how does Bitcoin work? is the major question when we think about bitcoin digital currency trading.
What is Bitcoin?
Bitcoin is a digital currency that could be used to buy goods or services. Satoshi Nakamoto, the inventor of Bitcoin published a whitepaper back in 2009 on Bitcoin. He said Bitcoin is “A Peer-to-Peer Electronic Cash System”. It means the electronic cash proceedings are carried out between the people directly.
Since, users power Bitcoins, third parties such as banks, credit card issuers etc. are eliminated in the process. As no middleman is involved users can get rid of high transaction costs. By now, we understand that Bitcoin is not a hard cash but an Internet entity. Therefore, it’s really important to understand how does it actually circulate in the market.
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How does Bitcoin work?
Firstly, Bitcoin can receive or send any amount of money. It can be from anyone and anywhere across the globe at a very minimal cost. Secondly, Bitcoin creates a wallet, which can be installed on mobile phone or computer. It is accessible and easy to operate.
It has two essential ingredients called an address and a key. An address is a public part of a Bitcoin. It is normally 27 to 34 characters where money is either received or sent. The key is the private part, which is cryptographed and is used to sign a transaction. The key also prevents the transaction to be altered once initiated.
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Thus, in order to make a successful transaction, a sender’s address, a receiver’s address, money and a key is required. Every new transaction is called a block, which is added to the public ledger forming a block chain. Every computer that writes a block or performs the transaction is called a miner.
Thus, Bitcoin is a new way of making payments. It has paved a new platform for a cashless economy. It can be rightly called as digital revolution.