly increasing value.

With every investment, risks are to be evaluated. The same is the case with Bitcoin investment too. Though real money holds more value, the slow yet efficient removal of skepticism or hesitation regarding virtual money has made Bitcoin quickly rise on the ladder of options to be selected.

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