“An investment in knowledge pays the best interest.”
— BENJAMIN FRANKLIN
Bitcoin is what is known as a cryptocurrency. It’s referred to by the BTC abbreviation in most market services that track and report on the prices of cryptocurrencies. Bitcoin’s development has spurred the creation and adoption of the entire new cryptocurrency and blockchain sector.
HOW BITCOIN WORKS
The Bitcoin protocol defines the rules of payment. Computers around the world work to verify each transaction and secure the network. These computers, or nodes, are known as miners. The software that runs the Bitcoin blockchain protocol uses a unique branch of math called cryptography that ensures the security of every transaction.
Bitcoin miners must follow the rules of the Bitcoin protocol. If a Bitcoin miner tries to dupe the system by creating a block that does not follow the Bitcoin protocol, Bitcoin nodes reject the block, and the miner loses his chance to win the block reward of several Bitcoins. To secure Bitcoin transactions, Bitcoin miners use networked computing power to solve a unique mathematical problem through the Bitcoin software.
FREE FROM BANKS
Bitcoin is not issued or controlled by a single agency or body. Many miners around the world provide Bitcoin’s support network. As the Bitcoin blockchain has grown, so has an entire industry, including many Bitcoin brokers and marketplaces. Ten years after the publication of the original Bitcoin whitepaper that started it all, there are more than 30 million people using Bitcoin.
Since Bitcoin transactions are logged and made available in a public ledger, it’s tough to commit any kind of fraud on the network. Even though each Bitcoin transaction is recorded in the digital address of every wallet in a transaction, the Bitcoin system does not record any identifying information.
BITCOIN AND PRIVACY
In practice, this means that every Bitcoin transaction is digitally acknowledged while being completely anonymous. Although individuals may not easily recognize the personal identity or details of the transaction, they may view the verified financial history of any Bitcoin wallet.
By using a system of wallets that adhere to specific Bitcoin addresses, anyone can swap value across the world without having to trust an intermediary such as a bank, credit card company, or another payment processor. An important aspect of Bitcoin, which is often misunderstood by people who first get into cryptocurrencies, is that it is possible to buy, sell, send, and receive a fraction of a Bitcoin. The value of goods that people are willing to trade for Bitcoin determines its value.
The Bitcoin blockchain prevents users from repeatedly sending the same Bitcoin more than once, and a user can not send Bitcoin from an address for which he does not have the private key. When a user attempts to create a transaction that violates the rules of the Bitcoin protocol, the network automatically rejects the transaction.
THE FUTURE OF BITCOIN
Some think that the design of the Bitcoin network means Bitcoin is safer than government currencies like the US dollar. The theory is that Bitcoin value is immune even if a local government collapses. The Bitcoin network is considered separate from other markets.
Bitcoin has caused a fundamental shift in some areas, including finance and computer science. Bitcoin enables disruptive technologies, ideas, and businesses in many areas that affect traditional industries such as banking, money transfer, investment, and payments. All indications are that cryptocurrencies are here to stay, and so far, no other cryptocurrency has come close to knocking Bitcoin from it’s top position.