November 27, 2018
Bitcoin Guide for Newbies – Know Bitcoin from the Scratch
Bitcoin is a consensual network that allows a new payment system and a fully digital currency or cryptocurrency. It is the first network among decentralized payment peers driven by its users without a central authority or intermediaries. From a user’s point of view, Bitcoin is like money for the Internet. Bitcoin may be the only existing triple accounting system.
Who Created Bitcoin?
Bitcoin is the first implementation of a concept known as “cryptographic currency” which was first described in 1998 by Wei Dai. He proposed the idea of a new type of money that would use the cryptography to control its creation and transactions rather than a centralized authority.
The Bitcoin protocol and its software are published openly and any programmer anywhere in the world can review it or create its own modified version of the software.
Who Controls the Bitcoin network?
In the same way that no one controls the technology behind electronic mail, Bitcoin does not have owners either. Bitcoin is controlled by all Bitcoin users in the world. Although programmers improve the software, they cannot force a change in the Bitcoin protocol because all other users are free to choose the software and version they want.
To keep them compatible with each other, all users need to use software that complies with the same rules. Bitcoin can only work correctly if there is a consensus among all users. Therefore, all users and programmers have a great incentive to protect this consensus.
How Does Bitcoin Work?
From the user’s perspective, Bitcoin is nothing more than a mobile or desktop application that provides a personal Bitcoin wallet and allows the user to send and receive Bitcoins with it. This is how Bitcoin works for most users.
Behind the cameras, the Bitcoin network shares a public accounting called “blockchain”. This accounting contains each transaction processed, allowing verification of the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the shipping addresses, allowing all users to have full control when sending Bitcoins from their Bitcoin addresses.
In addition, anyone can process a transaction using the computing power of specialized hardware and get a reward in Bitcoins for this service. This is commonly called bitcoin mining.
Is it really used by people?
Yes. There are a growing number of businesses and individuals using Bitcoin. This includes traditional businesses such as restaurants, houses, law firms, and popular Internet services such as Namecheap, WordPress, Reddit, and Flattr. Although Bitcoin is still a relatively new phenomenon, it is growing fast.
What Makes Bitcoin Special?
What makes Bitcoin special is not that it is a digital currency. The Dollar or Pound or other currencies are also, largely digital, and it is digital money that has existed for decades. Almost all the money that exists is digital. Neither does it make it special to have reduced transaction costs, or to make quick transactions.
These and other characteristics, eventually, will also end up being offered by banks. The main difference what really makes Bitcoin magical is that it is a P2P network: nobody issues the money. Separate politics and money. And this, by understanding how money and central banks work, makes you understand how Bitcoin makes humanity free.
Your Bitcoins are not files. There is not something specific that refers to a Bitcoin. The approach is different. Bitcoin is the unit of account of the balance sheets that the Blockchain manages. What each user has is a key (a password) that manages an address (or account number) in the Blockchain.
- Bitcoin – Refers to the transaction network; it can be used for applications of all kinds. In transactions, Bitcoins are sent; all transactions are stored pseudonymously in an account book called Blockchain.
- Blockchain – Public and distributed account book where all bitcoin transactions and their balances are stored permanently. Thanks to “mining”, Blockchain is known as the safest and most truthful database that exists.
- Mining – Process by which transactions of the Bitcoin network are verified. For this purpose, advanced cryptography and specialized hardware (“m iners”) techniques are used. A fixed amount of Bitcoins are created (“mined”) during the process.
Information by a leading New York based web design agency Fruxinfo Pvt. Ltd.