Hello, Guys! Today I’m going to talk about Cryptocurrency, the bitcoin value, and more specifically the most popular of the bunch Bitcoin. Now, many of you have probably heard this word bouncing around the internet. Some of you may even be traders and owned a few bitcoins yourselves, I’ve had a lot of people ask me about Bitcoin and what it’s all about. So, today in this discussion, we’re gonna talk about what is bitcoin, how it is created, where you store it when it was created and everything you need to know about Bitcoin.
When and who was Bitcoin created?
Bitcoin was invented by a mysterious person or group under the pseudo name Satoshi Nakamoto in the year 2009. Satoshi Nakamoto published the paper named Bitcoin which talked about the need for a truly digital currency which is not under anyone’s control. Bitcoin or Cryptocurrency is an Open-source software, it means that no person, no company or no country owns this network just like no one owns the internet. The system is peer-to-peer that is users can transact directly without an intermediary like a bank, a credit card company or a clearinghouse. Something similar to cash transactions today.
What is Bitcoin?
If I wanted to pay you some money, I would have to send that money to our bank. The bank is a middleman. Well, a decentralized currency, there is no middleman, no government in between me and you. We are the currency.
Bitcoin is a digital currency created in 2009. There are no physical Bitcoins only balances kept on a public ledger in the cloud that along with all Bitcoin transaction is verified by a massive amount of computing power.
So, Cryptocurrency is just set to your numbers of codes backed by complicated mathematical problems which are reflected on the public ledger you hold in a digital wallet. So, if you own some bitcoins then it will be reflected on the ledger of your digital wallet and that is all and only proof you have of owning this currency.
Bitcoin is a decentralized currency that runs on a technology known as the Blockchain. Once bitcoin is exchanged or transferred to somebody else, that transaction is verified by a Miner and when the miners verify a certain amount of transactions, they will actually earn Bitcoins.
Bitcoin was the first decentralized Crypto Currency and one of the reasons for its success, it has low fees whenever you transfer it, it can be in any country, and your account can never be frozen.
Bitcoin is a digital currency so it doesn’t actually exist. You can’t hold it in your hand. It’s only electronic. And unlike currencies produced by governments, also known as Fiat currencies, there is a limited supply of Bitcoin. It means when your government wants to print more money, they can just go print it and printing more and more money, sometimes that will devalue the currency.
Basic Knowledge: –
One thing that has made the value of bitcoin skyrocket is there is a limited supply. There will only be 21 million bitcoins ever in existence. The last bitcoin will become available in the year 2140, so we got a while.
So, basically bitcoin program is designed in such a way that bitcoins always remains rare and experts say it cannot be altered, this Bitcoin creation is called Bitcoin mining where Bitcoins are created as an incentive for users to verify the transactions.
Bitcoin is divisible like 1 rupee is divided into 100 Pesa, one bitcoin can be divided into 100 million Satoshi and you can even spend one Satoshi on Bitcoin network. Bitcoin is also portable as you can send it to anyone, anywhere, anytime in the world.
How can a set of codes with no intrinsic value become Global currency?
Before explaining that let me first explain what are the factors which determine if a commodity or any product can become a currency.
Currency should be durable, rare, divisible and portable if all these factors satisfy then that thing can become a currency. It started with the precious metals to currency notes today and maybe the Bitcoin in future.
So, our currency notes and coins are durable as they do not get spoiled for a long time and can be exchanged from the bank. They are rare as they are limited printed by regulatory authorities like RBI (India), they are easily divisible and surely portable. Similarly, for digital transactions that are transactions by credit card or debit card their durability that is security and accounts is maintained by RBI (Reserve Bank of India) and credit or debit card bank or payment company like Visa or MasterCard, rest factors are similar to currency notes.
Now, literally, anything can become a currency if all parameters are sorted and Bitcoin has proved that. Bitcoin is durable as these mathematical codes are secured by Bitcoin network where multiple users verify each transaction and record them in a public ledger called blockchain. Now, since all transactions are public and can be seen by everyone, therefore this negligible chance of fraud.
Key features of Bitcoin: –
- Blockchain-(Foundational Technology): – It is the foundational technology of bitcoin. Every transaction in the Bitcoin world generates two parts- one is Public Key, second is Private Key. Public key goes to a public lock called blockchain and the Private Key remains with your wallet, thus making all your transactions anonymous. So, a blockchain is basically a global running tally of every bitcoin transaction. Think of blockchain as an open and distributed digital ledger that is used to verify ownership of goods and verify financial transactions. Every time a transaction is completed using Bitcoin, computers distributed across the network validate the inputs and outputs, only the wallet IDs of the buyers and sellers are revealed in these logs and no other identity.
- Fast P2P Payments Worldwide: – Bitcoin transactions are typically verified and completed within 10 minutes so you can send money to anyone in the world without access to the banking system, with just an internet access within 10 minutes.
- No Double Spend Problem: – Double spending is a problem, you need to digital currencies because digital information can be easily reproduced with digital currency there is a risk that the holder could make a copy of digital token and send it to the merchant or any other party by retaining the original with blockchain technology and open-source character. Bitcoin network essentially works by using individual greed for the collective good. This is the network of the sageness people called miners who keep the system genuine by pouring their computing power into blockchain. This blockchain prevents rogues from spending the same Bitcoin toys and the miners are divided for their efforts by being gifted with the occasional Bitcoin and this is how new bitcoin created as well. Currently, transaction fees are charged by banks and financial institutions on every digital transaction and it can go up to 1-2% on each transaction as well. But with bitcoins is people verifying your transactions are getting new bitcoins as a reward.
- Low Processing Fees: – This zero transaction fees, you have an option to give small transaction fees for the faster processing of your transaction. However, in future when no more bitcoins will be able to get created then transaction fees will be charged but it will be negligible to what we are used to paying today.
- Decentralized: – Cryptocurrency is a true and pure decentralized digital currency those within the industry understand that one of the bitcoins most important feature and perhaps, it’s true coal innovation is its decentralized structure. Bitcoin has no central control, no central repository of information, no central management and crucially no central point of failure.
- Available To Anyone: – Available to everyone to transact through Bitcoin you just need internet nothing else, irrespective of your credit history your background you can open a Bitcoin account and start transacting with anyone across the world. This truly is a global currency and gives the power in hand of the user rather than a bank, government or credit card company.
- Anonymity (Partial): – Bitcoin is often described as an anonymous or nameless currency because it is possible to transfer bitcoins without giving any personally identifying information. However, it is not completely anonymous but pseudo-anonymous, sending and receiving bitcoin is like writing under a pseudonym. If an author’s pseudo name is Evelyn to his identity everything he wrote under that pseudonym will not be linked to him but experts have a way to achieve almost complete anonymity. And there is another side of experts who have ways to remove anonymity in the Bitcoin network.
- Transparent: – Everything that happens in the Bitcoin world is trackable thanks to the way that algorithm is structured. Every Bitcoin transaction is logged in the blockchain, this leads to a level of transparency that may surprise some Bitcoin users. If you publish a Bitcoin address on your website then everyone in the world will be able to know but your Bitcoin balance is where you have spent your bitcoins and from where you got them.
How is Bitcoin created?
They’re created through a process called mining. Just like gold miners will go and they will mine in the mountains to get gold. Bitcoin mine-workers will be mining on their computers to get Bitcoins and this process is done by setting up your powerful computer and having it solve complex mathematical puzzles around the clock and whenever those puzzles get solved, you earn a Bitcoin.
Now, in the early days, you could mine on your laptop and everything was fine but now it takes much more energy and larger computers. So, it’s really not feasible, unless you have larger computers and access to very cheap electricity.
Buy & Sell: –
Bitcoins are stored in special digital wallets on your computer or mobile device. So, once you’ve installed a Bitcoin wallet on your computer or mobile device, it will generate your first Bitcoin address and you can start making a transaction using your bitcoin address to another bitcoin address.
After you have transferred some Bitcoin to another address this information will be broadcast to the entire Bitcoin network and will be validated and confirmed by the network within a few minutes, mostly within 10 minutes. So, in this way, you can transfer bitcoins to your friend or to a vendor to buy certain goods or services. But currently, there are very few shops who accept Bitcoins in India. There are several bitcoin exchanges that allow people to buy and sell Bitcoins using Indian and other currencies as well and some Zebpay, Coinbase, Coindesk etc.
Well, you can just flat out purchase it, and that’s what I do. Coinbase is an online place where you can purchase bitcoin. Where I go there, it’s what I have found to be the most trusted, secure, and safe place to get bitcoin.
So, you can click here and sign up, when you can click that link you can click that link and you can start purchasing bitcoin right away.
Once you purchased your bitcoin on Coinbase, where do you store it?
You have a couple of choices. You wanna typically take it off the exchange and put it in something that’s more secure that you hold the security for. You could put that in a digital wallet, which may be stored on your computer or even on a device that you plug into your computer. You can even store it in what is called a paper wallet and what this is, is where you literally, on a piece of paper, print out the details of your bitcoin with the password on that paper. Don’t lose that paper.
Now, what keeps bitcoin safe?
Everyone has a public key and a private key. Well, think about it like a Post Box and you have a letter that you wanna put in the Mail. You can put that letter in the mailbox that is a Public Key. Anybody can put the letter in that mailbox.
Now, the Private Key would be owned by the postman. Only the person with that private key can get the mail out.
So, everybody has a public key and that means anyone who has that public key can put bitcoin in that address, just like anyone can put main in the mailbox. But only you have the Private Key to your mailbox and only you can withdraw the funds. Never let anyone get that Private Key.
The first time Bitcoin was ever used to purchase anything was May 22, 2010. In a Bitcoin forum, Laszlo Hanyecz offered someone 10,000 Bitcoin to order him a pizza. Someone took him up on that offer and they ordered him two Papa John’s Pizzas equivalent to about $25 in exchange for 10,000 Bitcoins. Today, those 10,000 bitcoins would be worth over $90 million.
Why so much interest in Bitcoin these days?
This graph shows why currently one bitcoin is around 9500 US dollars which are around 6 lakh rupees which were around 500 dollars just in May 2014 as was valued in cents in the year 2010. Due to this extraordinary value growth, many investors are looking at Bitcoins as an alternative investment option. Should you ride this Rollercoaster Ride or not please leave a comment in a Comment Box.