Bitcoin Explained – A digital currency

(Last Updated On: December 17, 2017)

What is Bitcoin?

Bitcoin is a money what is E-mail to a mail. Bitcoin doesn’t work like most money. It isn’t attached to a state or government, so it doesn’t have a central issuing authority or regulatory body. Basically, that means there is no organization deciding when to make more bitcoins, figuring out how many to produce, keeping track of where they are, or investigating fraud. It is a digital currency, created and held electronically. It uses peer-to-peer technology to operate; managing transactions and the issuing of bitcoins is carried out collectively by the network all over the world. It is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.

How does Bitcoin work?

Well, Bitcoin wouldn’t exist without a whole network of people and a little thing called Cryptography. In facts, it’s sometimes described as the world’s first cryptocurrency. And here’s how it works.

Bitcoin is a fully digital currency, and you can exchange bitcoins between computers in a worldwide peer to peer network. The whole point of most peer to peer networks is sharing stuff, like letting people make legal copies of music or movies to download, like the torrent. If Bitcoin is a digital currency, whats stopping people from making a bunch of counterfeit copies and becoming fabulously wealthy? Well, unlike a mp3 or a video file, a bitcoin isn’t a string of data that can be duplicated. A bitcoin is actually an entry on a huge, global ledger called the blockchain.

how blockchain works

The blockchain records every bitcoin transaction that has ever happened. So when you send someone bitcoins, it’s not like you’re sending them a bunch of files. Instead, you’re basically writing the exchange down on that big ledger- something like, “David sends Mike 2 bitcoins” now, maybe you’re thinking, “but wait. You said Bitcoin doesn’t have a central authority to keep track of everything!” Even though the blockchain is a central record, there’s no official group of people who update the ledger and keep track of everybody’s money like a bank does – it’s decentralized. In fact, anybody can volunteer to keep the blockchain up to date with all the new transactions. And a ton of people do. It all works because there are lots of people keeping track of the same thing, to make sure all transactions are accurate. You can think of each page as a “block of transactions.” Eventually, your notebook will have pages and pages of information – a chain of those block hence Blockchain.

So when you want to send or receive money, you have to announce it to everyone at the table, so the people keeping track can update their ledgers. So for every transaction, you’re announcing a couple of things to Bitcoin network. Your account number, the account number of the person you’re sending bitcoins to, and how many bitcoins you want to send. And all of the users who are keeping copies of the blockchain will add your transaction to a current block

How is Bitcoin transaction safe?

If all it takes to send bitcoins is a couple of account numbers, that seems like it might be a security problem. It’s a huge problem with regular money – just think about all the ways criminals try to steal other people’s credit card information. And with Bitcoin, there’s no central bank to notice anything weird going to shut down fraud like if it looked like suddenly you spent your entire life saving on a chicken roast. So whats stopping Hank from pretending he’s me and just sending himself all of the bitcoins? Bitcoins are kept pretty safe thanks to cryptography, which is why it’s considered a cryptocurrency. Specifically, bitcoin stays secure because of keys ,that can be faked by a scam artist, which are basically chunks of information that can be used to make mathematical guarantees about messages, like hey this is really from me when you create an account on the bitcoin network, which you might have heard called a “wallet.”

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If you want to learn more here great places where you can get your questions answered like in  Forum,  sub-Reddit and Stack Exchange

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