What is Bitcoin and how does it work?
What Is Bitcoin And How Does It Work?
So you want to know what is Bitcoin and how does it work? but don’t know where to start ? Well this article will help you in understanding what is bitcoin and how does it work.
What is Bitcoin ?
Bitcoin is a digital currency or cryptocurrency which was created in January 2009 by mysterious and pseudonymous developer Satoshi Nakamoto whose true identity has yet to be verified.
- It is virtual money
- It is a means of payment
- It is a good store of value
- It is only usable via technological devices and the internet
- It is already acceptable by Virgin, Microsoft and Starbucks.
In layman’s terms, bitcoin is a currency just like the dollar, the rupee, and other traditional currencies. It can be used to buy goods and services, hold value, and do many other things that a currency typically does.
There are many benefits to this virtual currency such as faster payments, secure transactions and lower transaction costs which have made its relevance in the modern financial world more apparent. That is why many countries now recognize the new-age currency and the groundbreaking technology on which it is based.
How is it different from other currencies ?
Bitcoin has no physical existence; it only has a digital existence. There are stark differences between bitcoin and other currencies. Unlike fiat currency, Bitcoin is created, distributed, traded and stored with the use of a decentralized ledger system known as blockchain.
How does it work ?
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.
Is it Legal ?
The Reserve Bank of India had banned cryptocurrency trading in India as in a circular issued on April 6, 2018 but on 4th March 2020 Supreme Court overturned the ban making trading in bitcoin and other cryptocurrency legal in india.
Who Runs It?
Nobody runs Bitcoin. It is different from the way regular currencies are operated. With regular currencies, value, inflation, supply and so forth is often dictated by a central authority.
In the case of Bitcoin, computers around the world work together to create bitcoins, with the ultimate number of coins that will constitute the bitcoin network set at 21 million. Its value is determined by the laws of supply and demand.
How Bitcoin (BTC), Cryptocurrency and Blockchain will Change Our Lives ?
The future of finance is believed to belong to virtual currencies or cryptocurrencies like bitcoin. Banking institutions are already starting to embrace the blockchain technology on which these currencies are based as they offer a greater level of security during transactions. People will also take up the use of bitcoin more readily as it offers safer, faster, and a more globally accepted way of making and receiving payments in comparison to the traditional currencies.
As we speak, there are countries where residents are turning to bitcoin due to the instabilities the local currency offers due to political or economic issues facing them.
An example is Venezuela. This trend is likely to grow in future as bitcoin and other cryptocurrencies exceed traditional currencies in acceptability around the world. Other sectors will change because of BTC and the blockchain technology as well. For instance, cloud storage services can use the encryption technology that blockchain systems use to ensure that data does not suffer any unauthorized modifications or access.
Even with regard to Internet of Things (IoT), bitcoin and its seminal blockchain technology has something to offer in future. Currently, this system works with a centralized technology, which is susceptible to hacks and other security issues. However, by being decentralized and encrypted like blockchain technology, it will be much more safer for everybody.
So yes, bitcoin and blockchain technology will change our future in a big way.
I hope now you have understood what is Bitcoin and how does it work. Comment down your queries below if you have any.
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