How Bitcoin Works?



Contrary to popular belief, Bitcoin is a different concept from standard virtual money. This currency is mathematically derived, and promises to change the traditional way people use currency or money. It’s important to understand that bit coins aren’t real notes or coins. In fact, they are strings of complicated code locked with high end, military grade encryption. People using a bit coin exchange to sell or purchase goods are very difficult to trace.

Until now, Bitcoin isn’t regulated by any Government organizations, banks or financial institutions. However, it’s getting popular because it can’t be counterfeited, and does not include transaction fees. Since it’s not possible to destroy numbers, this currency is even disaster proof. Unlike gold or paper money, it can’t be destroyed.

History and Origin of Bitcoin

The exceptional online currency was created by a developer known as Satoshi Nakamoto. However, this is just a pseudonym, and the individual is considered Japanese with excellent command over English language. The currency was created in 2009. Since it’s a digital and decentralized currency, it’s not controlled by any financial institution, government or country.

Unlike other currencies, this one is peer-to-peer and open source. This currency can be distributed over the internet from one device to another without any problems. Moreover, it doesn’t need any intermediaries or middlemen. As mentioned earlier, this currency is very difficult to trace. Thus, it has been extremely popular among people with libertarian mindsets.

The Best Place to Get Bit Coins

Most people don’t realize, but it’s quite easy to get this currency from online giveaways and friends. However, the best place to get this currency is a Bitcoin exchange. An exchange allows you to purchase this currency with real money. But when you use real money to buy this currency, you lose anonymity. Bit coins can also be bought from cash deposit establishments and mobile phones.

A process called 'mining' produces bit coins on a regular basis. This process is carried out automatically by computers or servers. The concept of mining is quite similar to the traditional use of the term in real world. In order to verify and record bit coin transactions, you need to spend some time and resources.

The currency can be pulled out by high end machines in exchange for solving complicated mathematical problems. As mentioned earlier, servers and computers with this currency offer military grade encryption capabilities. Here’s an example of how bitcoins are produced.

Buyer A from Location X pays seller B some bit coins online. Once this is done, miners race to authenticate the transaction after encryption. They log in bit coin codes in the central server. The individual solving the mathematical problems gets the bit coins. Around 25 new bit coins are created for every 10 minute block.

Using Bitcoins

When you get some bit coins for yourself, it’s important to store the currency in a virtual wallet. In order to achieve this task, you can use either computer programs or third party websites. When you create a virtual wallet, you instantly become a part of the huge bit coin network. When you want to send the currency or pay for some purchases, you need to get the person or seller’s identification number. This allows you to transfer the currency within a few minutes.