Think about a currency which can be used anywhere in
the world without any barriers of banks or government. A single currency for
the whole world which is transacted online. No inflation, deflation
appreciation or depreciation due to the comparison done with Dollar. Pay your
university fees, EMI, do shopping etc… anywhere in the world without the hassle
of currency exchange.
What is a Bitcoin?
Bitcoin is an open source peer-to-peer payment network
and digital currency introduced in 2009. It was developed by Satoshi
Nakamoto. It uses cryptography to secure
funds and hence it is called Cryptocurrency. Transactions transfer bitcoins,
the unit of currency, between Bitcoin addresses derived from cryptographic
public keys. There are totally 2.10 crore bitcoins created. Currently only 1.10
coins are available for transactions. Bitcoin lets you exchange money in a
different way than with usual banks.
Bitcoin price is volatile
The price of a bitcoin can unpredictably increase or
decrease over a short period of time due to its young economy, novel nature,
and sometimes illiquid markets. Consequently, keeping your savings with Bitcoin
is not recommended at this point. Bitcoin should be seen like a high risk
asset, and you should never store money that you cannot afford to lose with
Bitcoin. If you receive payments with Bitcoin, many service providers can
convert them to your local currency.
Wallet
A collection of addresses and their associated private
keys is known as a wallet. These may be stored online on the web, on local
hardware (like a personal computer or mobile device), or on paper print-outs.
Bitcoins are increasingly used as payment for products and services. An
advantage of bitcoin is that transaction fees are lower than the 2 to 3%
typically imposed by credit card processors. Notable vendors include OkCupid,
Reddit, WordPress, and Chinese Internet giant Baidu.
Blockchain
The block chain is a shared public ledger on which the
entire Bitcoin network relies. All confirmed transactions are included in the
block chain. This way, Bitcoin wallets can calculate their spendable balance
and new transactions can be verified to be spending bitcoins that are actually
owned by the spender. By keeping a record of all transactions, the blockchain
prevents double-spending (copying one bitcoin and spending it in multiple
different places) because the record shows that once a bitcoin has been spent,
the previous owner no longer controls it. The blockchain is not maintained by a
central body but by a distributed network of computers that run a program to
solve cryptographic puzzles relating to information in the blockchain.
How to get bitcoins?
Mining is how new bitcoins are generated. Users who
devote computing power to maintain the blockchain are called
"miners". They are awarded in bitcoin when they are first to solve
cryptographic puzzles relating to information in the blockchain. The
mathematical calculations performed by miners' computers serve to verify that
each transaction is valid and add the information to the blockchain. As more bitcoins come into circulation, the
puzzles involved in mining them become increasingly difficult, and the rewards
are halved at regular intervals, until 21 million bitcoins have been created
and production stops. As Bitcoin achieves wider recognition and more people
compete to mine the coins, competition for the limited number of bitcoins
awarded for solving the cryptographic puzzles becomes more steep and more
powerful computers are needed in order to compete – a fact which has spawned a
technology boom in sales of Bitcoin mining technology.
Transactions
A transaction is a transfer of value between Bitcoin
wallets that gets included in the block chain. Bitcoin wallets keep a secret
piece of data called a private key or seed, which is used to sign transactions,
providing a mathematical proof that they have come from the owner of the
wallet. The signature also prevents the transaction from being altered by
anybody once it has been issued. All transactions are broadcast between users
and usually begin to be confirmed by the network in the following 10 minutes,
through a process called mining.
Security and control
All Bitcoin transactions are stored publicly and
permanently on the network, which means anyone can see the balance and
transactions of any Bitcoin address. However, the identity of the user behind
an address remains unknown until information is revealed during a purchase or
in other circumstances. This is one reason why Bitcoin addresses should only be
used once. Always remember that it is your responsibility to adopt good
practices in order to protect your privacy. Bitcoin transactions are secured by
military grade cryptography. Nobody can charge you money or make a payment on
your behalf. So long as you take the required steps to protect your wallet,
Bitcoin can give you control over your money and a strong level of protection
against many types of fraud.
Processing Fees
Bitcoins can be transferred from Africa to Canada in
10 minutes. There is no bank to slow down the process, level outrageous fees,
or freeze the transfer. You can pay your neighbors the same way as you can pay
a member of your family in another country. Bitcoin allows you to send and
receive payments at very low cost. Except for special cases like very small
payments, there is no enforced fee. It is however recommended to pay a higher
voluntary fee for faster confirmation of your transaction and to remunerate the
people who operate the Bitcoin network.
Privacy
With Bitcoin, there is no credit card number that some
malicious actor can collect in order to impersonate you. In fact, it is even
possible to send a payment without revealing your identity, almost just like
with physical money.
History
Bitcoins were introduced in 2009 January 3 by a
computer programmer named Satoshi Nakamoto.
In 2011 the value of one bitcoin rapidly rose from about $0.30 to $32,
before falling back down to $2. During November 2013, the China-based Bitcoin
exchange BTC China overtook Japan-based Mt. Gox and Europe-based Bitstamp to
become the largest Bitcoin trading exchange by trade volume. On 19 November
2013, the value of Bitcoin on the Mt. Gox exchange soared to a peak of US$900
following a United States Senate committee hearing, at which the committee was
informed that virtual currencies were a legitimate financial service.
How does Bitcoin work?
First install a Bitcoin wallet on your computer or
mobile phone. Once you have installed, it will generate your first Bitcoin
address and you can create more whenever you need one. You can disclose your
addresses to your friends so that they can pay you or vice versa. In fact, this
is pretty similar to how email works, except that Bitcoin addresses should only
be used once.
