Bitcoin is the world’s largest cryptocurrency that works on blockchain technology. To understand what a Bitcoin is, one must start their journey by understanding blockchain technology.
So what is blockchain technology?
This is the question which many techies ask in today’s digitalized world. Blockchain technology is a kind of structure that stores transactional records of the people in secure databases known as chains. These records are also called as blocks.
We all know about Wikipedia. It is a platform where the master copy can be edited only by the client and is therefore trusted with security. But blockchain creates a distributed database that has a different kind of backbone where the records can be updated by any of the nodes in a network and the most popular record becomes the master copy.
Bitcoin is a type of digital currency. It was created in January 2009 by the mysterious Satoshi Nakamoto. Bitcoin promises people a lower transaction fee than the online payment method which we are using today. It is run by a decentralized authority i.e it is not controlled by one centralized authority. It is a virtual currency that is not available in any government agencies like banks.
Bitcoin is a collection of nodes that run the program responsible for it and stores it in a blockchain( which is a collection of blocks). Every block contains multiple transactions. These transactions can be seen by all the computers and also the viewers who are not running the node and therefore there is no way to cheat the system. Find out more about Bitcoin profit.
Bitcoin Mining and development of the network
Today, Bitcoin has around 10,000 nodes and this number is rapidly growing. The balance in the Bitcoin token is saved using the public as well as the private keys. These keys are nothing but a string of alphanumeric characters that are connected by a mathematical encryption algorithm that was used to create them in the first place.
The public key can be compared to a bank account number which acts as the address to which people can send the Bitcoins and the private key can be compared to the ATM pin which is kept private and only the authorized person can transmit the Bitcoins.
There is another terminology called a Bitcoin wallet. A Bitcoin key and a Bitcoin wallet are completely different. A Bitcoin wallet is a device which helps the users track the number of Bitcoins they own.
Currently there are approximately 21 million Bitcoins in use and about 3 million Bitcoins which are still to be mined.
Bitcoin mining is a process where the released Bitcoins are circulated and the people who process these transactions are called the miners.
There are three main aspects and they are security, confirmation of transactions, issuing new Bitcoins.
Producing new Bitcoins
The traditional currency is given to the people by government agencies like central banks, but Bitcoins are issued in a different way. Miners are given point for every 10 minutes in the form of Bitcoins.
The rate at which the Bitcoins are issued is put up in a program and therefore miners can’t cheat it and create Bitcoins on their own.
Confirmation of transactions
The transaction which happens is stored in blocks. And only if they are stored, they are considered as secure transactions.
There are few rules which can be considered, the transactions with no confirmation can be reversed.
At least one confirmation is enough for it to not be reversed for a small number of payments like 1000$.
For higher payments of about 1000$ to 10,000$, we require at least three confirmations in order for it to be non-reversible.
And for payments of a larger order of more than 10,000$, we need a minimum of six confirmations.
Miners make it difficult for the Bitcoins to be attacked and therefore provided security.
The more the number of miners, the more is the security.
If the hash power, in general, is distributed among many miners then the transactions can be made more secure.
So Bitcoin is completely safe to use and chances to get profit from this currency is more compare to other type of online work.