The Bitcoins are virtual cash that acts in a decentralized fashion and transacts through the Internet. As they are decentralized, it allows the buyers and sellers to male transactions as Bitcoins directly without the need for any intermediaries like a bank or financial institution. In our currency system, there is no limit to the number of currencies to be printed. But, in Bitcoins a total of 21 million Bitcoins only be mined totally, making it more valuable. This article gives an overview of Bitcoins and how to trade online in the following sections of the article. Also, you can use pattern trader to invest in bitcoins. We at Techdee have shared a detailed analysis of this topic.
The Bitcoin was first introduced as the open-source software by Satoshi Nakamoto in the year 2009. It was known from the research that, Nakamoto possesses about 1 million Bitcoins, where the current value for those Bitcoins is $3.6 billion as of September 2017. Nakamoto left the Bitcoin group giving all the power to BTC lead developer Gavin Andresen. After Nakamoto, Gavin made the Bitcoins function more autonomously, thereby benefitting the investors.
Many people wish to use Bitcoins as they do have the interference of any controlling authorities like banks or central governments. The sellers or buyers can easily transact Bitcoins in just a few minutes or within 24 hours. But the traditional banking system will take 2-3 working days to complete the transaction. They also impose the transaction fee for initiating the transaction. With Bitcoins, the user does not have to pay any transaction fee for national transactions. They also function 24 * 7 and do not have any limits in the transaction amount.
With the traditional international currency transaction, the users have to pay a high transaction fee. But Bitcoin international transaction, the transaction fee will be very minimal. Every transaction is stored as blocks in the distributed public ledger called blockchains. Hence the transactions are transparent, and every user will be able to see the changes in the blockchain. Therefore the Bitcoins are highly secured, as a hash code is attached to every block in the blockchain. If an anonymous user tries to tamper with the block, the hash code becomes more complicated to retrieve, and every block owner will be notified about this anonymous access.
Working of Bitcoins
The Bitcoin user will only know about how much Bitcoins he owns in his digital wallet, and he will be able to perform transactions along with viewing the transaction result. But in the background, several processes will take place. As soon as the Bitcoin user initiates the trade, his transaction, along with his personal information, will be stored as blocks in the blockchain. Before adding to the blockchain, a hash code will be generated. The blocks that have code generated will be generated based on the previous block’s information. Hence a small change in one block will be visible to all the users, and anyone will be able to fix the issues. The validity of every transaction can be verified with a Bitcoin wallet. Every transaction will be authenticated by the digital signature of the sending address.
Implementation and maintenance of Bitcoins
The following units are required to implement and maintain the Bitcoins. They are:
- The Cryptographic algorithms
- The blockchain platform
- The buyers and sellers who are the backbone to make the Bitcoin transaction
- The Bitcoin miners for mining the currency and performing the transactions.
How double-spending problem is avoided in Bitcoins
When the transactions are performed in a digital transaction, there should be accounts, a record of transactions, and details about balances. The big issue with the virtual transaction is, the same Cryptocurrency can be used for more than one transaction, which is called as double-spending. With the help of blockchain technology, the Bitcoins has avoided the problem of double-spending.
Every node or block in the blockchain technology, acts as a server and validates the transaction, and keeps track of the balances and records, for every transaction. By doing so, the same Bitcoin will never be used for another transaction.
Thus this article has discussed Bitcoins, Bitcoin history, and the working of Bitcoins in a detailed manner. Bitcoin first adopted blockchain technology, and its attractive feature is a triple entry bookkeeping system universally. The sending user’s digital signature acts as the authentication mechanism for security reasons.