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[Infographic] How Bitcoin Works: A Step-by-Step Guide
Bitcoin is the first virtual currency of the Internet. You can also call it Cryptocurrency. It has existed for several years now but many people wonder, “what is bitcoin” and “how bitcoin works”. It is also the most hyped and least understood technology today… …First Bitcoin came into existence in 2009 and the price is continuously fluctuating on the international market.
You can check the current price of bitcoin in dollars. What Are Bitcoins? Bitcoin was the first cryptocurrency/digital currency invented and until now, nobody knows who invented it. But: It was first appeared in 2009 by the Japanese developer named Satoshi Nakamoto and since then he’s disappeared. The other popular crypto/digital currencies are, Ethereum Litecoin Peercoin Feathercoin And many more They all are also called altcoins because they developed after bitcoin. Now, anyone can create cryptocurrency and that is called blockchain development. One of the key advantages of bitcoin is, it can be stored offline on person’s local hardware. This process is called cold storage of bitcoin.
So it protects the currency from being taken by others. While when you store it online, there are chances somebody hacks your PC and steal it from you. When you store the currency online that process is called hot storage. But all the advantages come with some disadvantage and in bitcoin, when you lose your hard drive it means you lose your bitcoins. There is no way to get it back. It is estimated that approx $30 billion bitcoins are lost/misplaced by investors and miners. Nonetheless, bitcoins remained the most popular and highly valued cryptocurrency of all time since last 9 years. Also read: Why to Implement Bitcoin Payments into Your Website & App How Bitcoin Works?
Bitcoin is the virtual money designed to be self-contained for their value. It does not need any banks to store or move the money.
Once you have bitcoins, they behave as physical gold coins in your pocket. You can purchase expensive things online using it or you can just hold them as an investment and wait for the price to increase. Bitcoins are traded from one person wallet to another… …A wallet is the small personal database where you store the coins. It can be your computer, smartphone, tablet i.e cold storage or it can be stored online in cloud i.e hot storage. For all the intents this currency is highly secured and it is computationally and mathematically so intensive, that to create a bitcoin, it isn’t financially worth for the frauds to manipulate the bitcoin system. Infographic – How Bitcoin Works: As you can see in the above infographic, there are 6 steps involved in exactly how bitcoin works. Step 1: A transaction is requested Initially, either sender or recipient requests the transaction. Step 2: computational problem solution Now the transaction information is recorded as the solution to the computational problem. This process is also called blockchain. Step 3: Solution transferred to the ledger The solution is transferred to the ledger, which is a widely-distributed record of the ownership and transference of all the currency in the circulation.
Step 4: Involved user verification The nodes (individual links of the chain) verify the users involved and the computational record of the transaction. Step 5: Agreements verification Now, once a predetermined threshold of time or numbers of node agreements is reached, the transaction is verified into the distributed ledger and becomes a permanent part of the chain. This entire process takes approx 10 minutes. Step 6: Goods and services are exchanged This is the final step of how bitcoin works. Here, when the transaction gets complete, the goods or services are exchanged.
So this was all about what is bitcoin and how does it work. …Now, let us see some interesting facts about bitcoin.
Interesting Bitcoin Facts: 1. The first bitcoin was used to buy the pizza. 2. The inventor of the bitcoin is still a mystery. 3. Founder of bitcoin owns $15 Billion plus in bitcoins (as of January 2018).
3. Bitcoin is untraceable. 4. If you lose your bitcoin private key that means you lose your bitcoins. 5. There are only 21 million bitcoins. 6. You can but a lot of stuff/expensive things with bitcoin. 7. Since 2010 bitcoin is continuously making the profit. 8. Bitcoin can’t be banned. 9. No Government or single entity has control over the bitcoin. 10. About 1000 people own 40% of the total bitcoins. 11. Bitcoin transactions are measured in Satoshi/byte i.e 1 Satoshi = 0.00000001 bitcoin. Conclusion: So, this was all about what is bitcoin, how bitcoin works and some interesting bitcoin facts. Blockchain and bitcoin is totally new industry and a lot of people are showing interest in developing their own blockchain/cryptocurrency People are also integrating bitcoin payment option in their website and mobile apps. Do you have any other interesting information about bitcoin, which I might miss above? Do let me know in the comments below.
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Published on Mar 13, 2018
Published on Mar 13, 2018
Know how Bitcoin is paving the way for virtual money; a quick rundown on what #bitcoin actually is and how it works.