Hey buddies!
Whenever we try to see the trend in the finance world, we always end up seeing one word at every other news in the feed. Yes, bitcoin is still trending over the news with its fluctuations in price. In this read, you can find the basics of bitcoin explained in very simple terms.
What Is BitCoin?
Bitcoin is a digital currency abbreviated as "BTC". It was established in January 2009. It was created following the ideas written on a "whitepaper" by the pseudonymous and mysterious "Satoshi Nakamoto". The identity of Satoshi is still a lingering mystery.
Bitcoin is a type of cryptocurrency. There are no physical bitcoins. The balances are kept on a public ledger that stays accessible and transparent to everyone. A massive amount of computing power verifies all bitcoins. These are not issued or backed by any banks or governments. Bitcoin is not a legal tender, but still, it is viral and has led to the launch of various other cryptocurrencies. The alternative cryptocurrencies are collectively called "altcoins".
Understanding Bitcoin:
As mentioned before, bitcoin has only digital existence. The bitcoin system is a collection of computers (nodes/miners) that all run bitcoin's code and store its blockchain. For easy understanding, let us say blockchain is a collection of blocks. In each block, a set of transactions are stored. No one can cheat this system because it is transparent and is easily accessible by anyone. Since the transactions are stored in a public ledger, all the computers running the blockchain have the same blocks and transactions.
The live transactions can be seen by anyone, even if they run a bitcoin node or not. To do a bad act like theft or damage, a person would need to operate at least 51% of the computing power that makes up bitcoin. Bitcoin has around 12,000 nodes as of January 2021. This number is still growing, making such an effect in the finance world quite unlikely.
But in the event of an attack, the bitcoin miners would likely fork to a new blockchain, making that person's efforts a total waste (Gotcha!) Bitcoin miners are people who take part in the bitcoin network with their computers.
Keys:
Now, how exactly are these balances maintained?
Balances of bitcoins are maintained using public and private "keys". These keys are long strings of alphanumeric letters linked through a mathematical encryption algorithm used to create the bitcoin.
The public key serves as the address which is published to the world. It is like a blank account number to which others may send bitcoins.
The private must be kept safe like a secret and should be used only to authorise bitcoin transmissions. It can be compared to an ATM pin. Bitcoin keys should not be confused with a bitcoin wallet.
Bitcoin wallet is any digital device that facilitates Bitcoin trading and allows users to track ownership of coins. The term "wallet" is a bit misleading, as bitcoin's decentralised nature means that it is never stored "in" a wallet, but rather decentrally on a blockchain.
We all consider bitcoin like an asset like gold that needs to be saved. But it is actually an asset that needs to be transacted like currency. Hoping that you understood what bitcoin is basically is, we will come back next week with some more information about bitcoin!
Until then, you know the drill,
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