What is Bitcoin ?
Bitcoin is the first global, decentralized currency that allows you to send money from one person to another without involving a third party broker, such as a bank. You only need your computer to make transactions because Bitcoin is fundamentally software.
A “bitcoin” is a unit of the currency that is moved around by the Bitcoin network. As a decentralized currency, Bitcoin is not controlled by anyone. Blockchain is the technology behind Bitcoin is one of the most accurate and secure systems ever created.
How Does Blockchain Work?
Blockchain is a ledger that keeps records of digital transactions. It is a distributed approach to bookkeeping. It opens and distributes the ledger among all participants, this efficient and trusted way makes bookkeeping inherently fair, transparent and resistant to manipulation. Instead of having a central administrator, like a bank or the government, blockchain organizes data in batches called blocks. These data batches use cryptographic validation to link themselves together. In other words, each block identifies and references the previous block by a hash value, forming an unbroken chain.
Blockchain is a kind of independent, transparent, and permanent database coexisting in multiple locations and shared by a community , so it referred a mutual distributed ledger (MDL).
Blockchain solves two of the most challenging problems of digital transactions controlling the information and avoiding duplication.
When a purchase is carried out, the ledger records it and sends it out to the entire network. Computers all over the world then compete to confirm the operation by solving complex math equations. The first to figure out the answer and validate the block receives a reward in Bitcoins , this process is called mining.
The validated block is timestamped and added to a chain in chronological order. The entire chain is continually updated so that it’s always an accurate representation of who owns what at any given time.
Steps of mining process.
- Central to Bitcoin is a public ledger, known as the Block Chain. for every 10 minutes, a new “block” is added to this chain or ledger.
- This ledger records all of the transaction about what quantities of bitcoin currency are now held at different public addresses in the last 10 minutes.
- A public address is a a 27 to 34 character string of uppercase, lowercase letters and the digits from 0 to 9. AKA base 58.
- Each public address has a corresponding private key. Whoever has this key, may spend the coins that are held at this private address. Private keys are 51 characters long in the same format as a public address.
- To spend an amount of bitcoin, you must use your private key to cryptographically sign the transaction and sending your bitcoin to another address.
- This message or transaction is then broadcast to the network, and the computers in the network begin working to write into the block chain or public ledger that your address no longer has the amount that was sent, but that that amount is now held at the receiving address.
- Each new set of transaction is recorded on the block chain, every 10 minutes.
- All of the computers that are working to write new blocks to the block chain, are known as miners.
- These computers are all racing to solve a cryptographic puzzle, which si required to write the new block.
- The computer that solves the puzzle, and writes the new block receives an award of newly created bitcoin.
- This transparency is a large part of the value created by Bitcoin, in that the rate of creation, and current amount in existence is known.
It is an anonymous currency that allows you to purchase internationally. but it has the volatility and threat of future regulation by the government. I think we will see bitcoin as another payment method along side options like credit cards, PayPal, Pay with Amazon, Google Wallet.