What is Bitcoin and How Does it Works?

What is Bitcoin and How Does it Works?

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What is bitcoin?


Bitcoin is a digital cryptocurrency created in 2009. A marketplace called “bitcoin exchange” allows people to buy or sell bitcoins through various currencies.


Bitcoin is a new currency created in 2009 by Satoshi Nakamoto. The identity of the person making the technology is still a mystery. Transactions are done without any middleman – meaning, no bank! Bitcoin can be used to book hotels on Expedia, purchase furniture at Overstock, and purchase Xbox games. But much about publicity it is getting rich by doing business. In 2017, the price of bitcoin skyrocketed into the thousands. Bitcoin is an inventive payment network and the latest type of money. A bitcoin is divided into eight decimal places (100 million of a bitcoin), and this smallest unit is called Satoshi.


Why Bitcoin?


Bitcoins can be used to purchase goods anonymously. In addition, international payments are easy and cheap because bitcoins are not subject to any country or regulation. Small companies may like them because they have no credit card fees. Some people buy bitcoins just as an investment, hoping that they will go up in value.


Key Takeaway


Launched in 2009, bitcoin is the world’s biggest cryptocurrency by market cap.

Unlike fiat currency, bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, called a blockchain. The history of bitcoin as a storehouse of value has been turbulent; Cryptocurrency skyrocketed to around $ 20,000 per coin in 2017, but two years later, currency trading is less than half. As an early cryptocurrency to cater to widespread popularity and success, bitcoin has inspired a host of other projects in the blockchain space.


Understanding Bitcoin


Bitcoin is a collection of computers, or nodes, that run the code of all bitcoins and store its blockchain. Blockchain can be considered as a collection of blocks. Each block contains a collection of transactions. Because all these computers running the blockchain have the same list of blocks and transactions and transparently these new blocks can be seen to be loaded with new bitcoin transactions, no one can cheat the system. Anyone, whether they run a bitcoin “node” or not, can see these transactions live. 


Bitcoin is a type of cryptocurrency. The balance of bitcoin tokens is kept using public and private “keys”, long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key serves as a published address to the world and to which others can send bitcoins. Private key (compare ATM PIN) means a protected secret and only used to authorize bitcoin transmissions. The keys to bitcoin are not to be confused with a bitcoin wallet, which is a physical or digital device that facilitates the trading of bitcoins and allows users to track the ownership of coins. 


How Does Bitcoin Works


Bitcoin is the first digital currency in all of the currencies, to use peer-to-peer technology to facilitate immediate payments. Independent individuals and companies that own the governing computing power and participate in the bitcoin network include nodes or miners. “Minors,” or those who process transactions on the blockchain, are motivated by rewards (release of new bitcoins) and transaction fees paid in bitcoins. These miners can be considered as a decentralized authority enforcing the reliability of the bitcoin network. New bitcoins are being released at a fixed, but periodically decreasing rate, such that the total supply of bitcoins reaches 21 million. Currently, there are about 3 million bitcoins which are yet to be mined. In this way, bitcoin operates differently from fiat currency; In centralized banking systems, currency is issued at a rate matching the growth of goods in an attempt to maintain price stability, while a decentralized system such as bitcoin determines the release rate ahead of time and according to an algorithm.


Receiving Bitcoins as Payment


Bitcoin can be accepted as a means of payment for products sold or services rendered. If you have a brick and mortar store, just display a sign saying “Bitcoin Accepted Hears” and many of your customers may adopt it well; The transaction can be controlled from the hardware terminal or wallet address expected through the QR code and the touch screen app. An online business can easily accept bitcoins by simply providing credit card, paypal etc. to this payment option.


Working For Bitcoin


People who are self-employed can pay for a job in bitcoin. There are many ways to achieve this such as creating an internet service and adding your bitcoin wallet address to the site as payment. There are several websites / job boards dedicated to digital currency:


Cryptogrind brings together job seekers and prospective employers through its website

Junk jobs in freelance, part-time and full-time – that offer payment in bitcoin, as well as other cryptocurrencies such as Dogecoin and Litoin.




Bitwage provides a way to select a percentage of your work paycheck to be converted to bitcoin and sent to your bitcoin address


Investing in Bitcoins


There are many Bitcoin supporters who believe that the digital currency is the future. Many of those who support bitcoin believe that it facilitates a very fast, low fee payment system for worldwide transactions. Although it is not supported by any government or central bank, bitcoins can be exchanged for traditional currencies; In fact, its exchange rate against the dollar makes potential investors and traders interested in currency plays. In fact, one of the primary reasons for the rise of digital currencies such as bitcoin is that they can serve as alternatives to traditional commodities such as national fiat money and gold.


Like any other asset, the principle of buying low and selling high applies to bitcoin. The most popular way of collecting currency is through buying on the bitcoin exchange, but there are many other ways of earning and owning bitcoins.


Bitcoin Forks


In the years following the launch of bitcoin, there have been instances in which differences between the factions of miners and developers prompted a large-scale division of the cryptocurrency community. In some of these cases, groups of bitcoin users and miners have changed the protocols of the bitcoin network itself. This process is known as “forking” and is usually the result of the creation of a new type of bitcoin with a new name. This division can be a “hard fork”, in which a new coin shares the history of transactions with bitcoin up to a decisive split point, at which point a new token is created. 


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