Everything about BitcoinSeptember 17, 2021
First, what exactly is Bitcoin? Wikipedia describes it as digital currency that is managed and issued via the Internet. In layman’s terms, it is “virtual money” that is transferred via the Internet between users. It is also known as “online currency”. It is best to explain the concept by explaining that you don’t have to deal with a government entity or financial institution when you complete an online transaction. Instead of dealing directly with them, you trade money online, and there’s no third party.
To begin , let us look at how a typical “real world” wallet works. When you transfer funds from your “real world” account to your” bitcoin wallet” that is in essence transferring the money from your wallet to the recipient’s wallet. The process is quicker and simpler since you don’t have to use intermediaries. A typical transaction would be I give you my email address, I give you your phone number, and you give me your email address. All that is actually happening is that we exchange a thing (your email address) in exchange for something (your phone number).
Let’s take a look at the way something similar to a real currency works. Let’s say I’d like to buy a cup coffee because I am visiting the city for a business meeting. To purchase the coffee I’d need to first sign up for an account at the local coffee shop. From there I could keep my coffee until I arrive at my meeting and then I’d pay for my coffee using my bank account in the real world.
Let’s say I’m going to a place where I’m not connected to the traditional banking system, like London. What do I do? Simply put, the bitcoin network acts like a digital currency so I can purchase my fuel with any digital currency I choose. If I want to travel to London using the pound, I can choose to use the Euro or the USD. The great thing about this is that while it may have a higher exchange rate, since there is no central government that oversees these currencies, they function as a strong currency since there are no known threats to the value.
As for what happens in between all these transactions? The transaction actually takes place between all the entities involved in the transaction, referred to as “miners”. These entities are what keep the entire system running. The “mining process” is what allows transactions to go through and keeps the network secure. This is achieved by inviting users to join the bitcoin mining pool. They pool their resources and boost the speed at the which new blocks are mined.
Now that we have the workings behind the scenes, how do we determine if transactions are being tracked , or whether they are being “minted?” Blockchain technology, a new technology that seeks to make all mining activities transparent, is actually in place. The basic principle is as follows: when someone is mining a new block they add it to the ledger they already have, called the “blockchain”, along with all of the other transactions that occurred during the time. Each transaction is monitored and recorded to the computer system of the particular ledger. This allows you to be able to see in a glance how much money coins someone has been minted and the amount they’ve spent.
Although this sounds good in theory, there’s one flaw with the system that everyone should be aware of. Since there is no physical product, there’s no way for people to examine a person’s transaction history. They could report suspicious transactions but it’s not possible to verify whether the transaction is legitimate or not. Only way to protect transactions is to use a computer that is offline such as an offline paper wallet. There are online websites that will take care of this for you if you don’t want to perform your transaction from the internet.
The new bitcoin transaction system allows people to trace their transactions using the protocol. This makes it almost impossible for anyone to alter or double spend on another person’s transactions. However, not all computers can handle this new technology, which means that some of the biggest names in the field right now aren’t making the leap into the next technology of computing power. There are numerous developers working to create software that can enable even the most basic computers to make transactions on the internet. When the protocols are made available to the general public it will be easier for people to transfer money from one wallet to the next and also make use of their computing power to travel around the globe using bitcoins instead of traditional currency.
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