Everything you need to know about Bitcoin!
The bitcoin system and transactions may seem complex at first when you enter the world of cryptocurrencies. You may hesitate to send any amount or make transactions for the first time. To learn the bitcoin system, network, and wallet, you must learn the steps involved. At first, it is imperative to know what bitcoin is, how it works, how it is stored, and on which technology do the bitcoin system work?
What is Bitcoin?
Bitcoin is a currency that has a value and can be used to make a transaction. Through bitcoin, a user can initiate a payment. Three elements in a bitcoin transaction include an amount, a transaction input, and a transaction output. The input is the bitcoin address used to send money; transaction output is the receiver’s address on which the money is sent. The amount is the amount that is required to be sent. Bitcoins are stored in a bitcoin wallet that can only be accessed by bitcoin owners.
How does a bitcoin transaction work?
One way of completing bitcoin transactions is through a bitcoin wallet. Bitcoin wallet has a bitcoin address, and each bitcoin address is registered on the blockchain technology. The address of both the sender and the receiver gets registered on the bitcoin network. The sender’s address act as transaction input, and the receiver’s address act as transaction output.
Other than the bitcoin address, the transactions that are made are also registered on the bitcoin network. The blockchain technology is completely transparent means everyone can trace the bitcoin transactions. But the best thing is that no one can trace the bitcoin address because bitcoin wallet maintains user anonymity and secure the transactions.
How can bitcoins be used as a medium of exchange?
Just like fiat currencies, bitcoin has a value, and it can be used as a medium of exchange. Most people are confused about how and where it can be used to buy things? Because bitcoin has a value, it can be exchanged for any product. In earlier days of bitcoin, people hesitated to use it, but in today’s time, with bitcoin’s growing popularity, more and more businesses have started accepting bitcoins as per this website for Bitcoin.
Not only in legal businesses or agencies, but bitcoin is also widely used to buy illegal things as well. Silk Road is a marketplace where people use bitcoins to buy illegal drugs. Now you might be confused about these can be used?
Bitcoin is a decentralized currency, which means no central authority or financial institutions control or govern it. No one can record all transactions of bitcoin; this is why bitcoins are widely used for illegal things.
Small amounts of bitcoin
Most people are unaware of the fact that bitcoins can be sliced into tiny parts or amount. Bitcoins are divisible, and the smallest part of bitcoin is often referred to as Satoshi. The amount of Satoshi is 100 of one-millionth of a bitcoin. It is impossible to send this tiny amount over the bitcoin network. The smallest transaction has recorded that value around 546 satoshis.
Bitcoin transactions involve no third-party to complete or verify the transactions; therefore, no transaction fee is charged while making the transactions. But sometimes the transactions may involve a small percent of the transaction fee of the value. You can keep track of all transactions from a bitcoin wallet.
What is Bitcoin Mining, and how is it done?
Satoshi Nakamoto created Bitcoin in 2009, and only a limited amount of bitcoin exists, i.e., 21 million. Over 17 million bitcoins are in circulation in today’s time, and with increasing popularity, the number of bitcoins in circulation is rising. Many bitcoins still need to be discovered.
If you are a beginner, then you must know the ways to obtain bitcoins. Basically, there are three ways that include mining new bitcoins, accepting bitcoin as a payment method, and buying bitcoins from exchange. Bitcoin mining is the way to mine new bitcoins and verify the bitcoin transactions. The mining is through specialized computers by solving complex mathematical algorithms. The miners verify the transactions and add them in public distributed ledger in every 10 minutes. They are awarded bitcoins for solving the complex algorithms fastly.