You may have heard about Bitcoin and wondered what it really
was. There is always a lot of news about this digital currency and especially
how it rises and falls in price dramatically at times. Well here we will give
you the complete 101 on Bitcoin.
As we already mentioned, Bitcoin is a digital currency. You
may think that there are actual coins available but there are not. These are
just fabrications. The original intention of Bitcoin was to send payments anonymously
and securely online. This is still true to a certain extent today.
A Decentralized
Currency
A number of countries around the world are scared of
Bitcoin. It is a totally decentralized currency not controlled by any
governments or centralized banks. Some countries have actually banned Bitcoin.
A major advantage that Bitcoin has over conventional fiat
currencies is that it is not affected by any inflationary of deflationary
measures imposed by countries. There is a limited supply of Bitcoin which increases
its value – similar to gold.
The Technology behind
Bitcoin
Blockchain is the technology behind Bitcoin. This is a
public ledger system which adds to a large chain of confirmed transactions
which is where the name blockchain originated from. Anyone can see the entire
blockchain for Bitcoin since it began in 2009. This is a lot of data and will
grow even larger in the future.
With blockchain technology after verifying a financial
transaction you cannot change it. It creates immutable records. This is
excellent for security but not so good if you make a mistake with a Bitcoin
transaction. There is no turning back after verification and confirmation.
Thousands of computers (nodes) in the blockchain network for
Bitcoin validate it all of the time. This means that it is virtually impossible
to hack a blockchain network as you would require more processing power than
all of the computers that make up the network.
Bitcoin Mining
The process of verifying Bitcoin transactions falls to
Bitcoin miners. These are individuals, groups or companies that use high
powered computer equipment to solve the complex cryptographic codes needed to
verify each transaction.
Bitcoin miners receive rewards for this work in the form of
Bitcoins. With Bitcoins being very valuable these days, mining can be a very
rewarding task. The problem is that with the creation of new Bitcoins the
number of new ones available falls.
You need a great deal of computer processing power to
participate in Bitcoin mining now. A powerful desktop computer is nowhere near
good enough. So if you want o be a Bitcoin miner you need to invest in high
spec computer equipment (and lots of it), and be prepared to run them 24/7 with
the electrical costs that that brings.
Where can you get
Bitcoins?
You can purchase Bitcoins in your native fiat currency e.g.
US Dollar by using a cryptocurrency exchange such as Coinbase.com. There are
fees involved for buying and selling as you can imagine.
A cryptocurrency wallet stores your purchased Bitcoins. The
cryptocurrency exchange will provide you with an online wallet and there are
other forms of Bitcoin wallet such as a desktop wallet, a paper wallet and a
hardware wallet.
The hardware wallet is the most secure because you do not
leave it plugged into your computer or mobile device. An online wallet is the
least secure because if you can access it online then so can hackers.
