We have all heard of Bitcoin, however, it still may not be clear to everyone what bitcoin exactly is and how it works. Dubbed as “currency of the future”, it is important to understand Bitcoin in details as it will not only increase its presence in our everyday life but also facilitate our everyday life in ways we could not have imagined.
What is Bitcoin?
Bitcoin is a form of digital currency which is created, stored and managed digitally. No one can control it, it is decentralized and can be sent electronically through the internet. Bitcoin, also referred to as “electronic money”, is built on Blockchain. Blockchain is a concept we have covered in one of our recent blog articles and it represents a distributed database that maintains a continuously growing list of ordered records.
Who created Bitcoin?
In 2008 the first Blockchain was conceptualized by a software developer Satoshi Nakamoto, and it was implemented the following year as a core component of the virtual currency, Bitcoin. Here, Blockchain servers as the public ledger for all transactions. Satoshi Nakamoto had the idea of creating an independent digital currency which could not be controlled by anyone. The idea consisted of being able to transfer the currency electronically with very low transaction fees. He called it a P2P Electronic Payment System.
Where are Bitcoins stored?
Bitcoins are stored in digital wallets, in the ledger, which can be online or offline. They can even be stored on a mobile device, and are ready to use whenever you have your phone with you. No matter which Bitcoin supported digital wallet you choose, your Bitcoin will always have two keys – one public and one private.
Bitcoins are transferred directly from person to person through the internet using a wallet software. A Bitcoin transaction is a transfer of value between Bitcoin wallets that afterward gets included in the Blockchain. Every Bitcoin wallet has a private key which is used to verify transactions and with it provides a mathematical proof that the Bitcoins have come from the right owner. Every transaction is usually confirmed within 10 minutes through a process called mining.
Bitcoin mining is a process of adding transaction records to the Blockchain. By doing this, every record is placed in a chronological order in the Blockchain, it Is protected and cannot be modified because doing so would invalidate all following blocks. Every transaction is thus verified by a large network of mining computers and after successfully verifying the transaction, a “miner” is rewarded with a small amount of bitcoins. This is how new bitcoins are brought into the system.
By using the Bitcoin, there is no need to go to the bank or for the transfer to go through a clearinghouse. With this, transaction fees are much lower and there is no more waiting in long queues.
It has been gradual, however, more and more places are opening their doors to Bitcoin and are enabling purchases by using the virtual currency. A great acceptor of the currency is Lamborghini, the first motor company to hop on the digital currency board.
Bitcoin is a digital currency that is changing the way we manage and transfer money. It is decentralized, easy to use, anonymous and completely transparent. Bitcoin is offering secure, fast and simple money management that will change our lives.
Share with us, what are your thoughts and opinions on Bitcoin?
Manigo Team, March 2017