What is a bitcoin and how it works

Bitcoins are becoming highly discussed topics these days. Understanding bitcoins and how they work can open up new avenues for you to do online transactions.

What is bitcoin?

Bitcoin is a kind of digital currency. It is also called as cryptocurrency. Bitcoin uses the rules of cryptocurrency to regulate and generate the units of its currency. Coming under the scope of cryptocurrency, this decentralized digital currency of bitcoin is the first of its kind and the most valuable among all the other alternatives available in this segment. In 2009, Satoshi Nakamoto invented bitcoin.

How bitcoins work?

Bitcoins are virtual coins. They feature the value and trade in the same way a nugget of gold will possess. Bitcoins can be used to purchase goods and services online. You can also tuck them away hoping that their value will increase over the years. Bitcoins are traded from an individual’s personal wallet to another. In the bitcoin domain, we can understand the term wallet as a small personal database that can be stored on your computer drive. You can also store it anywhere on your smartphone or tablet or in the cloud.

How to get started with bitcoin?

If you are a new user, you can just get started with bitcoin even without understanding the technical details of it. You just have to install a bitcoin wallet on your mobile phone or computer. This will generate your first bitcoin address. You can create more bitcoins whenever you have a need. When you share your bitcoin address with your friends, they can pay you. The system of bitcoin is similar to how email works. However, the difference is that you can use a bitcoin address only once.

What is Blockchain technology?

Block chain is a kind of shared public ledger. The entire system of bitcoin depends on this to work. Block chain includes all confirmed transactions. Block chain enables the bitcoin wallets to calculate the spendable balance. This can help verify the new transactions so that you can make sure you actually own it. Cryptography enforces the integrity and the chronological order of block chain.

What is a bitcoin transaction?

A transaction can be defined as the transfer of value between bitcoin wallets. This will get automatically included in the block chain. Bitcoin wallets store a secret piece of data called as seed or private key that is used for signing the transactions. This secret data piece will also help to ascertain that the value has come from the owner’s wallet. The signature helps prevent the transaction from being altered by anyone after it has been issued. The process called as mining will confirm the given transaction within 10 to 20 minutes by broadcasting the transaction to the entire network.

What is bitcoin mining?

Mining can be explained as a distributed consensus system that can be used to confirm the pending transactions by way of including them in the block chain. Mining brings in a choronological order to the block chain and helps keep the network neutral. If they have to be confirmed, transactions must be fitted within a block that needs to adhere to the cryptographic rules. The network will verify this for confirming the transaction.