Bitcoin explained – Understand Bitcoin in simple words

BITCOIN EXPLAINED – 

Bitcoin explained as it is a peer to peer system for online payments that do not require a trusted central authority or you can say Bitcoin is divorced from governments and central banks.

bitcoin explained
Source – by tiendientu Vietnam

If we understand it in simple terms than Bitcoin explained as digital and global (money system) currency. It allows people to send or receive money across the internet, even to someone they don’t know or don’t trust. Money can be exchanged without being linked to a real identity, and the mathematical field of cryptography is the core field which keeps Bitcoin secure.

Bitcoin was invented in 2008 by Satoshi Nakamoto that’s why the unit of Bitcoin is named after him as Satoshi.

It is organized through a network known as blockchain, which is an online ledger that keeps a secure record of every transaction to a commonplace.

Every time any transaction occurs, i.e., anyone buys or sell Bitcoin, the swap gets lodged.

Several hundreds of transaction make up a block.

Most unusual part is that no one controls these blocks because block chains are decentralized across every computer that has a Bitcoin wallet, which anyone only gets when someone buys Bitcoins.

Bitcoin is more reliable, quicker, and cheaper form of payment in comparison to money tied to individual countries.

And it is the only form of currency that user can mine themselves if their computer has the proper ability (means configuration of the system).

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BLOCKCHAIN –

For complete understanding of Bitcoin first, you have to understand BLOCKCHAIN 

Let me first explain it in common analogy to make it simple for you. The blockchain is like a full history of banking transaction, Bitcoin transactions occurred or stored in a ‘block.’ (BLOCK  is the collection of transactions occur on a Bitcoin network at a set period.) and a countless number of blocks are connected to each other in linear and chronological order inside blockchain.

Currently, most people use a trusted intermediary such as a bank to make a transaction. But blockchain allows consumers and suppliers to connect directly, removing the need for a third party.

And to keep exchange secure Blockchain provides a decentralized database of transactions that everyone on the network can see. This network is the chain of computers that must approve a transaction before it is verified and recorded.

Now let me explain it is in technological analogy

Blockchain described as a type of “distributed ledger” or decentralized database that keeps a record of Bitcoin transaction, and the technology prevents the same Bitcoin from using more than once.

As the block is the current part of blockchain which records all the recent transactions and when one block gets completed it stored in blockchain as a permanent database. After completion of a block, a new block is generated which has a hash of the previous block now they are connected to each other in linear, chronological order inside the blockchain.

Hence blockchain is the connection of a countless number of blocks in linear and chronological order where every block containing a hash of the previous block and are stored as permanent database inside it(blockchain).

The blockchain database is shared by all nodes (a node is a person who has a file of a transaction on the network) participating in a system. The full copy of blockchain contains every Bitcoin transaction ever occurred. So it can provide an insight of any Bitcoin transaction took place at any time in past and thus can reveal how much Bitcoins belonged to a particular Bitcoin address.

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WHAT MAKES BITCOIN CURRENCY SO SPECIAL?

One of the main difference between Bitcoin and regular money is that Bitcoin can be sent or received from any identity whether it is a real-world identity or not.

Unless someone chooses to link his or her name with Bitcoin address, it will be difficult to tell who owns the address.

Bitcoin doesn’t keep track of users it keeps track of addresses where money is.

To understand how it is possible? Let me explain.

Each address has two important pieces of cryptographic information one is a public key, and another one is a private key.

A public key is like your email address it is open to everyone, and anyone can send bitcoins to it. It is termed as public Bitcoin address.

A private key is like your email address password which is only with the owner and only owner can send Bitcoin with it. That’s why it is called private address, and it is kept secret.

To send bitcoins from a Bitcoin address, you prove to the network that you own the private key that belongs to the address, without revealing the private key.

It is done with the mathematical field of cryptography. That’s why it is not important to keep track of user it is only important to keep track of address, and your Bitcoins will always be secure.

The core innovation that makes Bitcoin currency so unique is that it uses consensus in a massive peer-to-peer network to verify transactions. It results in a system where payment is non-reversible.

And accounts can’t be frozen.

Each Bitcoin has a complicated ID, known as hexadecimal code. That is many times harder to steal than someone credit card. 

And since there is a finite number to be accounted for, there is less of a chance Bitcoin or fraction of Bitcoin will go missing.

Hence, nobody can steal your Bitcoin, transaction fees are much lower, and Bitcoin transaction is quicker than the traditional transaction.

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BITCOIN FUTURE

bitcoin-explained-jpeg

Bitcoin future looks bright, and it is assumed as it will hit $500000 mark by 2030 and catching even a fraction of a Bitcoin starts to look a lot more enticing.

Bitcoin is unique that there only 21 million of them. Founder of Bitcoin arrived at that number by assuming people would discover, or mine Bitcoin, a set number of blocks of transactions daily. 

 Every four years, the number of Bitcoins released relative to the previous cycle gets cut in half, as does the reward to miners for discovering new blocks.

As a result, the number of Bitcoin in circulation will approach 21 million but never hit it. It only means Bitcoin will never experience inflation, Unlike US dollars whose buying power can be diluted, but merely there won’t be more Bitcoin available in the future.

So concluding, Bitcoin future is bright as star and people can invest at almost no risk

ALSO VISIT

Best Bitcoin exchanges to buy sell and trade Bitcoins worldwide

5 Legit ways to make money with Bitcoins

Best places to buy Bitcoins online 2017

 

 

harsh vasistha

Hey, welcome to the community of coinexpansion.com.
I am Harsh Vasistha, owner, and the author of this blog. I am 26 years of age and from New Delhi (India). I am an (IT) Engineer. I am not a techie, but my passion for learning new things and decoding those things in words is the main architect of this blog. Currently, I am offering my service to start ups as well as to an online news portal. I have given true emphases on the quality of content and will continuously enlighten you with more & more pragmatic content. You are welcome to join our ever growing community and become part of Coinexpansion family.

246 thoughts on “Bitcoin explained – Understand Bitcoin in simple words

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