What is a Bitcoin and is it Scandalous to work? 4 Basics of Bitcoin

What is a Bitcoin?

Bitcoin is a type of cryptocurrency. There are various other digital currencies like Ethereum, Litecoin, Stellar Lumen, and Zcash among others. Out of all these, Bitcoin is the most popular as it is the first of its kind. digital currency was created by an anonymous person named Mr. Satoshi Nakamoto and launched in the year 2009 right after the Great Recession of 2008.

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Why was Bitcoin created?

Bitcoin is a Digital currency, a digital asset that uses cryptography to control its creation and management rather than relying on central authorities. Originally designed as a medium of exchange, digital currency is now primarily regarded as a store of value. The history of digital currency started with its invention and implementation by Satoshi Nakamoto, who integrated many existing ideas from the cryptography community. Over the course of digital currency history, it has undergone rapid growth to become a significant store of value both on- and offline. From the mid-2010s, some businesses began accepting digital currency in addition to traditional currencies.

This provides us some pretext as to the reason behind the development of Bitcoin or Digital currency.

In the world of finance, some particular institutions hold power over financial transactions.

For, let’s say, you as an Indian want to transfer money to Mr. John living in the U.S. In the usual procedure, you would go to the bank and convert your rupees into dollars. 

The bank would take substantial time to do the transfer. Also, they would charge some processing and service charges. So, here we have the bank as the middleman. The bank is a centralizing system that keeps the records of both the sender and the receiver.

In 2008, the recession occurred due to poor decisions made by big banks. This proves that any mistake made by these middlemen(banks) will take a toll on your money.

Hence, Nakamoto created a digital currency through which people could transact without any middleman. The sender and the receiver must have opened a ledger account for themselves on any Digital currency platform. They must own digital currency and they will be able to transact directly. 

It is an absolute decentralized system of transactions maintained over the internet. 

How does Bitcoin work?

Bitcoin runs on a blockchain system. In such a system, some blocks contain information related to transactions- e.g., A sent $500 to B, at 7:40:25 IST; G sent $ 390 to F, at 4:59:13, and so on.

These blocks are databases that contain such information. After one block gets filled up, the last transaction points to another block where the future transactions will be recorded. This process continues and chains join the blocks. Hence, we have the name blockchain system. Of course, these systems are all virtual. The information is stored in such a manner that no transaction can be deleted. Hence, no one can tamper with the information. All transaction information is present in the digital currency network. 

Bitcoin: A Boon or Curse?

  • Transactions take place smoothly in less time with Digital currency. 
  • But, in the absence of centralization, the users of digital currency do not know each other. They are just assigned an identification number. Interested parties can transact with each other. 
  • But, if you send money to the wrong account, there is no chance that you will ever get it back. 
  • Nobody knows who is who. This is the reason for the biggest criticism of Digital currency. Since anybody can transact from anywhere, it is said that this fosters illegal actions like terror funding through the dark web.

Bitcoin has its pros and cons 

  • They are a highly volatile investment option. Falls and rises in days. An individual must use proper discretion while investing in digital currency.

What is digital currency and cryptocurrency?

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