November 19, 2013

What is BITCOIN ? | Swaroop's Blog

22:45 Posted by DurgaSwaroop No comments
Bitcoins have been the talk of the economic world ever since US senate has decided to take them seriously. So, for those who don't know about Bitcoins, this article gives you a quick overview of it.
So,What is Bitcoin?
                 Bit coin is a Decentralized, digital, peer to peer (P 2 P), crypto currency. That is too many techy words in one sentence. So, let's break it down part by part and try to understand what it means.
  • Decentralized -  There is no central authority or bank to create Bit coins unlike the regular currency, where a central monetary authority prints (mints) it and distributes it.
  • Digital Currency - It is electronics money (e-cash) that can act as an alternative currency. Not to be confused with Virtual money, because this is real deal. You can use this to buy real goods and things.
  •  P2P - I am sure you know about this very well. But for those who don't, peer to peer is basically a network in which each node of the network (called Peer) will act as both provider and consumer  (If you have ever used bit-torrent clients, this is the network type in them)
  • Cryptocurrency - Cryptocurrency is nothing but a digital currency which use cryptographic principles to facilitate generation and transactions.
     (On a side note, Bit Coin is the first fully implemented commercial cryptocurrency)
Bitcoins allow instant payments to anyone in the world. All the transactions & generations are not tracked by any authority (since it is Decentralized) but are collectively managed by the p2p network itself. The idea of Bitcoin was introduced by a ghost person, "Satoshi Nakamoto". No one knows who he really is and has been an unsolved mystery since 2008.
Bit coin is specifically developed to prevent , Double Spending, which is very prevalent in other digital currencies.

So, How does this work?
Everyone who wants to do a transaction with bitcoins need to install a, Bitcoin Wallet on your device and you'll become part of the Bitcoin P2P network. When ever you need a transaction done, the Wallet will generate a onetime Bitcoin address. You will share this with your friends (your transaction partners, to be more specific) much like how you share your email address, but the only difference is that a Bitcoin address is for one time use.

When you initiate a transaction of Bitcoins to a certain user, the wallet stamps it with a digital signature which acts like a proof that, YOU (the owner of the wallet) have initiated the transfer and you'll broadcast the transaction details on the network.

Each of these transactions need to be verified before they go public. This verification or conformation process is called BIT-MINING or simply Mining. This is done by people called, Miners (suits them well). These miners confirm your transaction by including it on the BLOCK CHAIN in a chronological order (also creating new bitcoins in the process) . A Block Chain is nothing but a public list (accessible to anyone in the network) of all the transactions done. The miner may get some transaction fee depending on the transactions.

After it gets confirmed, the recipient can use those Bitcoins, he gets, any way he want.
This entire process gets completed in under 10 minutes (sometimes well in seconds), very very less compared to any other means of transaction. So, the sender can send the Bitcoins and the recipient will be able to use them in 10 minutes.

A very interesting thing about the Bitcoin protocol is that the number of bitcoins that get generated DECREASE over time.

What are the Advantages?
There are many considerable advantages with Bitcoins compared to the regular monetary transactions.
Some of them being,
  • It is fast 
  • It is Resilient and decentralized
  • Globally accessible
  • Fraud Control
  • User-friendly
The Other side of the 'COIN'
Perfection in anything not possible. This applies even to Bitcoin protocol.
A few things you need to consider are,
  • Keeping your wallet secure
  • Bitcoin price is volatile
  • It is not completely anonymous
  • And most importantly, Bitcoin is still EXPERIMENTAL
One more interesting fact is that the, US senate has decided to take Bitcoins (BTC) seriously. And, in the MT Gox exchange, it was valued at $700
                             1 BTC  = $700  (seriously !!!!)
That surely raises peoples interests in this and encourages more people to be involved with the Bitcoin transactions.

That is a simple yet comprehensive look on Bitcoins, a possible future currency. For a further more deep and extensive details about Bit Coins, Bit Mining and other related things, please refer the following sites.
We would really love to here what you think of Bitcoins. Do you think this is really secure? Will this be the future currency? Do you see any loop holes in this idea?
Let us know what you think in the comments section below !!

As always have a happy reading !!!


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