What Is Bitcoin? A Concise and Informative Guide

What is Bitcoin

Bitcoin – Coming across this word too often? Interested to know what a Bitcoin is? Or are you planning to invest in Bitcoins? First learn what it is, in and out! A little knowledge is too dangerous, especially when you are about to invest in them.

Who Controls and Monitors Bitcoins and Associated Transactions?

A Bitcoin is a form of cryptocurrency. A cryptocurrency is a currency that exists only virtually, meaning they have no physical form like an American Dollar or UK Pound. So, it is basically a currency that came into existence with the concept of cryptography. Cryptography is a concept or rather the art of encoding and decoding.

Bitcoin is a completely digital form of currency, which is also decentralized, meaning there is no entity like a bank or any other organization which regulates Bitcoin related matters. So, now a question may arise in everyone’s mind! What if I just create or duplicate a Bitcoin? Well, it can’t just be done as there is a ledger which is makes a note of every transaction made online. The best thing about the ledger is that anyone who wishes to keep a record of the transaction can actually do it. So, there are thousands of people who are maintaining this huge global ledger, also called the blockchain. These people who do it are commonly known by another name – “miners”. So, a Bitcoin miner is that person who is spends resources like computing power to maintain this ledger.

What is Bitcoin

How does the miner Benefit from this Ledger-Keeping?

This is where the founder of Bitcoin did the best thing. Every time a miner adds a block to the blockchain, he/she is awarded with a certain number of Bitcoins. This reward system is very carefully designed by the founder that for every 210,000 blocks added to the ledger, the reward which is actually created out of thin air, gets halved. It started with 50 Bitcoins for every block added. The present reward has quartered to the originally set value, that is the miner is awarded 12.5 Bitcoins per block. The reward system was so set because limiting the number of Bitcoins will raise its value with time. Additionally, they are also tipped a small amount for every transaction they add to the global ledger. As of 2016, there is was a whopping 106GB of ledger data! Surely the numbers would have gone up exponentially!

How can I be a miner?

This is where you need a Blockchain Course. Because, when you have mastered the blockchain and its functioning, you are set to be a miner and enjoy the benefits mentioned above. So, don’t think too much, complete your blockchain course and be the miner who can benefit more than your counterparts.

Why Isn’t There A Chaos with So Many Ledger-Keepers Around?

There is chance that two different miners have accounted the same transaction. To overcome this problem, every block is encrypted by a SHA-256 algorithm originally created by the NSA. The Secure Hash Algorithm (SHA) which is 256-bit in size is like any other hash algorithm, for example could ask to add up numbers 1,3,5,7 together. Adding up numbers is quite an easy task to accomplish for any computer! It wouldn’t even take seconds for the computer to answer with 16. But the catch here is that the output or in this case the sum of the above said four numbers which is 16 is given and the computer has to generate the numbers which added up to 16. Now, there are various possibilities to obtain 16. It can be 8+8 or 1+2+3+10 or something else. So, the computer keeps guessing until the desired set of numbers which adds up to 16 is obtained. If you think this is quite a simple task, well then it is not. A machine that is designed to decrypt SHA-256 encryption on an average takes about 10 minutes to find the right answer, in this amount of time the computer would have done millions of calculations.

Whoever first finds the answer to the problem given, gets the credit for adding the transaction and hence gets the reward. This is the control strategy to keep a chaotic environment away in the world of miners.

Is Bitcoin Illegal to Transact With?

Bitcoins is accepted legally in some form in a large number of countries. The list includes USA, Canada, Japan, Australia, European Union and many others. Some countries have accepted it with open arms while in some there are partial regulations and, in some countries, they are illegal. So, the legality of Bitcoin depends on which country you are hailing from.

How to Buy, Sell or Transact Bitcoins?

To transact in Bitcoins, one needs to have something called a Bitcoin wallet. These wallet services are offered by various companies around the globe like Electrum, Edge, Armory, Coin.Space, Digital Bitbox and many more. Once you create a wallet with any of these companies after setting up your account, you will can transact with Bitcoins.

Bitcoin which is regarded as the world’s first cryptocurrency is highly volatile in nature and has seen quite high rises and falls in its due course of its existence. So, it is advised to study the Bitcoin market very thoroughly before investing in Bitcoins! With a proper watch on the market and timely investments, you can do wonders! Even mining blocks can be considered an option for earning coins, but requires capital to buy the mining machines! Consider well before buying these too and keep in mind the power demands of such beasts! Happy mining and investing!

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About the Author: Emily Brantly

Emily Brantly is a freelance writer and blogger who is passionate about music, movies and books. She enjoys writing reviews and covering stories related to the entertainment industry. Email: [email protected]