What is Bitcoin?
Bitcoin is a form of digital asset, decentralized virtual or digital currency, which is the first of its kind, referred to as cryptocurrency. It is also referred to as a payment system that has been created by Satoshi Nakamoto. This invention was first published in 2008 and in 2009, it has been released to the public as open-source software.
It is not controlled by anyone so the transactions are made between the users without any third party involved. And because it is a form of digital currency, it is not printed on paper, unlike other types of currencies.
What is Bitcoin used for? Since Bitcoin is considered as digital currency, it can be used in exchange for goods and services, through peer-to-peer system electronically. It can also be used in exchange for other currencies. Transactions are made without intermediary so it only happens between the users.
How is it created? Since Bitcoin is not printed on paper, it is created using a certain type of software. No one controls it, it is the first decentralized type of currency; which means that there are no banks or any financial institution that controls it. People do not just create Bitcoins but they produce these through mining.
Mining is an activity where users use their ability to compute using network nodes in verifying and recording payments into the blockchain which is a public ledger that contains Bitcoin transactions. This payment processing work is then rewarded by newly created Bitcoins or with transaction fees.
What is Bitcoin? What is it based on?
Physical conventional currencies are based on silver and gold. Because Bitcoin is a type of digital currency it is not based on silver or gold, but on mathematics. Since no bank or financial institution creates it is not physically produced.
Bitcoins are based on mathematical formula which is used in a certain software program designed to produce Bitcoins. And because this program has been made available as an open source, the public can easily access and use it.
What is Bitcoin ownership? The good thing about Bitcoin is that it is designed for use only with the right private key. Only Bitcoins associated with the specific address can be spent by the user. With the use of this private key, the user is able to sign the transaction digitally and, thus, enabled to pay for goods or services. Without the corresponding private key, the user can no longer use Bitcoins in making transactions. With the use of a public key, the signature is then verified by the network.
What is Bitcoin? How are transactions made?
In order for a transaction to be valid, it must be digitally signed. Transactions are made by having one or more inputs and an input must be a previous transaction’s unspent output. The use of multiple inputs is comparable to multiple coins when using cash transactions. Similarly, if the number of inputs is greater than the sum being paid for, the change is returned to the user through the use of additional output. A user can also make multiple payments resulting to multiple outputs.
Transaction is made by sending Bitcoins to a Bitcoin address. So if Bitcoin is used to purchase certain goods, the users can just simply click certain links on web pages. Provisional Bitcoins URI schemes are being used to complete the transaction.
What is Bitcoin wallet? Since there are no banks that control Bitcoins, they are stored and held in wallets. The wallets’ main purpose is to store information which is essential in making transactions with the use of Bitcoins. Although Bitcoins are said to be stored in wallets, they can’t really be separated from the transaction ledger or the blockchain. Wallets are really provided in order to store Bitcoin holding digital credentials and allow users to spend them.
Characteristics of Bitcoins- What makes Bitcoins different from government-backed currencies are these unique features. Bitcoins are decentralized. Since no certain bank or institution or central authority controls it, people’s Bitcoins cannot be taken away from them easily. With the right tools a Bitcoin address can be set up in a matter of seconds. Another good thing about it is that there are no fees required. Bitcoin does not require a user to link his Bitcoin address to his name but the blockchain is transparent making every transaction visible to every user.
Bitcoins are fast and easy to use. By understanding what is Bitcoin, you’ll be able to see how easy and fast it is to use in transactions.