A cryptocurrency is a kind of digital asset which is used as a mode of exchange. It uses strong cryptography to give full-proof security to the online and offline financial transactions, control the creation of additional units and verify the transfer of assets. Cryptocurrency is a kind of digital currency that uses decentralize control as opposed to centralized digital currency and central banking system. A cryptocurrency’s decentralized control works through a blockchain, a ledger technology.
In 2009, the first decentralized cryptocurrency that was released was Bitcoin, an open source software. After the creation of Bitcoin, over 4000 alternative variants of Bitcoin or cryptocurrencies have been created.
What is Bitcoin?
Bitcoin, also known as a cryptocurrency, is a kind of digital currency, the symbol being used is BTC and XBT. It is used as a medium of exchange (virtual). It is a decentralized system and not used by any country’s bank or government. Therefore, using bitcoins as a mode of exchange is a bit risky and people do not feel safe often to turn “real” money into bitcoins. Bitcoins can be used in trading markets for goods with vendors who accept bitcoins as their payment. The name that often relates to the initiation of bitcoin is Satoshi Nakamoto. Over the decade of bitcoin history, it has seen much growth to become a popular currency both on and offline as it deals with inflation. It is a peer-to-peer electronic cash system in which one is able to send bitcoins as a customer for buying goods, to the vendor’s account using the computer or phone’s app.
As of its creation-history, bitcoin’s domain was registered under the name ‘bitcoin.org’ on 18 August 2008. A link to the paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-peer Electronic Cash System was posted to a cryptography mailing list on 31st October 2008. And finally, Nakamoto published the bitcoin software as open source code in January 2009. It is assumed that Nakamoto is estimated to have mined one million bitcoins before disappearing in 2010. Before disappearing he handed over the network key code and control to Gavin Andresen. As a result, Andresen later became the lead developer at the Bitcoin Foundation.
How Bitcoin works?
The transactions done in a Bitcoin network node are recorded in a ledger called blockchain. The blockchain is “an openly distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. It is related to cryptocurrency bitcoin as it serves as the public transaction ledger of the cryptocurrency bitcoin. It was invented by Satoshi Nakamoto back in the year 2008. The blockchain is a type of “payment rail” or a payment network that moves money from a payer to a payee.
Bitcoin to bitcoin transaction use a heavily encrypted hash code across a peer-to-peer network. Bitcoin users use a digital wallet which holds individual addresses the user sends and receives bitcoins from. And also, the users use a private key which is known only to the user.
Valuation of Bitcoin in Terms of World Currency
The bitcoin network is designed mathematically in such a way that it would generate no more than 21 million Bitcoins. As of this writing, 1 bitcoin worths 2,67,950.74 Indian rupee. And the amount is not fixed, it fluctuates with time as in stocks do in stocks market.
In most of the countries like USA and others, bitcoins are much controversial as it makes illegal and illicit transactions often to hide unreported and untaxed funds from the government. So this is the main reason why bitcoins are not backed by banks and the government of these countries.
How One Can Get Bitcoin Assets or Offers?
Mainly there are three ways by which people can get bitcoins:
- One can get bitcoins in exchange of ‘real’ money.
- One can sell things and get bitcoins in exchange.
- Bitcoins can be created using a computer.
People set up powerful computers to get bitcoins. This is called mining. But the sums become more and more difficult to stop too many bitcoins being generated. If one starts mining now, he would take years before he gets a single bitcoin.
One could end up spending more money on electricity for his computer than the bitcoin worths. It is an open source software. Everybody and everyone can use it publicly without letting their key addresses know to others. People can transact anytime and anywhere if he knows the right protocol to use this software.
Some people also own bitcoins as a measure of investment. But there is always risk using bitcoins as a digital asset as there are anonymous users using the network and you can not know the names payers or payee unless you are told. There is the instance of bitcoins being stolen from Bitfinex when it was hacked in the year 2016.
How to do Bitcoin Transaction?
If someone needs to spend their bitcoins, he must know the corresponding private key and digitally sign the transaction. The network verifies the signature only by using the private key. Somehow if the private key is lost, there is no other way that the owner can prove his ownership, the coins are then become unusable and as a matter of fact, get lost. For example, in 2013, one user claimed to have lost 7500 bitcoins worth $7.5 million only because he lost his private key contained in his hard drive. Approximately 1 billion bitcoins have been stolen in July 2018. There are assumptions that about 20% bitcoins are lost
Apart from the risks, there are advantages too that is why people want bitcoins as a mode of currency exchange. People like bitcoins because of the fact that:
- It is not controlled by the government or banks;
- They can also spend their money anonymously, without letting others know about it unless they want to;
- It is difficult to copy bitcoins, make fake ones or spend ones you do not own as it is recorded publicly.
Bitcoins Future Star
The future of bitcoin can be at stake. The governments of countries such as China, Japan and Australia are regulating stern restrictions as there can be huge currencies hidden in a digital wallet that is illegal and matter of great concern.