Full Detail- What Is Bitcoin And How It Works. And How It Is Profitable To Us

Bitcoin is a form of digital currency, created and held electronically. No onecontrols it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all aroundthe world, using software that solves mathematical problems.It’s the first example of a growing category of money known as cryptocurrency.What makes it different from normalcurrencies?Bitcoin can be used to buy things electronically. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it isdecentralized. No single institution controls the bitcoin network. This puts some people at ease,because it means that a large bank can’t control their money.Who created it?A software developercalledSatoshi Nakamotoproposed bitcoin, which was anelectronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
No one. This currencyisn’t physically printed in the shadows by a central bank, unaccountable to the population, andmaking its own rules. Those banks can simply produce moremoney to cover the national debt, thus devaluing their currency.Instead, bitcoin is created digitally, by a community of peoplethat anyone can join. Bitcoins are ‘mined’, using computing power in a distributednetwork.This network alsoprocesses transactionsmade with the virtual currency, effectively making bitcoin its own payment network.So you can’t churn out unlimited bitcoins?That’s right. The bitcoin protocol – therules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners. However, these coinscan be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after thefounder of bitcoin).What is bitcoin basedon?Conventional currency has been based on gold or silver. Theoretically, you knew that if you handed over a dollar at the bank, you could get some gold back (although this didn’t actually work inpractice). But bitcoin isn’t based on gold; it’s based onmathematics.Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available, so that anyone can check it.The software is also open source, meaning that anyone can look at it to makesure that it does whatit is supposed to.What are its characteristics?Bitcoin has several important features that set it apart from government-backed currencies.1. It’s decentralizedThe bitcoin network isn’t controlled by one central authority. Every machine that mines bitcoin and processes transactions makes up a part of the network, and the machines work together. That meansthat, in theory, one central authority can’ttinker with monetary policy and cause a meltdown – or simply decide to takepeople’s bitcoins away from them, as the Central European Bankdecided to doinCyprus in early 2013. And if some part of the network goes offline for some reason, the money keeps on flowing.2. It’s easy to set upConventional banks make you jump through hoops simplyto open a bank account. Setting up merchant accounts for payment is another Kafkaesque task, beset by bureaucracy. However, you can setup a bitcoin address in seconds, no questions asked, and with no fees payable.3. It’s anonymousWell, kind of. Users can hold multiple bitcoin addresses, and they aren’t linked to names, addresses,or other personally identifying information. However…4. It’s completely transparent…bitcoin stores details of every single transaction that ever happened inthe network in a hugeversion of a general ledger, called theblockchain. Theblockchaintells all.If you have a publicly used bitcoin address,anyone can tell how many bitcoins are stored at that address. They just don’t know that it’s yours.There are measures that people can take to make their activities more opaque on the bitcoinnetwork, though, such as not using the same bitcoin addresses consistently, and not transferring lots of bitcoin to a single address.5. Transaction fees are minisculeYour bank may charge you a £10 fee for international transfers. Bitcoin doesn’t.6. It’s fastYou can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.7. It’s non-repudiableWhen your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.So, bitcoin has a lot going for it, in theory.

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