What is Bitcoin and How to Buy-Sell Bitcoins? Digital currencies which are not in ties with either the government or the bank is known as Bitcoin. The users can spend the Bitcoin anonymously.
These coins are generally created by the users by mining them. They basically lend the computer power to verify the transaction of the other users. These users, in turn, receive the bitcoins. Bitcoins can also be purchased or sold with the exchange of currencies like US dollars, or even other currencies can be used. The worth of the bitcoins is now even more than gold ounces. These coins are digital. Bitcoins were the best currency choice for those cyber attackers who were capable of crippling the computer network all over the world in earlier days. When the Ransomware of the attackers was in action, the victims were held hostages, and their data was encrypted, they demanded the payments in bitcoins so that the attackers could access their computers.
It is true that the history of bitcoin is really bitter, but this type of a digital currency helps the people to purchase services and products, and pay the money without the involvement of the banks, issuers of credit cards or even any third party. Bitcoins are nothing but lines of the computer codes which are signed digitally every time they are traveling from one person to another. Bitcoins have gained so much popularity because all the transactions are made anonymously. This currency has become very popular with not only the libertarians but also with the tech enthusiasts, criminals and speculators.
Bitcoins are anonymous up to a certain point. It is true that the transactions that are made and the accounts from which the transactions are made can be easily traced, but it is not an easy job to know who the owners of the accounts are. But in case there is any issue, investigators can undoubtedly track the owners down by converting the bitcoins into the regular currency.
Bitcoins are considered to be the newest forms of currencies that have just started hitting mainstreams. This is also equally true that many people do not have the idea and do not understand the reason as to why they should make use of bitcoins instead of their regular currencies. Listed below are few of the reasons as to why one should make use of the virtual currency- bitcoin.
● Bitcoins are fast: When a person pays money in a cheque from any other bank to his own bank, it is obvious that the bank will keep the money on hold for a number of days. The reasons behind this are that; banks do not really trust that funds are actually available. In the same manner, the wire transfers that take place internationally are very time to consume as well. But, if the transactions are made with the help of the bitcoins, then it is comparatively a faster process. The transactions take place within an instant, provided that the transaction is “zero-confirmation.” This is much faster than the inter-bank transfers.
● Bitcoins are cheaper: It is true that the transactions that are made with the credit cards are fast too. But, it is not free. There are many merchants who charge fees for transactions that are made through debit cards or credit cards because they also pay the swipe fees. In the case of the bitcoin transactions, the charges are minimal, and they may also be free in certain cases.
● Bitcoins cannot be taken by the government: On March 2003, the Central Bank had made the decision of taking back the uninsured deposits of around $100,000, in Cyprus, in order to recapitalize itself. This meant, eating into the savings that the families had made. This can never happen with the bitcoins. Bitcoins are decentralized, and a person owns them. The central authority cannot take this away as it has absolutely no control over this currency. This is extremely beneficial for those people, who do not have faith in banking systems that are traditional.
● Bitcoins cannot be charged back: Bitcoins once sent, are gone. When bitcoins have been sent, it cannot be retrieved by the person who has sent it, without the consent of the recipient. This is why it is very difficult to commit any kind of fraud, which is something very often seen in cases of credit cards. In the case of the credit cards, the people after making purchases can contact the company of the credit card to send the money back, and this can reverse the entire process of the transaction. This is not possible with bitcoins.
● Payment information cannot be stolen: One of the most important benefits of completing transactions with bitcoin is that no payment information can be stolen. When making payments with the credit card, a person needs to fill up online forms and enter details that are secret of the credit card number, the expiry date of credit card, etc. This is one of the main reasons as to why the credit card numbers are being stolen. When making transactions with bitcoins, no private information is required. Only if a person publishes his private key, he is unsafe, but otherwise, bitcoin transactions are very safe.
● Bitcoins are private: There are times when we do not want people to want to know what we are purchasing. Bitcoin is a currency that is private. Also, there are a number of people who make use of the bitcoins in a very unwise manner, making it easier for others to identify them.
Bitcoins are safer in the sense of the term that no one has any authority over it. This is what makes it easier for anyone to spend bitcoins all around the globe, and also only when the person to whom the payment is being made, receives bitcoins. Bitcoins are similar to regular money and are used by many people for making investments, while many others use bitcoins for transferring money from one country to another. Transactions are faster and easier with Bitcoins, and the time taken is also relatively shorter. In a world full of people who want to steal away information, it is safer and wiser to make use of bitcoins.
In the traditional system of flat money whenever there is a requirement more extra money the government prints them. The biotin is not a printed money, and it is explored. Computers around the globe will compete within themselves to mine for these coins.
Let us look back what is Bitcoin? Bitcoin is like a digital currency which is created as well as handled electronically. It is not controlled by any person. They are not like dollars or some other form of currency which is actually created by the people or increasing businesses and all the running computers across the globe just by solving problems related to mathematics.
It is basically used for the purpose of buying things electronically. The primary difference between Bitcoins and their currency is that Bitcoins are decentralized. There is no institution that will control the network of Bitcoin.
How Mining Take Place?
The Bitcoins are transferred from one person to the other with the help of Bitcoin network but here someone has to track all the record of the transactions made else it is quite hard to track them later. Here the block which is present will keep the record of all the transactions which are done during a particular set of time or period in a list. The job of the miner is to certify the transactions and then write it in general ledger.
Further Study About Bitcoin Mining
There is some long list consisting of blocks in general ledger which is termed as the block chain. You can easily explore many transactions which are made of the Bitcoin addresses during any point in the network. With every transaction the detail of it is stored in block chains which ultimately creates a huge list showing all the Bitcoins transactions. Now the copy which is constantly updated in the block and these are given to the participants to inform them what is actually going on.
You have to trust this general ledger, and all this process is done digitally. But in order to be sure on how these block chains maintain to keep themselves intact, you need to learn about miners. When the transactions are made, and the block is formed then the miners make it go through some process. They take all the related information and put them in blocks, and then they apply some mathematical formulas which ultimately turn it into a different thing. This different thing is the hash where all the numbers or the letters are put into a random sequence. Then this hash and the block are stored in the end as the block chain at that particular time. But these hashes are very unique and have interesting properties.
Creation of hash from blocks of Bitcoin is quite easy, but you can’t tell which data were there just by seeing the hash. Though hashes are the product of large data, still it is quite unique. If someone changes a certain character in the block of Bitcoin, then the entire hash will be different. They also use other small data. These small data is actually the hash of the block which is stored in the last of the block chain. And as the hashes are produced using the data of the last block hence creates some digital way of the wax seal which proves that all the blocks are legitimate as tampering it would make others inform.
If someone tries to make any kind of fake transactions then just by changing something in the block which is already there in the block chain will ultimately lead to the change of hash. When someone runs this hash function, they can check the authenticity of the block. When they come across any minute change in the hash function, they will spot it as the fake one. Hence there will be no transactions.
The work of hash is to produce next block in the chain so tampering it would actually change the hash of the block. This will continue until the down of the chain, and it will throw everything and consider them to be a fake one if found tampered.
How The Competition For Coin Take Place
When the miner is sealing off all the blocks, then they all complete it using software which is designed particularly for mine blocks. When someone creates any hash, they are rewarded with 25 Bitcoins and blockchain is then updated. And all the people on the network get informed about it. This is the way of mining and making all the transactions work properly. But the main problem with it is that the process to form a hash by collecting data is quite easy, and it is done by computers. The network of Bitcoin will have to create more difficult one as if it is an easy one then anyone can easily create the hash of many blocks and do hundreds of transactions, and all the Bitcoins will be mined easily. So they level up as per the protocol of the Bitcoin which is also known as “proof of work.”
So according to the protocol, they won’t accept any previous hash. They want each block hash to have uniqueness like they would ask for a particular number to have a certain number in the beginning before producing the hash so you can’t predict the way it will look. With the introduction of new data in the block, the hash will be different.
The miner does not have any right to interfere with transactions data which is there on the block, but they need to change the data in it to create a new hash. So they use another small data termed as a nonce. A hash is created when this nonce is used with data of transactions. If the required format is not fit by the hash, then this nonce will change, and then the entire thing is re-hashed. You can take several nonces to see which one is required and that is what the entire miner does at that particular time.
This is the technique for earning Bitcoins.
Bitcoins are digital or electronic currencies that work on the basis of a peer-to-peer. This actually means that bitcoins are decentralized and no has any authority over them. Bitcoins are exactly like regular currency notes which can be exchanged among two or more persons, but the banks or the governments cannot track them. This system is dependent on the cryptography in order to control the currency’s creation. No authority can control the bitcoins’ generation or can track them, but the system is designed in such a manner that the network can maintain a system that is foolproof and all the transactions that are made are recorded. This can also be tracked in case if there is any issue. The best thing about this cryptocurrency is that when one person receives a Bitcoin from another person, he can be assured of the payment, and the anonymity is still ascribed to the transaction. Payments that are made through e-wallets or online banking lack any form of anonymity.
Bitcoins can be sent digitally to persons who have Bitcoin addresses, and the currency can be transferred from one corner of the globe to another. A person can also have a number of Bitcoin addresses for a variety of purposes that generally include personal or business matters. The receivers can spend the bitcoins within a few minutes of receiving the payment. Once the bitcoins are given away, there is no scope of getting the coins back. The currency can only be received back with the consent of the receiver and if the receiver decides that the coins can be given back. Bitcoins are not currencies that are printed, but they are the non-reputable records of the transactions that have been made.
The bitcoins are available from the Bitcoin exchanges. Another way of getting bitcoins is that it can also be purchased from the other users. Another source that may be available in future is the traded exchange fund for bitcoins, from where a person can get bitcoins. A person can also become Bitcoin miner. The only thing that they have to do is, making investments in hardware and software. The higher the hardware’s power which enables proper encryption technology, the probability of earning the bitcoins also increases. Bitcoin usage is not mainstream at all, but there are many merchants who accept payments made in bitcoins all around the world.
Bitcoins are generally generated when entities, which may include either a business or a person makes use of the software power in order to solve mathematical puzzles which help in making the blockchain more secure and safe. The level of difficulty is so high that it takes a lot of time to solve this problem. Even if a person becomes a miner, then there is hardly any guarantee that he would mine bitcoins of any number that he wants to.
When bitcoins are sent from one person to another, the transaction falls within the blockchain. This blockchain assures that a person cannot spend some bitcoins more than once in a particular transaction. There are computer networks that validate all the transactions by making use of the algorithms in such a manner, that the transactions cannot be altered.
Before purchasing bitcoins, it is very important to know that the bitcoins cannot be accepted in any and every place. There are only certain merchants who accept transactions made through bitcoins. Also, bitcoins are speculative investments in comparison to the regular currencies, and their value tends to fluctuate. Listed below are the following methods how one can buy bitcoins.
● The app “Coinbase” has to be downloaded first. This app is available for the Android phones and the iPhones.
● After the app has been downloaded, a Coinbase account has to be created.
● Once you are logged in to the app, you can keep a check on the daily volatility. The price of the bitcoins is very tricky, one day their value is very high, and on other days, the value is nominal. This is an extremely speculative investment.
● After this, the button “buy” has to be tapped on, and a payment account has to be added.
● After the account has been added, you are ready to buy the bitcoins for a certain amount of fees.
After the bitcoins have been purchased, you can easily make the transactions with people who have existing Bitcoin addresses. This is a faster way of making payments in comparison to the traditional banking system.
Selling a Bitcoin is not really a very straightforward method when compared to buying bitcoins. When a person decides to sell the bitcoins, he has first to decide the ways in which he can sell them. He has two options which include selling the bitcoins online and selling the bitcoins to another person. Both the options have not only advantages but also disadvantages. Selling the Bitcoin online is considered to be the most common way to trade the Bitcoin.
Listed below are the following ways to sell bitcoins online.
● Direct trades are one of the ways to sell the bitcoins online.
● Another method to sell the bitcoins is registering with online exchanges.
● Bitcoins can also be sold through peer-to-peer marketplaces, where people who have specific needs come together.
Bitcoins can also be sold in person, and this is considered to be the easiest method to give away the digital currency. This can be done by scanning of the QR code on the phone of the person to whom the Bitcoin is to be sold. The cash is accepted, and the Bitcoin is transferred. This is the easiest way to sell bitcoins. A person may have close friends or even family members who are interested in purchasing the bitcoins. They just have to set up Bitcoin wallets, and then the bitcoin is sent to them, and the cash is collected. Bitcoins have really managed to change the transaction processes, and they are faster and swifter in comparison to making money transfers through banks.
Bitcoins are considered to be a type of currency in digital form which is associated with the use of encryption techniques in order to bring about regulations in generations of units related to the currency as well as the verification of fund transfer, through the independent operation of the central bank. The Bitcoins can be spent by a person anonymously. The Bitcoins basically exist electronically. The price of the Bitcoins is known to fluctuate at times, with their values rising high at times and achieving nominal value at other times. The worth of the Bitcoins is currently more than one gold ounce. They are completely digital.
Bitcoins gained preference as the choice of currency for the cyber thefts, which were earlier held to be responsible for crippling down the computer networking in every nook and corner of the world. It is true that the history of the Bitcoins is rather bitter, but this type of digital currency help the people in purchasing services as well as products. They can also exchange money without the involvement of the banks or any third party. The Bitcoin transactions are generally sent from the Bitcoin wallets that are electronic in nature to the wallet of another person which requires a digital signature.
Records of The Transactions
The funniest thing about the Bitcoins is that the Bitcoins do not really exist anywhere. When people discuss someone else having the Bitcoins, and they look into the addresses, they will see that the addresses do not hold digital Bitcoins. One can never point to physical objects or digital files and claim that there are Bitcoins in there. But, there will only be the records of the transactions that were made in between various addresses and balances which either increase or decrease. The transactions that have taken place are generally stored in ledgers which are also known as block chains. If anyone wants to know the balance, a particular address will not have this information, but it can be reconstructed when looking at this block-chain.
What Do Transactions Look Like?
When a person sends Bitcoins or transfers Bitcoins from one account to another, it consists of three valuable points of consideration, which include:
●Input: Input is basically the record of the Bitcoin address that was used for sending the Bitcoins to the person who is making the transaction, in the first place.
●Amount: The amount includes a number of the Bitcoins that the person is sending to another person’s Bitcoin address.
●Output: The output is basically the Bitcoin address of the person to whom the money is being sent.
These are the three valuable points of consideration to look into that are available when Bitcoins are sent from the Bitcoin address of one person to another.
In order to send Bitcoins from one person to another, two very important things are needed. This includes the Bitcoin addresses and the private keys. The Bitcoin address is generally generated in a random fashion. This is nothing but a sequence that consists of numbers and letters. Similarly, the private key is also a sequence of numbers and letters. The only difference between the Bitcoin address and the private key is that the Bitcoin address can be viewed by anyone, whereas, the private key is kept secret. It is almost like a deposit box that has a front made up of glass. Everyone is aware of what is inside, but only the private key can unlock the safe either to put things inside or take things out of the safe.
When a person wants to send the Bitcoins to any other person, he makes use of the private key for signing messages that consist of the three valuable points of consideration, the input, the amount and the output, which is the address of the person to whom the coins are being sent. After this, the transaction is verified by the Bitcoin miners, followed by being put into transaction blocks and finally being solved.
Why Is It Necessary To Wait For The Transaction To Be Cleared?
Since the transaction is verified by the Bitcoin miners, it is necessary to wait until they finish mining the transaction. The protocol of Bitcoin is set in such a manner that it takes approximately ten minutes for mining each of the blocks. There are many merchants that may make a person wait until they have received confirmation of the block, which takes a little longer time than usual, before downloading the goods or taking advantages of paid services.
Also, there are few merchants who do not make a person wait until they receive confirmations of transactions. They take their chances and assume that a person will not try to spend the Bitcoins before the confirmation of the transaction. This generally happens for the transaction values that are low, and there is not a great risk of fraudulent activities.
What Happens When Input and Output Amounts Do Not Match
The only existence of the Bitcoins is on the transaction records. This means that a person can have a number of transactions that are tied to one single address. A person may send two Bitcoins, four Bitcoins or five Bitcoins as transactions that are separate at different times. It is wiser to spend the outputs of the transaction as a whole instead of breaking it into small amounts which are inconvenient.
When transactions are made using credit or debit cards, the respective merchants may charge a transaction fee. When Bitcoins are used instead of the regular currency, the transaction fee that is charged us very nominal. Also, sometimes, there is no transaction fee at all. The transaction fees are calculated by making use of various factors. There are a number of miners who are available right now who process all the transactions for no extra fee or charges. In earlier days, it was very frustrating to calculate the transaction fees as it was very complex. There have been a number of protocol updates that has led to the development of the transaction process.
Bitcoin transactions are very fast and swift as the banks, and the government cannot interfere with the transaction. It is also cheaper in comparison to the traditional banking system. It is wiser to use Bitcoins for the transaction as it is an easier approach when it is placed in comparison to bank transactions.
Published by Matt Johnston & last updated on July 24, 2017 8:54 am