What Is Bitcoin? How To Make Money With Bitcoin Mining Calculator – What if there was a standardized currency that could be used anonymously across the internet and in select real-world locations?
You’ve likely heard of bitcoin, the digital currency that has recently come into the spotlight. Here, we give you a clear understanding of what it is, what it does and how you can use it to buy products or services online.
What Is Bitcoin? How To Make Money With Bitcoin Mining Calculator
What is Bitcoin?
Bitcoin is a digital currency, designed for secure financial transactions that require no central authority, no banks, and no government regulators. Bitcoin, a peer-to-peer cryptocurrency, runs on a system which allows you to send and receive bitcoins without a third party (such as banks or payment processors like Visa).
You can use Bitcoins to send or receive any amount of money, with anyone, anywhere in the world, at very low cost. It would let transacting parties remain anonymous, keep transactions very secure, and eliminate middlemen fees. However, bitcoin transactions are recorded in a public ledger called the bitcoin blockchain, which cannot be edited or deleted.
Bitcoins are impossible to counterfeit or inflate. Unlike government-issued money, that can be inflated at will, the supply of bitcoin is mathematically limited to twenty-one million bitcoins, and that can never be changed. The values of other currencies can rise and fall when a central bank decides to print more paper money. But since Bitcoin is digital and there is a limited number of them, the expectation is that it won’t be prone to such devaluation.
How to use bitcoins?
Bitcoin can be used for spending, similar to money. You can also keep them for investment purposes, or simply prefer to use them as a method to make an international money transfer.
Bitcoin exists electronically and is kept in ‘bitcoin wallets.’ There are many types of bitcoin wallets: desktop wallet, mobile wallet, online/web-based wallet, hardware wallet and even paper wallet.
Bitcoin wallets come with bitcoin addresses, which represent a destination, similar to an email address. Bitcoin addresses are alphanumeric, between 27-34 characters in length.
Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your Bitcoin address, where you receive money from others. You can disclose your addresses to your friends so that they can pay you or vice versa. And you can have as many wallets and bitcoin addresses as you like.
To send bitcoins, users simply have to ensure positive balance in their bitcoin wallets, insert the receiver’s bitcoin address, and hit send. There is a small miner’s fee to process the transaction – miner’s fees are given as a reward and incentive to Bitcoin miners for maintaining equipment.
You can spend bitcoins anywhere that accept bitcoins as payment. You can also use a Visa/Mastercard-linked bitcoin debit card issued by companies like Wirex or Coinbase.
How do Bitcoins work?
Bitcoins would be ‘mined’ by computer software, transferred directly amongst users and recorded in an untamperable ledger without the need of a third party. That is, Bitcoin is controlled by open source software that operates according to the laws of mathematics — and by the people who collectively oversee this software.
The software runs on thousands of machines across the globe, but it can be changed. It’s just that a majority of those overseeing the software must agree to the change.
Bitcoin works on blockchain technology. The blockchain is a shared public ledger on which the entire Bitcoin network relies. Any confirmed transactions (including newly added bitcoins) are added into blockchains. When any user initiates a new transaction (send or receive bitcoins), the transaction is verified using blockchains.
How secure is Bitcoin?
The Bitcoin ecosystem is decentralized, and cannot be controlled by any person(s), including the creator. Bitcoin payments are impossible to block, and bitcoin wallets can’t be frozen.
Bitcoin is a math-based currency. That means that the rules that govern bitcoin’s accounting are controlled by cryptography. Bitcoin uses Public-key cryptography, the system which uses two pieces of information to authenticate messages. When you set up your Bitcoin wallet for the first time, you are asked to set up a private cryptography key (also known as a “seed”) that’s associated with an address on the internet that contains a balance in the public ledger. This is the most important part of Bitcoin security.
NOTE: Never write down your private key (seed) online & don’t share it with anyone!
The address and the private key let you make transactions. If you want to send your bitcoins to someone else, you need your address and their address. When you make a Bitcoin transaction, your Bitcoin software signs the transaction with your private key. This cryptographic signature is the mathematical mechanism that allows someone to prove ownership.
Unlike normal transactions where we have to enter our personal details, the only thing anyone will see is your Bitcoin wallet address. This ensures anonymity & safe online transactions.
However, Bitcoin can be stolen in many ways. It is the bitcoin owner’s responsibility to keep them safe, and this meant implementing additional layers of security such as 2-factor authentication. Keeping them in web wallets can be dangerous.
How to acquire Bitcoins?
You can buy bitcoins from many online exchanges. There are a lot more options now than ever before – there are global bitcoin exchanges and also country-specific bitcoin exchanges.
Here are some of the best & official resources for Bitcoin enthusiasts:
- Bitcoin.org
- Bitcoin Block Explorer
- BTCC
- Coinbase
- Coinsecure
- Localbitcoins
- Unocoin
Who found Bitcoin?
Since the founding of the cryptocurrency in 2008, Bitcoin’s inventor or inventors have been shrouded in mystery. It was first introduced by a Japanese programmer who went by the name of Satoshi Nakamoto. In October 2008, he published a paper on ‘The Cryptography’ mailing list and in January 2009, when the first open source Bitcoin software was released, the first ever bitcoin was issued. He published a proof of concept, and it really gained steam a year later, when developers flocked to the project. By the end of 2011, bitcoin was established enough.
The idea was to create a currency whose value couldn’t be watered down by some central authority, like the Federal Reserve. When the system quits making new money, the value of each bitcoin will necessarily rise as demand rises — it’s what’s called a deflationary currency — but although the supply of coins will stop expanding, it will still be relatively easy to spend. Bitcoins can be broken into tiny pieces. Each bitcoin can be divided into one hundred million units, according to Bitcoin’s inventor Satoshi Nakamoto.
On May 2, 2016, Australian tech entrepreneur Craig Wright confirmed that he was the founder of the virtual currency, ending years of mystery.
Disadvantage of Bitcoins
Lack of acceptance: Cold hard cash is still the widest and most used form of payment – it’s acceptance is second to none. By contrast, bitcoin is only accepted at a handful of shops.
Lack of protection: In general, bitcoin is not considered legal in most countries around the world. Therefore, theft or scam victims have almost no option for recourse.
Due to lack of control and regulations, many countries are understandably wary of bitcoin and other cryptocurrencies in general. But some progressive countries such as Japan have started to recognize it as currency.
As Bitcoins require no central authority, banks, or government regulators they become attractive to criminals and off-the-grid activities, those who want to evade tax authorities. Hence governments and central banks have been vocal about the risks involved in dealing with virtual currencies. If you’re having any questions regarding What Is Bitcoin? How To Make Money With Bitcoin Mining Calculator let us know in the comment box below.
