Bitcoin is one of the most used word and a trending topic in 2020 in the world of money and finance. You may know that Bitcoin is there for a decade now but suddenly its prices started to rise in 2020 and many major firms are investing in Bitcoin, Including Elon Musk’s Tesla. This is high time that everyone should be aware of Bitcoin. If you are still confused about Bitcoin and don’t know what it is or you just have a little bit of Idea about Bitcoin then this article is for you.
In this article, I am going to explain Bitcoin and Bitcoin concepts in a very easy and simple manner, So that you can understand it.
A Brief History
The white paper of a bitcoin was released in 2008 and later the Bitcoin was released in 2009. Bitcoin was created by a mysterious man who goes by the name of Satoshi Nakamoto. Nobody knows about this man. The creator of Bitcoin is unknown [who goes by name satoshi Nakamoto] This provides an advantage because even if this person dies nobody will ever know about that and this will not affect the price of Bitcoin. Since its launch, Bitcoin has given a very high return and its value is constantly increasing the sudden increase in the value of Bitcoin started when big companies Tesla, JP Morgan, Visa, and other corporations started to invest in Bitcoin. Since then pricing is increasing rapidly and many people are investing in Bitcoin.
What is Bitcoin?
Bitcoin is a cryptocurrency, let’s take a look at what is cryptocurrency?
Bitcoin is a type of digital cryptocurrency. Note that the world cryptocurrency is a combination of two words Cryptography and currency. assume that you are familiar with both the world’s that is cryptography and currency. but just to make sure Cryptography is nothing but the process of converting plain text into a complex text so that it would be unreadable. When you do the process of encryption it is also cryptography. and I assume that you what is a currency like Rupees in India and dollar in the United States.
Bitcoin is a peer-to-peer exchange cryptocurrency. Peer-to-peer exchange means that there is no third party involved between the sender and the receiver. I will take an example of UPI payment to explain this concept.
Ex: imagine you are buying a pack of bread and you want to pay the shopkeeper via UPI, This is not a peer-to-peer exchange of money because there are banks involved in this transaction and on a very high level there is also a government bank involved who controls and regulates money. So let’s say when you make a payment you initiate a request to your bank, which verifies that you have enough money and you are the real owner of that money and your account is valid. The next thing is that your bank transfer money the shopkeeper’s bank account and once the transaction is verified the shopkeeper receive its money by UPI transaction.
Note that in this process there are two banks involve this will not be a peer-to-peer exchange.
As I said Bitcoin is a peer-to-peer exchange which means there will not be involvement of any third-party during the transaction.
Let’s understand this again from a Bitcoin perspective. When you pay the shopkeeper via Bitcoin there will be no third-party involved you will send the bitcoins to the shopkeeper via peer which will verify the transaction and once it’s valid transaction will be done and the best part is the middle peer won’t be able to know your identity or anything all you need is just a bitcoin address!
Bitcoin is based on what is decentralized blockchain. Blockchain can be considered as a hyperledger format thing where everybody can verify a transaction. Blockchain itself is a very vast concept.
How Bitcoin works?
As discussed earlier when you send Bitcoin from person A to person B the transaction happens by peers this PEERS solves a very complex algorithm or mathematical expression to verify that the transaction is varied and once is verified then they make the transaction successful, Then it is stored in the format of blockchain where everybody can verify the transaction note that these two parties do not necessarily have to know each other all they need is just a Bitcoin address.
Bitcoin mining is nothing but a process of releasing new bitcoins into the blockchain network.[more like gold mining where we mined gold and introduce it to the world] The number of Bitcoin is limited up to 21 million. It is said that all the bitcoins will be mined till 2140. The bitcoin mining process is nothing but solving a very complex mathematical algorithm to add new bitcoins to the circulation, The people who do Bitcoin mining are known as miners. Every miner after a successful transaction of Bitcoin receives a small number of fees for Bitcoin mining. Bitcoin mining is not a simple process it requires a lot of computational power as well as electric power. In the process, the computer generates a lot of heat, So mostly Bitcoin mining happens in the cold region. In the process of Bitcoin mining, a miner adds and verifies as a transaction record into the Bitcoin network for adding a specific block to the blockchain network miner is rewarded with a few bitcoins this reward gets decreases as the number of bitcoin increases. In May 2019 the block reward was 50 new bitcoins! now it is much smaller.
Solo Vs pool mining
When you try to mine Bitcoin on your own using your computer without the help of anyone that is known as solo mining generally people with a lot of GPUs and a lot of very efficient power computers do the solo mining. Where a group of people combines their computational power to form a strong network which mines Bitcoin is known as pool mining. pool mining is a very common process where the reward is distributed among the network.
Hot & Cold Wallets
Since you know that Bitcoin is a type of currency there must be a wallet to hold this currency. Bitcoin wallets are of two types one is cold wallet and another one is a hot wallet.
Hot wallets are stored in software this is connected to the internet lets say if you are using an online banking wallet like Paytm or phonepe all these wallets are hot storage. Bitcoin also has many clients for hot storage.
Cold storage is slightly different than hot storage you can purchase a bitcoin and then save it onto your device so you can save it to a pen-drive or hard drive.
So that was all about the bitcoin! I hope that now you have completely understood the bitcoin and few terminologies regarding this.
The Official website for bitcoin is: Bitcoin.org
Bitcoin wallet: Android App
Closing Words: Bitcoins is a very popular cryptocurrency and its price is also increasing day by day, However, keep in mind that it’s highly volatile and prices are changing every second. If you are planning to invest in bitcoin, Do the necessary research before investing.