As the popularity of Bitcoin and blockchain technology continues to grow everyday, many individuals have questions about it’s fundamentals and use cases.
In this article, we aim to provide answers to common queries you might have regarding Bitcoin and blockchain.
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Bitcoin is a distributed peer to peer digital currency that can be used as an assest and a payment platform. Bitcoin is operated on a global scale, using a digital ledger called blockchain to validate transactions worldwide. It was launched in 2009 by an unknown person or organization named Satoshi Nakamoto.
Unlike fiat currency which needs to be converted from one currency to another while making cross country payments, Bitcoin can be transferred instantly betwee 2 parties which makes international transactions much easier and faster. The total supply of Bitcoin to ever be created is capped at 21 million with about 19 million in circulation today.
How does Bitcoin work?
Bitcoin uses public-key cryptography and proof-of-work to process and verify payments. Each payment transaction is broadcast to the network and included in the Bitcoin blockchain so that the included bitcoins cannot be spent twice.
Bitcoins are sent (or signed over) from one Bitcoin address to another with each user potentially having many different addresses. After an hour or two, each transaction is locked in time (i.e. in a block that is mined roughly every 10 minutes) by the massive amount of processing power that continues to extend the blockchain.
What is Blockchain and how does it work?
Blockchain is a digital ledger that records transactions in a sequential manner, publicly or privately. The transactions work on a peer to peer system eliminating the need for a middlemen.
Bitcoin working is defined by how a blockchain transaction work, every transaction that occur on a blockchain isengraved on a digital ledger and is irreversible. The ledger is decentralized, and is hosted by network of computers across the world. Each block is made up of data that is based on encrypted Merkle Trees which are used to detect any fraudulent transactions or corrupted files and remove them.
There are multiple blockchains and cryptocurrencies generally use their own blockchain such as Ethereum, operates on its own distinct blockchain. Bitcoin remains the oldest and longest-running blockchain, containing the largest number of recorded transactions.
What Is Bitcoin Mining?
Bitcoin mining is a process that utilize computational power to secure bitcoin transactions and introduce new bitcoins to the network. It can be done by anyone with sufficient computing power that can solve mathematical problems that verify transactions and precent double spending.
A reward of 6.25 newly generated bitcoin is rewared to the miner for every block found. The number of newly generated coins is governed by a halvening event that takes place roughly every 4 years which decreases the number of bitcoin generated per block.
How to Buy Bitcoin?
Bitcoin can be bought using a cryptocurrency exchange. Exchanges allow you to buy, sell and hold cryptocurrency. Regardless of where you buy your Bitcoin, you’ll need a Bitcoin wallet in which to store it. This might be called a “hot wallet” or a “cold wallet.”
A hot wallet (also called an online wallet) is held by an exchange or a provider in the cloud. Providers of online wallets include Exodus, Electrum and Mycelium. A cold wallet (or mobile wallet) is an offline device used to store Bitcoin and is not connected to the Internet. Some mobile wallet options include Trezor and Ledger.
While most of the people will not be able to purchase an entire Bitcoin ( BTC ) because of its price, but you can buy portions of BTC on crypto exchanges buy depositing fiat currency in the exchange and converting them into BTC. As of July 12, 2023 1 Bitcoin is approx. $30,000 US dollar.