Bitcoin is an Electronic Cash System formed by decentralized blockchains that function as Peer Peer exchange. Its protocol eliminates the necessity of an intermediary that may be required t authorize transactions decentralizing the whole system.
Bitcoin was created around two thousand and nine by someone using the fake name of Satoshi Nakamoto’. bitcoin is spent without a bank needing to be used. Bitcoin can be used to book a hotel, shop for furniture, and purchase X – box games. But it is mostly used because it is possible to get rich by trading it. The price’ of them jumped into the 1,000s In twenty seventeen.
Bitcoins can be used to order things online without anyone being able to trace your transaction back to you. Also, out-of-state payments are simple and affordable because they are not linked to other countries around our world. Small businesses use them because there are no credit card fees when using bitcoin. Some people just buy it hoping that one-day prices for them will jump and they can make a lot of money off of it sometime.
Bitcoins are kept in an online wallet which is located either in cloud or on your computer. Your wallet is an online bank that allows people to place or take bitcoins, order things that they want, or keep their money in a savings account. Unlike actual bank accounts, bitcoins are not insured by FDIC.
Each transaction is recorded in a log that can be seen by anyone but the names of buyers and sellers are never revealed and can only be seen in their wallets keeping all users anonomous. That is the reason people use them for illegal activites of buying drugs or worse things that you can purchase when sellers allow it to be used.
No one knows how long these will last or what will come of it one day. Some countries are beginning to weigh regulations for bitcoin. Governments’ are worried about taxes and not being able to control currency in this day and age.
Decentralization Of BITCOIN
The decentralization of Bitcoin means that unlike physical currency, there is no central authority that is responsible for minting new ‘BITCOINS’ after regular intervals but a constant number of 21 Million Bitcoins are available throughout the planet.
Furthermore, the number of blockchains decline continuously every year therefore this means that the later an individual tends to mine for a Bitcoin, the smaller share of he is going to get.
This process is responsible for generating new Bitcoins. It relies on the Proof of Work (PoW) consensus algorithm and cryptographic hash functions. This process enables blockchain to automatically record all the confirmed transactions digitally signed by cryptographic means. Since the blockchain is a decentralized medium for transactions, it is quite difficult to alter the records and commit any frauds as tampering with the records would demand tremendous computing power.
How Bitcoin Works
- The user installs a Bitcoin wallet on his device that generates a unique Bitcoin address.
- The user can share his Bitcoin address to authenticate transactions in his wallet.
- Once a transaction has been completed, it gets recorded in a Blockchain which is like a shared public ledger which means it is not owned by any particular authority.
- Cryptography ensures that new transactions can take place in an integral and chronological way.
- Each time a transfer of value between two wallets takes place, it is digitally signed by a private key which authorizes the transactions and provides a proof syntax for future references.
- The digital signature also ensures that once the transactions have taken place, they cannot be tampered with by any external source.
- Mining registers the pending transactions in the blockchain in a chronological way thus supporting the neutrality of the network.
- If an attempt is made to tamper with the previously held transactions in a blockchain, it will disable all the subsequent blocks that are a part of this blockchain thus adding to the integrity of this system.
- Thus, once a transaction has occurred, its details cannot be tampered with or deleted in any way so that one does not rolls back any previous transaction that he may have committed.
Future Of Bitcoin
Until now, the idea of Bitcoin and other crypto-currencies seems quite promising and viable, there still are certain loose ends that may pose a threat to the system in the near future like the anonymity that is maintained in such networks may prove a medium for certain illegal activities like terror funding, money laundering, illegal weapon purchase, etc. Furthermore, since the system runs totally on a decentralized method, it is quite possible for hackers to break into systems. Therefore, the future of Bitcoin and other Crypto-Currencies is quite a matter of debate for now with certain pros as well as cons. There are certain alterations in the existing protocol that may promote a more secure and promising future for such peer-to-peer transactional mediums to secure their existence.