What is Bitcoin?
Bitcoin is one of the first digital assets that operate without any central control from governments or banks. Bitcoin relies on a peer-to-peer distributed ledger system known as blockchain.
Bitcoin transactions are recorded on a public ledger. Transaction copies are on servers all over the world. Anyone with a computer can set up one of these servers, or nodes. The consensus on who owns which crypto coins do not rely on a central authority like a bank; instead, it is reached cryptographically by all the nodes worldwide.
Every transaction is shared from node to node and broadcasted to the network publicly. Bitcoin transactions are bunched together in a group known as a block by miners. These miners add transactions to the blockchain permanently.
How are Bitcoins stored?
Just as traditional currencies are stored in a physical wallet, crypto coins are held in digital wallets. These crypto coins can be accessed using software or many other online tools.
Currently, bitcoins can be divisible by eight decimal places. The hundred millionth of a bitcoin, is called as a satoshi.
Investors use a private key to prove ownership of funds to the network when completing a transaction. Users can memorize their private keys and need nothing else to use their crypto.
Who Created Bitcoin?
Despite research by journalists and crypto community members, the creator of Bitcoin remains anonymous. In 2008, the principles behind Bitcoin appeared in a white paper published online by a person or group known as Satoshi Nakamoto. This white paper wasn’t the first to come up with the idea for digital money using the field of computer science and cryptography. The Bitcoin white paper referred to earlier concepts, but it was a unique solution to the problem of establishing trust between online entities using pseudonyms.
Nakamoto brought together two concepts: the blockchain ledger and the Bitcoin private key. Users control their Bitcoin holdings using their private keys. A private key is a string of random numbers and letters that unlocks a virtual vault containing their crypto assets. A virtual ledger called the blockchain tracks every private key.
How Does Bitcoin Work?
The emergence of Bitcoin marked a major advance in the field of computer science as it solved a fundamental problem of internet commerce: how to make transactions between two people without a trusted intermediary?
Bitcoin is an asset for the internet; it enables financial transactions across borders without the involvement of a central power like a bank, company, or government. Bitcoin created the potential for an open financial system that is more innovative, free, and efficient.
Bitcoin is not owned by an individual or a company like credit card networks like MasterCard and Visa or a payment processor like Paypal. Bitcoin is the first completely open payment network; anyone with an internet connection can participate.
The blockchain is one of the most vital elements of Bitcoin. The blockchain tracks who owns what, like how a bank tracks its assets. Decentralisation sets the Bitcoin blockchain apart from a bank’s ledger. Anyone can view the blockchain, and no single entity controls it. Here are some of the steps on how it all works.
- Mining rigs are specialized computers that solve the equations required to verify a new transaction. In the early days, a simple desktop PC was powerful enough to participate, allowing anyone to try mining bitcoins. These days, the hardware required is specialized, massive, and usually owned by businesses or large groups of individuals pooling their resources
- The accuracy of the blockchain is maintained by the collective computing power of crypto miners. Each new bitcoin and all subsequent transactions are recorded on the blockchain
- The Bitcoin network conducts a continuous lottery in which all miners worldwide compete to be the first to solve a math problem. A winner is found, and the winner will update the blockchain with new transactions. The reward changes over time; currently, the winner of this lottery is awarded 6.25 bitcoin
- As the value of Bitcoin rises, its easy divisibility has proven to be a key attribute. Currently, one bitcoin is divisible to eight decimal places, and 100 millionths of one bitcoin are known as a Satoshi
- The creators of Bitcoin have set up the network to ensure scarcity, as the total number of bitcoins will never exceed 21 million. Currently, around three million bitcoins are still available for mining, which will occur more slowly. According to this theory, the last blocks will be mined in 2140
How to Invest in Bitcoin?
The easiest way to buy Bitcoin is through a crypto exchange like Zebpay. Zebpay makes it super easy for users to buy, sell, send, receive and store Bitcoin. Learn more.
Is Bitcoin a good investment?
At the time of writing, one Bitcoin is valued at $16,527. Bitcoin has a short history of being an investment asset with many volatile price changes. Whether Bitcoin is a good investment depends on factors such as your investment goals, financial profile, portfolio, and risk tolerance. Users should do their due diligence or consult a financial advisor before investing in Bitcoin. Learn more.
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