Bitcoin is the pioneer of crypto currency. Bitcoin was created on a blockchain technology by a person or a group of person using the alias name: Satoshi Nakamoto. The whitepaper was released and was accepted by the user and miner community just after the financial crisis in USA,around the year 2008. A blockchain network uses computers undergoing a process called mining. A payout in bitcoin is received by the miners for keeping the network secure. Anyone can share their computing power to the bitcoin network to earn bitcoins, which can be exchanged for altcoins or fiat currencies. Bitcoin network is decentralised and is not controlled by any particular country or bank.
Blockchain and bitcoins
Blockchain technology is a technology which enables a ledger to be kept in a decentralised network. Typically users will have a unique HD password & private keys, which allows them to check their wallet value. The blocks of bitcoins are broadcasted every 10 minutes. The transactions in a block are processed and validated amongst the bitcoin network. After few confirmations are received, the transactions are complete and the network receives a new copy of the ledger. The miners are paid for the processing effort in bitcoins. One miner cannot exploit the system, as all other miners will detect it as a false transaction which keeps the network secure.
How to use bitcoin
The first step is to sign up for a bitcoin wallet, which supports bitcoin and can store your private keys. Always remember to keep your bitcoins safe by preserving your private keys & HD password. If you lose them you cannot use your bitcoins. You can also use a hardware wallet to ensure security. To buy bitcoins you can go to exchange or buy it from someone. Your wallet will contain a receiving address through which you receive funds. Always use escrow to buy Bitcoins from a person. After buying them you can use it through send bitcoin in your wallet. It takes more than 5 confirmations to permanently be included in the blockchain.
The digital signature ensures that the value you are sending or receiving is later not manipulated. The transaction is processed by the bitcoin network by the process of mining. Your transaction is processed within few hours irrespective of the distance between sender & receiver. The transaction is secure, censor-free & anonymous. The master seed ensures that the current value and new value are validated in the entire bitcoin network. The different types of wallet that you can use are online wallet, offline wallet , paper wallet & hardware wallet. You can ensure security by keeping control over your private keys & keeping multiple secure backups of your wallet. You can also use bitcoin faucet to learn using bitcoin for free.
The future of bitcoin
The value of bitcoin has risen exponentially since it’s inception. The disruptive tech that this is, it gives everyone the freedom of exchange, irrespective of physical & legal barriers. Bitcoin has given rise to a new technology and a new way internet works. This is a form of new Internet Democracy which is booming right now. More and more people are investing in bitcoins and are enjoying the gains. Crypto currencies are the future of digital currencies. They are being accepted worldwide. The more people accept it the more powerful it becomes. The value of bitcoin is currently (september 2017) 4430 USD.
Unlike government controlled fiat currencies, which are prone to inflation as the banks keep on issuing new notes, the bitcoin is inflation free as only a certain number of coins can be created. The bitcoin can be easily liquidated by an exchange. Typically crypto currency exchanges also are traded 24/7, 365 days a year, unlike stock market trading. The mining of bitcoin will lose profitability in near future as the mining difficulty increases. The Bitcoin has become a central currency in the world of cryptocurrency and is highly used. Satoshi a micro fraction of bitcoin is used to perform small value transactions this is also a part of bitcoin network.
The concept of physical notes and currencies was redefined when the Bitcoin, a crypto currency, was created by the pseudonymous developer Satoshi Nakamoto in 2009. Little did the world know about the potential of Bitcoin. Back in 2010, 10K bitcoins could buy only 2 pizzas, but today their worth is more than $20 million.
– Floris van Vredendaal, AllCrypto.com
While the traditional currencies can be produced by a central agency or a consortium, the crypto currencies cannot be printed or produced as such, these being produced or mined by high-end rigs which are often called ‘mining rigs’. These rigs solve complex math problems or complex computations to obtain these virtual currencies.
In earlier days Bitcoin mining could be done on average CPU’s, but it didn’t take long before the miners realized that a certain set of configurations produced better returns. Thus, mining became exclusive to the owners of rigs, which consist of high-end hardware. Basically, bitcoin mining is accomplished by running a SHA256 double round hash verification process for validating Bitcoin transactions and providing the much-needed security for the public ledger of Bitcoin network.
To maintain credibility and transparency a ledger is maintained which keeps the record of transactions that have been made.
All the transactions made in a period are collected forming a block, miners provide with the computational power to write them in a ledger. The general ledger comprises of a list of blocks called blockchain. To make sure the blockchain stays intact miners put it through a process and turn it into a random sequence of letters and numbers which is known as a ‘hash’. Every time a hash is successfully produced, the miner is rewarded with 25 Bitcoins.
For a computer producing a hash from a collection of data is very easy however this task is made deliberately difficult by the Bitcoin network. The network demands that it has to look in a certain way “Nonce” which is a random piece of data that is used to create a hash. The hash has to fit the data if it doesn’t “nonce” is changed and the whole hashing process has to be repeated.
Since the creation of the Bitcoin people have been looking for ways to mine Bitcoin and there are some ways to do that however for that one needs mining hardware. Mining without the required hardware doesn’t provide with the same performance and is likely to consume more electricity.
Basically, Bitcoin network compensated miners for their efforts by giving bitcoins to those who contribute to the needed computational power. The more computational power one gives the greater the reward. There is a limit of 21 million Bitcoins that can be mined and it is hardwired into the system itself and once this limit is reached there will be no more mining.