What is Bitcoin and what advantages does it offer to its users?
Bitcoin is a cryptocurrency or digital currency that can be traded for services and goods with vendors who accept Bitcoin payments. Bitcoin holders can exchange goods and services without a bank as an intermediary.
Bitcoin is the most popular cryptocurrency with its value being on the rise since its introduction in 2009, According to Bitcoins creator Satoshi Nakamoto he says that the purpose of Bitcoin is an electronic payment system that is based on blockchain /cryptographic evidence rather than trust. Holders buy it as an investment waiting for it to increase in value while other businesses use it as a method of payment. For example, PayPal accepts Bitcoin as a method of payment.
In the USA Bitcoin is controversial since it can be used to transfer illicit funds or even hide unreported income from IRS. By design, the limit for Bitcoin is 21 million coins out of which 18.77 million have been mined already. This makes it scarce and regulates the inflation which could occur if the crypto was in limited supply.
How does Bitcoin work?
Bitcoin is built with a technology referred to as blockchain It is a kind of public ledger that records transactions digitally in multiple places simultaneously. Blocks within a blockchain are units that contain information about each transaction such as time, date, seller and buyer, and an identifying code for each transaction.
Blockchain is made in a way that makes it hard to forge the data or hack the system making it immutable and secure. Every computer within a blockchain network has a duplicate of the ledger to avert single failure points. If one block is changed then the other blocks within the distributed ledger must also change. Blockchain technology is decentralized meaning that it is not regulated by one organization.
How blockchain works.
Bitcoin is kept in a digital wallet software on a computer. Crypto wallets are the best to keep Bitcoin secure. Multiple wallets also exist. Software wallets enable users to keep some Bitcoin in a computer or mobile phone for daily usage with the other balance stored in an offline wallet. This keeps the most Bitcoin amount safe from malware.
Offline wallets include software installed in a USB or CD instead of the internet to be kept physically secure. Another kind of offline wallet is a hardware wallet and are physical device like flash drives that store a user’s private keys. Even if the device is connected to another device the private keys cannot be exposed since signed transactions are done on the device. Multisignature wallets on the other hand need two or more private keys to authorize transfers. This makes it difficult for a wallet to be accessible if lost. One key is kept in a safe location as a backup another is stored on the holder’s mobile phone and the third key can be kept with a multisignature provider.
In summary, Bitcoin has value just like other cryptos since people are willing to exchange them for goods and services. However, the value of Bitcoin has fluctuated since its introduction in 2009. Due to this volatility in value, Bitcoin has become an investment option for most people. They trade the cryptocurrency in online exchange platforms like xbt app ifex 360 AI.