What is Bitcoins and how it works? Explained in detail
In today's scenario, we might have used many different types of currencies. Have you ever heard something called as Bitcoin? Well, if not, let's know what is a Bitcoin how it works and how to mine it and is it safe.
In simple terms, we can define a Bitcoin as an electronic form of currency which does not have any physical shape to it. It is completely electronic. And another interesting part is that it has no government or bank that authorizes it. It is completely virtual.
Now coming to the value of a Bitcoin it is not a stable one the value of this currency is highly unstable and unpredictable. A few days back the value of a single Bitcoin reached a record breaking new height of $4400. But it can tumble down at any time, even the next second. As of 15/08/2017, the value of one Bitcoin is 258837.96 INR which is quite shocking right.
Another important aspect is that Bitcoin has 8 decimal values. So one Bitcoin is represented as 1.00000000. So you can spend even 0.00001000.
To define it in a clear manner Bitcoin can be considered like a register book which has an account balance of each and everyone's detail. So each and everyone has a register book and whenever a transaction takes place the registers get updated automatically. And each and everyone can see account balance of others, but it is difficult to find a specific person as it will be represented with an account number.
Now you may wonder how to transfer Bitcoins and how the registers get updated as it has no banks and government. So when a person transfers some amount of bitcoins the details of the sender and his account number and the receiver and his/her account number is attached to the transaction so these details are used to update the register globally.
So in order to keep all the accounts, safe even Bitcoins has a signature which is used during transaction same like our normal banks do. But this signature is in the form of math.
Whenever a new account is created a private key is attached to it so a signature is created by combining the private key and the details of the sender and receiver. Which will be verified at both the ends and then the transaction is done.
So Bitcoin mining is an important process during the transaction. And it is a way how new Bitcoins come into rotation.
Let us assume an example, let us assume that A has a bank balance of 50 INR. But he gives a cheque of 50 INR to B and C. So now 50 INR will be received by either B or C it depends on who reaches the bank first. Because when one person withdraws 50 INR the bank balance of A will be 0 and another one which has a cheque won't be able to withdraw.
But in Bitcoins, as this is totally done through online there may be network delays and criminals can make use of this and use the same money twice. So in order to prevent this, each transaction is attached with a math problem. So the miners will have a powerful computer to solve these problems and many miners will receive a single transaction problem. So when a miner finishes the math problem first the transaction gets successful then another transaction takes place. In this way, the problem is solved.
So in return, these miners will receive a little part of the transaction as their income.
Even you can become a miner, but you need to have a powerful computer that has a best in class CPU and GPU. Being a miner is not an easy task as you need to keep running these computers whole day. So you need to calculate whether the electricity consumed and the cost of mining is less than your income. So you can have a profit.
Now you may think where are these Bitcoins used. Bitcoins are getting popular day by day. Many online stores are accepting it. And you can even trade in them and sell it to others or convert it into your regional money.
So these are the important things about what and how a Bitcoin works.
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