What is bitcoin, How it works and the future of Bitcoin

All the currencies of the world are held by their respective financial institutions of the country or cash in hand. But crypto currencies are mostly used outside of present banking and governmental institution and are traded over the internet. There are more than 1372 crypto currencies (as on 31 Dec. 2017) available over the internet and is growing. But around 700+ of them are active. Bitcoin is one of the crypto currencies and most popular all over the world.

What is Bitcoin?

It is invented by a group or single person under the assumed name Satoshi Nakamoto in 2009. It is open source software. Bitcoin is created as a reward for solving mathematical problems, known as mining. It uses the rule of cryptography to generate its new unit.

Bitcoin can be exchanged for other currencies or product/services (just like any other physical currencies of the world). Many merchants accept payments in Bitcoin. It can be traded as just like stocks are traded. It can be bought on digital currency exchanges. Many people hold on to Bitcoin as an investment (also called Gold 2.0) because of its fastest rising ROI.

Bitcoin is the first decentralized digital currency and a worldwide payment system. It has no single administrator or central bank. Bitcoin is the world’s famous, popular and the biggest digital currency in-terms of market capitalisation. It commands 37.8% of the market share.

There are few other crypto currencies which are also growing in popuarity. These are Ripple, Ethereum, Bitcoin Cash, Cardano, Litecoin, IOTA, NEM, Dash, Steller, Monero etc to name a few.

How does Bitcoin work?

By installing Bitcoin wallet on laptop/desktop/mobile, it produces your first Bitcoin address. Whenever needed more can be produced. This address can be shared with whom so ever you want to enter in for the transaction. Bitcoin address so generated can be used only once.

Bitcoin network depends upon the block chain, which is a public ledger. Only confirmed transactions are included in the block chain. By maintaining ledger, Bitcoin wallets can calculate the balance that you can spend. The trustfulness and sequential order of block chain are administered by cryptography.

The transfer of amount between Bitcoin, that is a transaction, is stored in the block chain. A undisclosed data, that is “private key”, is used to log in the transaction, which is with owner of the wallet. This private key prevents unauthorized alteration by anyone. All transactions are shared among users and are confirmed by the network within 10 minutes. This is called mining.

Mining is a distributed agreement system which is used to confirm the pending transaction by including them in the block chain. For transactions to get confirmation, they must be packed in a block, which has a strict code of cryptographic rules and is verified by the network.

What is the future of Bitcoin?

Bitcoin can save you from economic turmoil, which is regularly happening in different parts of the world under different governments.

The future of Bitcoin is bright because people who invested in Bitcoin have created sufficient wealth, to live a king size lifestyle. In one year alone, it has increased investors’ wealth many times, which no financial securities (precious metals, bonds, shares or mutual funds) have ever given over the years.

With a small starting fee and an average risk-taking tolerance, one can make sufficient profits from this new virtual currency.

Information from your debit/credit can be stolen and sold to third parties for monetary gain by the fraudster but sale/purchase of Bitcoin is completely anonymous. Hence theft of your profile is virtually impossible.

Many investors made money because of crypto currencies volatile nature. Buying when low, selling when high is the simple formula to gain more profit. Few investors are using the strategy of holding on for long period of time and then selling.

One should look at both pros and cons at what Bitcoin can and cannot give you. Investing small amount and taking calculated risk is worthwhile.



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