bitcoin-defined

Bitcoin Defined: An Easy Explanation Of The Most Popular Crypto

Bitcoin is not only the first digital currency but it is also the most famous crypto among the 58,000 digital currencies that exists today. The financial media eagerly covers each new massive high and deadly declines making BTC an inescapable part of the crypto space. While the deadly fluctuations might offer great headlines for the financial media, it hardly makes this crypto the best options for beginners or users who are searching for a stable store of value. Evaluating the ins and out of this crypto can be tricky. So let us take a closer look at the idea of Bitcoin and some Bitcoin news. 

What Is Bitcoin?

Bitcoin (BTC) is a decentralized digital coin that users can purchase, sell, and even exchange directly without any third party like a bank or a financial institution. The creator of this currency Satoshi Nakamoto illustrated the requirement for “an electronic payment system based on cryptographic proof instead of trust.”

Each and every transaction of Bitcoin that has even been completed remains on a public ledger that everyone can access making each transaction hard to reverse and impossible to fake. 

Since the public launch of this coin in 2009, the Bitcoin price has increased dramatically. Even though, once it was valued at under $150, as of 14.09.2021 at the time of writing the value of 1 BTC is $45,931.00. Because the supply of B TC is limited to 21 million coins, many crypto experts predict that the value of this crypto will keep on increasing in the future. 

Bitcoin Blockchain Architecture

BTC is constructed on a distributed digital ledger known as blockchain platform. As the name suggests, this platform is connected to the body of data, built of units known as blocks that has information about each and every transaction which include date and time, buyer and seller, total value, and also a unique identification number for each exchange. According to Stacey Harris, consultant for Pelicoin, which is a network of digital currency ATMs, 

“Once a block is added to the blockchain, it becomes accessible to anyone who wishes to view it, acting as a public ledger of cryptocurrency transactions.”

The blockchain platform is completely decentralized which implies it is not controlled by any intermediary organization. It is more like a “google Doc” where everyone can work on. Nobody is the owner of the network but anybody who has the link can contribute to it. These codes are random numbers that are long, making it highly difficult to fraudulently produce. 

The Concept Of Bitcoin Mining Explained In Brief

Bitcoin mining is a process of adding new blocks to the blockchain network by solving complex mathematical problems. People who choose to conduct this process known as PoW (Proof of Work) deploy their computer systems in a race to solve mathematical problems that verify transactions. 

To motivate the miners to keep mining and support the complete system, Bitcoin offers rewards to the miners. So if you wonder how to get Bitcoin? Then this is an option. These rewards are new Bitcoins. In the beginning it was okay for an  average individual to mine Bitcoin, but that scenario no longer exists. The Bitcoin is framed to make the puzzle solving more and more difficult, requiring more computing facilities. It is a high energy consuming process and that is one of the biggest disadvantages of Bitcoin mining or Bitcoin as a whole crypto. For this reason it even faced a crackdown in May 2021. 

Native Wallet For BTC

A BTC wallet is a form of digital currency wallet that is used in the process of sending and receiving BTC. This is similar to a physical wallet, but instead of storing physical coins, the wallet keeps cryptographi\c informations that is required to send transactions and access BTC addresses. There are some BTC wallets that can also be used to store other crypto as well. Here are the types of BTC wallets. 

Desktop Wallets

These wallets are installed on a laptop or desktop computer and offer the user full control over the wallet. There are some desktop wallets that also include additional features, like node software or even exchange integration.

Mobile Wallets

They perform the same operations like a desktop wallet, but this time on a smartphone or other mobile device. There are many mobile wallets that can conduct quick payments in physical stores through NFC (Near Field Communication ) or by scanning any QR code.

Web Wallets

A web wallet is also known as an online wallet or hot wallet that can send and store digital currency on your behalf. The main pros of web wallets is that they can be accessed from anywhere, any device, as conveniently as checking your email.

Hardware Wallets

Hardware wallets are also known as cold or offline  wallets.  They are by far the most secure type of crypto wallet, as they keep private keys on a physical machine that has no access to the Internet. These devices look like a USB drive. When the user wants to make a BTC transaction on their computer, they plug in the cold wallet, which can sign transactions without revealing the private keys of the user.

Criticism On Bitcoin

Over the time along with popularity, Bitcoin has faced a lot of criticism as well that includes its system of mining. The University of Cambridge uses an online calculator that tracks the energy consumed and at the starting of 2021 it was calculated to use more than 100 terawatt hours every year. In reality, cash has offered this function for centuries now and the public ledger of BTC may be a tool for law enforcement. 

The Bottom Line

Bitcoin is known to be the first and most popular cryptocurrency in the world. It has paved the way for all other crypto and it is the reason for this massive crypto industry that is running today. But despite being the most popular crypto it has faced some severe criticisms, one among them is its huge consumption of energy during the mining process. 


Frequently Asked Questions On Bitcoin

1. How do Bitcoins work?

BTC is constructed on a distributed digital ledger known as a blockchain platform. As the name suggests, this platform is connected to the body of data, built of units known as blocks that has information about each and every transaction which include date and time, buyer and seller, total value, and also a unique identification number for each exchange.

2. Can you legally invest in Bitcoin?

The answer to this question differs from country to country. Bitcoin is legal in many countries while it is again illegal in many. So in countries where Bitcoin or any other digital currency is not allowed you cannot invest in Bitcoin legally there.

3. Where do bitcoins come from?

Bitcoin is created by the process of mining. BTC mining is a process of adding new blocks to the blockchain network by solving complex mathematical problems.

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