What is bitcoin currency in English? Not hard to Understand

Bitcoin? What is it and How does it work?

bitcoin

Table of Content:

  1. What is bitcoin and how does it work?
  2. What is bitcoin in simple terms?
  3. What is a peer-to-peer network?
  4. What is bitcoin mining?
  5. Who is the founder of bitcoin?
  6. Ownership
  7. Advantages of Bitcoin
  8. Conclusion
  9. Resources

What is bitcoin and how does it work?

bitcoin is a decentralized digital currency that uses peer-to-peer technology. bitcoin is stored and traded with help of a decentralized ledger system which is Blockchain.

In 2008 or 2009 Satoshi Nakamoto created bitcoin. However, the use of this digital currency begins in 2009. bitcoin is decentralized which means that it has no central authority. bitcoin runs by nodes within the network by peer-to-peer network technology. Users can send and receive bitcoin on peer-to-peer bitcoin networks.

There is no central authority which is why for transactions Bitcoin uses proof of work, peer-to-peer networking, and a pair of public and private keys (public-key cryptography). All the transactions are verified by the computers (nodes) by using cryptography which is why bitcoin is known as cryptocurrency. Transactions are recorded inside Public Distributed Ledger Technology (Blockchain).

Please understand these

  • Distributed Ledger Technology A shared ledger or distributed ledger is a unity of synchronized, replicated, and shared data spread across multiple sites, Institutes, or Countries or maybe across the public. it is also known as replicated journal technology RJD. There are no central administrators like in centralized systems.
The data structure of blocks in the ledger
source: wikipedia.org
  • Proof of Work is cryptographic proof where a party proves to others (verifiers in-network) that a specific work (computational effort) has been expended. Verifiers can then confirm the expenditure. Learn more about Proof of Work. In the case of bitcoin transactions, Users with computers lead to verify transactions (authorization). To add a block they need to solve complex mathematical problems.
  • Blockchain A digital ledger which record transactions and track assets in a business network using a chain of blocks. A decentralized system of transactions is run by participants (node) and no single person is in charge. Learn more about Blockchain.
  • Cryptography is basically used for secure communications. The study and practice of techniques for secure communication in the presence of an adversary (malicious entity) are known as cryptography. Secure communication means that between the communication of two parties or entities there are no third-party involvements. Learn more about cryptography
  • Cryptographic Hash The mathematical method that maps arbitrary size data to a bit array ( An array that compactly stores bits) of a fixed size.

What is Bitcoin in simple terms?

Bitcoin is money but not the physical one. It is virtual money that is not run by a central authority but by all the members of the network combined in a peer-to-peer network. People can send and receive bitcoin. Bitcoins are available in exchange for ‘real’ money. You can sell and purchase goods by bitcoin. bitcoin is illegal in many countries but is also legal in many countries including Japan.

What is a peer-to-peer network?

Peer-to-peer is a type of networking where all the nodes are connected to each other with equal rights. There is no central computer (server) in this type of network. In this type of network nodes (a device in a network) that are connected to each other can share their resources with each other and they do not need a server computer (Server is a centralized administrative system in a network It serves the needs of other computers). Learn more about peer-to-peer Networking. the bitcoin network is also a peer-to-peer network that runs on a cryptographic protocol.

What is Bitcoin Mining?

Cryptocurrency Mining farm in Iceland
source: Wikipedia.org

In bitcoin, there is no central administrator. Hence, each time a transaction is made Users with computers lead to verify the transaction (authorization). To add a block they need to solve complex mathematical problems. ( This process is known as Mining. and the users doing it are known as Miners) Miners are rewarded for this but mining is not an easy task at all. Mining verifies and adds records of transactions in the network. Heavy energy and good computer are needed to do this which make this work very costly.

First, GPUs and then FPGA and ASIC chips, and now mining hardware of high performances are used for mining purposes. Learn more about Mining.

Who is the Founder of Bitcoin?

Satoshi Nakamoto is the founder or creator of bitcoin. Nobody knows that Satoshi Nakamoto is a name of a person or a group of persons. Yes, you read right the founder of the most famous cryptocurrency is an unknown personality or a group. Anyway, the White paper of bitcoin was authored by Satoshi Nakamoto. Learn more about Satoshi Nakamoto.

Ownership:

If the ownership means central authority then there is none in the case of bitcoin but ownership means something else. there are bitcoin addresses where bitcoins are registered. for the creation of a bitcoin address, you do not need more than a valid private key and computing with the corresponding bitcoin address. One-way cryptographic hashing is used to derive the bitcoin address from the private key.

To spend the bitcoin owner must know the digital sign and corresponding private key. The signature is verified by the network by using the Public key. You can say that a Private key is the certificate of one’s ownership of bitcoin in the bitcoin network. Hence one should never reveal his private key. Learn more about Ownership.

Advantages of Bitcoin

  • Accuracy: bitcoin transactions are highly accurate because they have to be approved by thousands of nodes.
  • Cheap: bitcoin transaction fees are very low. It makes transactions cheaper than any bank can offer.
  • Decentralized: there is no third-party involvement which is making it highly secure.
  • Fast Transactions: Transactions made here are really fast as compared to transactions made by a central authority. Transactions can be faster with high-speed Internet.
  • Secure transactions: once the transaction is made its authentication is checked by thousands of nodes in the chain.

Conclusion

Bitcoin is a digital currency that is less costly for transactions and much faster too. It is decentralized hence there are no central authorities to verify transactions. Therefore, transactions are verified by nodes in the peer-to-peer network. The identity of Satoshi Nakamoto is still a mystery. I think that one day the whole world may accept bitcoin.

What do you believe about the future of bitcoin? Please tell us by commenting down below.

Make sure to read:

Resources:

https://en.wikipedia.org/wiki/Bitcoin#Ownership

https://www.investopedia.com/terms/b/bitcoin.asp#toc-what-is-bitcoin

https://en.bitcoin.it/wiki/Main_Page

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