Bitcoin is a worldwide payment system and cryptocurrency. It is the first decentralized digital currency, as the system works with no central bank or single supervisor. The network is peer-to-peer, and dealings take place between users directly, without any liaison.
Network nodes confirmed Bitcoins transactions through the use of cryptography and recorded in public distributed ledger called a blockchain.
It is the practice and study of techniques for secure communication in the presence of third parties called adversaries. Cryptography is about constructing and examining protocols that stop third parties or the public from reading private messages or various aspects of information security such as data confidentiality, data integrity, and authentication.
Bitcoins can be used to buy products anonymously. Also, worldwide payments are cheap and straightforward because bitcoins are not attached to any country or subject to regulation. Small companies may like them because there are no credit card fees. Some people buy bitcoins as an investment, hoping that their value will increase with time.
Buy on an Exchange
Several marketplaces called “bitcoin exchanges” let people purchase or sell bitcoins using various currencies. Coinbase is a top exchange, besides with Bitstamp and Bitfinex. However, security can be a worry; bitcoins worth tens of millions of dollars were stolen from Bitfinex when it was hacked in 2016.
People can send bitcoins to each other using their computers or mobile apps. It’s similar to carrying cash digitally.
People battle to “mine” bitcoins using computers to solve challenging math puzzles. This is how bitcoins are created. Presently, a winner is rewarded with 12.5 bitcoins approximately every 10 minutes.
Bitcoins can be stored in a “digital wallet,” which exists either on a user’s computer or in the cloud. The wallet is a type of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Nothing like bank accounts, bitcoin wallets are not assured by the FDIC.
Types of wallet:
- Wallet in the cloud: Servers have been hacked. Companies have fled with clients’ Bitcoins.
- Wallet on a computer: You can accidentally delete them. Viruses could destroy them.
Though every bitcoin deal is recorded in a public log, identity of buyers and sellers are never revealed but only their wallet IDs. While that keeps bitcoin users’ transactions confidential, it also lets them purchase or sell anything without easily tracing it back to them. That’s why it has turned out to be the currency of choice for people virtually buying drugs or other illegal activities.
Rivals of Bitcoins:
Bitcoin’s competitors are also gaining grip, all speeding up to become the leading supplier of the future cashless world. Following are the competitors:
- Ethereum (ETH)
- Ripple (XRP)
- IOTA (MIOTA)
- Dash (DASH)
- Litecoin (LTC)
No one knows the future of Bitcoin. It is mostly free to use, but some countries like Japan, China and Australia have begun weighing regulations. Governments are disturbed about taxation and their lack of control over the currency.
Author: Malik Noureed Awan