What is Bitcoin?

bitcoin

I would like to start with layman’s language.Bitcoin is digital money that you can transfer to another person without the need of a third party, like a bank. It can be thought of as a digital equivalent of cash – it’s just one person transferring value to another person, no bank involved. In fact, Bitcoins are not issued by a bank or government, so an even more apt analogy than cash might, therefore, be gold.

Ok, digital gold, got it.All Bitcoin transactions, from the beginning of time, are written down in an enormous, public ledger. When you transfer money from your Bitcoin wallet to another person, you do that by writing this transaction down in the public ledger. Everyone is watching this ledger and has their own copies of it, and so they now know that there is less money in your wallet and more money in a friend’s wallet. So everyone knows how much money each wallet contains. This is where your money is stored, in this public ledger with millions of copies that everyone maintains together. They do, however, not know who owns that wallet – Bitcoin has no notion of identity.

Now, in technical terminology, Bitcoin is the first global, decentralized currency that allows you to send money from one person to another without involving a third party broker, such as a bank. You only need your computer to make transactions because Bitcoin is fundamentally software.

As a decentralized currency, Bitcoin isn’t controlled by anyone. It’s open so that anyone can benefit from it. Blockchain, the technology behind Bitcoin is one of the most accurate and secure systems ever created.

A blockchain is a ledger that keeps records of digital transactions. Instead of having a central administrator, like a bank or the government, blockchain organizes data in batches called blocks. A blockchain just sounds like a kind of database with built-in validation—which it is. However, the clever bit is that the ledger is not stored in a master location or managed by any particular body. Instead, it is said to be distributed, existing on multiple computers at the same time in such a way that anybody with an interest can maintain a copy of it.Better still, the block validation system ensures that nobody can tamper with the records. Rather, old transactions are preserved forever and new transactions are added to the ledger irreversibly. Anyone on the network can check the ledger and see the same transaction history as everyone else.

Effectively a blockchain is a kind of independent, transparent, and permanent database coexisting in multiple locations and shared by a community. This is why it’s sometimes referred to as a mutual distributed ledger (MDL).A block is thus a permanent store of records which, once written, cannot be altered or removed.

Blockchain solves two of the most challenging problems of digital transactions :

[1] controlling the information and [2] avoiding duplication.

Computers all over the world then compete to confirm the operation by solving complex math equations. The first to figure out the answer and validate the block receives a reward in Bitcoins and this process is called mining.The validated block is time stamped and added to a chain in chronological order. The entire chain is continually updated so that it’s always an accurate representation of who owns what at any given time.

The founder of Bitcoin is Satoshi Nakamoto, an anonymous online alias for a forum poster. The founder remains unknown, and no one truly knows who the actual founder is.

At the moment, Bitcoin is owned by the community as a whole, as it is an open source initiative, with no single owner behind it. It is a community movement.

There are two factors which make people excited

[1] Get rid of transaction costs:
Because no third party is needed, there is nobody charging a transaction cost. Banks, card issuers, and payment processors place a 1-5% transaction fee on that coffee you bought this morning and everything else you buy. This is not very visible in everyday life because it’s almost always baked into the price of things, but if you start transferring money internationally with companies like the Western Union, you realize that there is quite a bit of money in the business of transferring money.

[2] Take currency power away from banks and government:

Banks and government have the legal and physical ability to create money. I won’t get into the details of how that works, but the main problem is that whenever money is created, it dilutes the value of everyone’s money, which makes it a super-fast, completely silent, taxation.Sometimes, governments and banks use this power responsibly, but sometimes, they do not.

Now there may be a question in your mind that what’s preventing another person from transferring money from my wallet to their own?

This is where cryptography comes in. When your Bitcoin wallet is generated, it’s given to you in two parts. One public part, an address, that you give to other people so that they know where to send you money, and a secret part, a key.

The key is used to “sign” transactions. It takes the amount, the sender address, receiver address, and the key, jumbles it together with math, and out comes a signature, that you put in the ledger along with the transactions. Due to how cryptography works, other people can mathematically verify that the person that generated this signature for this transaction must indeed have the key for this wallet. They can, however, not work backward to what the key actually is – that would take a supercomputer thousands of years to do.

Who generates Bitcoin, if there is no governing body?New bitcoins are generated by a competitive and decentralized process called “mining”. This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.

At last, as I have just searched on Google value of Bitcoin on September 15,2017 is US$ 3258

Anyone can generate Bitcoin using a computer.How?I will write it in my forthcoming blog.Thank you…

Note:
I would like to show a red signal for the legality of Bitcoin or any other crypto currencies like Bitcoin.As the legal status of Bitcoin varies substantially from country to country and is still undefined or changing in many of them.Please refer https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory .This blog is written for with a view to extending general knowledge only.

Source: Quora

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